Parents ask this constantly, usually with good intentions and usually after hearing that it will save the family probate. Sometimes it does. Often it costs the child far more than probate ever would, in a tax bill nobody saw coming.
The problem is basis, not probate
Here is the mechanism that decides most of these decisions.
If a child inherits property at death, they generally receive a stepped up basis, meaning the property is treated as acquired at its value on the date of death. Sell it soon afterwards and there is little or no capital gain.
If a child receives the property as a lifetime gift, they generally take the parent’s original basis. Sell it later and the gain is measured from what the parent paid decades ago.
In New York City, where a house bought in 1985 can be worth many multiples of its purchase price, that difference is not academic. It can be the largest single number in the whole transaction.
Other consequences worth knowing
Exposure to the child’s life. Once the property is theirs it is available to their creditors, their divorce, and their judgment creditors. A parent can end up living in a house that is now an asset in someone else’s dispute.
Medicaid. Transfers can trigger a look back period affecting eligibility for long term care. This is technical, it changes, and it is exactly the kind of thing to check before signing rather than after.
Losing control. A parent who transfers outright has no legal right to remain unless the deed reserves one.
Property tax exemptions. STAR, senior and veteran exemptions attach to the owner. Changing the owner can end them.
Gift tax reporting. A transfer for less than value is a gift, and above the annual exclusion it generally requires a federal gift tax return even when no tax is due.
We sign wills, trusts, powers of attorney and health care proxies in person, on paper, and we coordinate witnesses. Home, office, hospital or rehabilitation facility, across all five boroughs, evenings and weekends.
The alternatives people actually use
Leave it in a will. Simple, preserves the stepped up basis, keeps control. The cost is probate, which in New York is a known and survivable process.
A revocable living trust. The property passes outside probate, the parent keeps control while alive, and the basis step up is generally preserved. More expensive to set up than a will, cheaper than the alternative for some families.
A life estate. The parent keeps the right to live there for life and the remainder passes to the child at death. It has real advantages and real drawbacks, including that selling later requires everyone’s cooperation.
An irrevocable trust. Often used in long term care planning. Powerful and unforgiving, since the point is that you cannot simply undo it.
Which of those fits depends on the family, the property, the health picture and the numbers. That is an estate attorney conversation, and it is the one worth paying for.
The New York mechanics if you do transfer
Downstate transfers are usually done on a bargain and sale deed with covenant against grantor’s acts, or a quitclaim between family. See which deed to use in New York.
Even a transfer for no money normally requires the state transfer tax form TP-584 and the equalization form RP-5217, with New York City transfer tax filings as applicable. Exemptions exist for certain family transfers but must be claimed correctly rather than assumed.
The grantor’s signature is acknowledged before a notary, and the deed is recorded through ACRIS. We handle recording from intake to confirmation.
The one that catches everyone
A deed does not move the mortgage. Transferring the house to a child leaves the parent on the loan, still liable, with no ownership. Most mortgages also contain a due on sale clause that a transfer can trigger.
If there is a mortgage, talk to the lender before recording anything.
Frequently asked questions
Can my mother sell me the house for one dollar?
She can transfer it, but a nominal price does not make it tax free. See that question in full.
Does adding my child to the deed avoid probate?
It may, depending how title is held, while creating the basis, creditor and Medicaid issues above.
Is inheriting really better than being gifted?
On capital gains, usually yes, because of the basis step up. On other factors it depends.
Do I still need a lawyer if the family agrees?
Agreement is not the risk. Tax and eligibility consequences are, and they do not care that everyone got along.
Can this be notarized online?
A deed often can, but the recording office decides. Confirm before booking. See online notary for real estate.
Life estates, and what they actually cost
A life estate deed is the compromise families reach for: the parent keeps the right to live in the property for life, and the remainder passes automatically to the child at death.
The attraction is real. It avoids probate for that asset, and because the transfer completes at death rather than during life, the stepped up basis is generally preserved.
The costs are less discussed. The transfer of the remainder interest is a completed gift at the time the deed is signed, which has its own reporting and Medicaid timing implications. Selling or refinancing afterwards requires the remainder holder to cooperate and to receive their share of the proceeds. And the arrangement is difficult to unwind if the relationship changes.
Adding a child to the deed is not the small step it seems
Adding a name creates a co-owner today, not a beneficiary at death. That child’s creditors, spouse and judgment holders now have a route to the property. If the child is sued or divorces, the family home is in the conversation.
It also gifts a fractional interest now, with the basis consequences that follow, and it can affect the parent’s property tax exemptions.
People do it because it is cheap and quick at the deed office. The expense arrives years later.
The order to do this in
Speak to an estate attorney and an accountant before choosing an instrument. Establish the current basis and the likely gain on a sale, because that number often decides the whole question. Check the Medicaid picture if long term care is foreseeable. Then choose the tool, and only then think about deeds and notarization.
We handle the execution and the recording once the decision is made. Making the decision is not notary work, and anyone offering to make it for you is not doing you a favor.
Recording is not the same as deciding
Once the instrument is chosen, execution is mechanical. The grantor signs, the signature is acknowledged before a notary, and the deed is filed with the transfer tax forms.
What we would gently push back on is treating the recording as the plan. Families sometimes arrive having already decided to quitclaim the house to a child this week, having read that it avoids probate, without having looked at the basis, the exemptions or the Medicaid timing. Probate is a known and survivable cost. A capital gains bill measured from a 1985 purchase price is not.
The deed is the last step, not the first.
See also: notary services for older adults · capacity: when a notary has to say no
Related reading
- Which deed to use in New York
- How to transfer a deed in NYC
- The best way to leave your house to your heirs
- What happens if you die without a will
- NYC deed and document recording
This is general information, not legal or tax advice, and NotarEaseNYC is not a law firm. A notary public cannot advise on transfers, taxes or Medicaid planning. Speak with a New York estate attorney and an accountant before transferring property.