Does a Quit Claim Deed Provide Least Tax Burden

[senza]

My question involves real estate located in the State of New York:

An aging single aunt wants to give home which she fully owns (no mortgage), while she's still living, to her only niece using a quick method with the least tax implications for both. A friend suggested that she use a quit claim deed to add the niece to the title to achieve this. Is this accurate, or is there a better approach?

Thanks in advance for any advice.

[flyingron]

Quit claim doesn't change anything with regard to taxes. The only difference between a quit claim and a warranty deed is that the quit claim makes no representations as to the validity of what is being conveyed (I could quit claim you all my interest in the Empire State Building even though I have no such interest).

Your friend is a complete idiot. Adding someone to a deed isn't like some sort of club membership, nor is it estate planning. Putting niece on the deed means you are giving her half the property now and it makes no representation as to what happens when aunt dies. If the property is worth more than $13,000, a gift tax form must be filed though no tax is likely due. Unless the new ownership is held with right of survivorship, the aunt's share will still have to be probated.

Giving away ownership interest when alive is often ill-advised. It can screw medicaid eligibility. It can make it impossible to get financing (either a regular or reverse mortgage) if aunt ever needs the money. If something happens to the niece (anything from her dying before the aunt, to getting in a messy divorce, running up a lot of debt), it can adversely affect the Aunt's interest in the property. The niece will also acquire the aunt's presumably low basis in the property (not the current value or even the value at the time the aunt dies) which can have substantial tax liability for her if she eventually sells it.

Aunt should go to a proper estate planner and look at either a will or trust to direct her assets at death. While she's there she should probably also look at advanced care directives (living will) and perhaps a medical power of attorney.