Is Adding a Co-Owner to Your Property Title a Smart Move?

Exploring the Top 5 Benefits and Risks of Co-Ownership in Real Estate

It’s common for property owners to call our office asking whether they can add or remove someone from their property deed. These requests often arise from casual conversations, where people learn about the potential benefits of transferring property but lack complete or accurate information.

Before proceeding, the first consideration is whether the transfer would trigger Transfer and Recordation Taxes. Many jurisdictions offer exemptions that allow property owners to transfer interest without these taxes, particularly for spouses, domestic partners, and direct lineal relatives like parents and children. Some jurisdictions permit no-cost transfers to siblings, though this is less common. Additionally, transferring property to an Inter Vivos Revocable Trust for estate planning purposes often qualifies for exemptions.

However, whether Transfer and Recordation Taxes apply is just one part of the story. The inquiry cannot simply end there and, in fact, should not start there. There are several other important considerations when planning a no-consideration property transfer, some of which may have unexpected consequences.

1. Gift Tax Implications

A no-consideration transfer may be classified as a gift for tax purposes. If the property’s value exceeds the annual gift tax exclusion (currently $19,000 per recipient in 2025), this could trigger gift tax liability. In such cases, you may need to file a gift tax return. However, this doesn't necessarily mean you owe taxes right away. You can apply the gift amount against your lifetime Unified Credit and Gift Tax exemption (currently $13.99 million in 2025), so no immediate tax is due unless you exceed this threshold.

2. Capital Gains Tax Consequences

Adding someone to your deed during your lifetime can also impact future capital gains tax when the property is sold. The new owner will share in the property's cost basis. If there are substantial gains, they could face a significant tax burden when they sell, based on the original purchase price rather than the property’s current market value.

Furthermore, this approach misses the potential benefit of a “step-up” in basis that would occur if the property were inherited after the owner’s death. If you add someone to the title, they won't receive this step-up, which could result in them paying taxes on the property’s entire appreciation.

3. Estate Planning Considerations

Transferring property may interfere with an existing estate plan. If you’ve set up a trust or will, a transfer could unintentionally alter the distribution of your estate, potentially conflicting with your wishes. For example, if the transfer occurs after your estate plan has been created, it may inadvertently impact how your assets are distributed, leading to unintended consequences for your beneficiaries.

4. Impact on Property Title & Ownership Rights

When someone is added to the deed, they gain legal rights to the property. This can complicate matters if you want to sell, refinance, or further transfer the property in the future. Any future decisions, including selling or taking out a loan against the property, would require their consent.

If the relationship between the property owners changes, this can lead to complications that may make the process more difficult.

5. Due on Sale Clauses

If the property has a mortgage or deed of trust, it likely includes a Due-on-Sale clause. This clause allows the lender to demand full repayment of the loan if the property is sold or transferred. Certain transfers, such as those to a spouse, children, or in cases of inheritance, are typically exempt from this clause. However, adding someone to the deed could violate the mortgage terms, potentially triggering a default, even if this is rare in practice.

Final Thoughts

While no-consideration transfers can be helpful in certain situations, they carry important risks and complications. When property owners ask about transferring ownership, my first question is: Have you consulted with an estate planning attorney or tax advisor? Are there any loans on the property? Have you considered the possible gift tax implications or the impact on your capital gains taxes in the future?

The answer is often no. In such cases, I recommend that the owner consult with professionals who specialize in tax and estate planning. Our firm does not offer such advice, so it’s crucial to seek expert guidance before making such decisions.