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What To Consider Before Changing the Title On your Home

The way that title is recorded on a piece of property has important implications. The right to use the property, the way the property and income generated from it are taxed, and how the property is transferred at the time of the owner’s death are all influenced by the title. In legal-jargon, the title is a “bundle of rights” in a piece of property. These rights may be separated amongst many people and each owner’s rights may differ depending on how the title was recorded.

Read on to learn about the common reasons property owners change titles, how to change your property’s title, and if doing so is a good option for you.


Reasons You May Change Title on Your Home

Adding a Child to the Deed To Avoid Probate

Whether you are considering adding your child to your title for inheritance purposes or another reason, it is important to understand the implications of doing so. As explained in this article, it is possible that adding your heirs to the title will subject your estate and/or your children to avoidable taxes. Additionally, if they are added to your title, your property may be subject to claims by your children’s creditors.

There are other ways to avoid probate and ensure a smooth transition of the property to your children and/or other beneficiaries:

  • Set up a living trust, transfer your home’s title to the trust, and designate your heirs as beneficiaries in your trust document.
  • Put the property in an irrevocable trust and make your heirs the beneficiaries.
  • Set up a Family Living Partnership (FLP) with your heirs and transfer your property title to the FLP

Each of these options has advantages and disadvantages, which can be better understood by talking to a professional estate planner or real estate tax and law specialist.


Putting Property into an LLC or Other Corporate Entity

If your property is income-generating, holding its title in an LLC may shield you from liabilities and have tax-benefits. The former is especially important if you are renting out the property. If a property is held in an LLC or Corporation, your personal assets will be protected should a tenant or guest get hurt on the premises and take legal action against you. This type of property ownership can also simplify the process and costs of transferring the property. However, both options require you to invest time and money to set up and maintain the business entity. You’ll have to consider if the rewards justify this extra investment.

LLC’s are generally considered less complicated to set up and maintain, however other business entities like S-Corps offer different advantages. You can read more about the differences between holding property in an LLC vs S-Corp here.


What to Consider When Changing Title

When you buy a house, there are a number of contracts and policies that are typically put in place. Below is a list of parties that you’ll need to contact if you are considering changing title:

  • Have you taken out a mortgage on the property? If so you’ll need to speak to your lender.
  • You’ll need to discuss the repercussions of changing title with your title insurance company as the change can void the title insurance policy unless you add an endorsement.
  • Often times title and homeowners insurance are issued by the same company at the time of purchase, but if for some reason your homeowner’s insurance was issued by a different company, you will need to reach out to that organization as well.
  • If you have put the property in a will, you may want to contact an attorney to discuss modifying it.

Changing the title on your property can save you and your family time and money in the long run but doing so takes know-how. While it may be tempting to do this on your own, unless you have specialized real estate tax and law knowledge, hiring a professional can help to ensure that your title was properly recorded and that you understand the legal and tax consequences of the change. After all, nothing is worth more than your peace of mind.

Please note: The information contained within this article is provided for informational purposes only and is not intended to substitute for obtaining accounting, tax, legal or financial advice from a professional accountant or lawyer.

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