Q: I want to put the deed to my mortgaged home in my sons name,what is the first step/

A: If you transfer the deed to your son, you may need to do a deed of gift, and your mortgage company needs to clear that. It is very likely to violate the "due on sale" clause. You may be able to get the lender to agree to moving the home into a living trust that lists your son as a beneficiary. Alternatively, you can refinance. Or, you can do a will. There are many stories on TV and in novels as well as in lecturers making the circuit decrying the difficulties of probating wills. Most of that information was outdated when I entered practice in the 1980's. Probate is much easier than it used to be. The lecturers keep pushing living trusts because they make money selling them or selling the real estate. Maryland remains harder than DC or Virginia on probate, but it is much better for consumers than it was when those movies were made.

A: This is not difficult, but unless the mortgage is refinanced by him, or extinguished by full payment, he will take subject to the mortgage. Also, the terms of your mortgage might restrict your ability to re-title without paying the balance.

A: Both attorneys correctly noted the general principle that people need to pay off their mortgage before transferring / deeding their property, BUT there are still ways a parent can legally add a child to a deed without needing to pay off the mortgage early.

A) If the goal is to transfer current ownership, you can do so by means of a deed after you contact your lender's assumption department. There is a federal law that addresses the situation you describe. While in MOST cases you can't deed a property without first paying off the mortgage, you may be able to do this if you are gifting to your son and it is a federally related mortgage (most loans are). Basically, a child of a borrower can assume the loan if they get the property from their parents. So you probably CAN do the transfer.

That is only part of the equation, however, as there are at least 2 other things to watch out for. First, In some counties in Maryland you will need to pay a tax to record the deed based on the value of the current mortgage. The amount of the tax varies with the amount of the mortgage, but it can be several hundreds or thousands of dollars so you'd really want to talk to an attorney who can figure that out for you. Second, anytime you give anyone property worth more than $15,000 the IRS wants you to file something called a gift tax return. There might not be any federal income tax owed but since real estate is usually worth more than $15,000 in this state, it helps to be aware of this requirement.

OR

B) There is a simple and easy way to add a child to title if the goal is to make sure your child will eventually inherit the property. You can do this by something called a life estate deed. It also has the added benefit that the property remains the original owner's and no creditor of the child can take it away during the parent's lifetime. My firm does these types of deeds for parents adding children onto the property regularly. This kind of deed doesn't require anyone paying off the mortgage early and should be exempt from transfer and recordation taxes. It doesn't cost any more than doing a "regular" deed and I encourage you (and anyone in this situation) to talk to experienced counsel to see if it makes sense in your situation. My firm does these throughout Maryland but there are other attorneys who do as well.

While not legal advice, I hope this general information helps!

A: So, I am going to add my two cents to these answers, all of which are correct. Generally speaking, however, you may not want to transfer the deed to your son while you are living, for one very good tax reason: if you do this, your son will receive your tax basis in the property (what you paid for the house originally, above which is subject to capital gains tax upon resale). In contrast, if your son were to inherit your house by will, or by distribution from a revocable living trust upon your death, then he would receive a stepped-up tax basis equal to the fair market value of the house as of the date of your death. That means, upon resale, capital gains only applies to the amount above the stepped-up basis. That tax savings can be enormous, depending on the value of the house. Other practical reasons exist to caution you from adding your son to the title: it may expose your home to potential debts or liabilities of your son (judgments, tax liens, divorce/marital property issues, etc.); it restricts your ability to refinance, sell or transfer your interest as your financial, living or health situation changes; and if you reach a point where you need long-term nursing home care with Medicaid coverage, there may be other considerations that are best addressed by different estate planning strategies. Before you do anything, meet with an estate planning lawyer to discuss your goals and how you want your estate distributed after your death. Then map out the best plan to maximize the value and effectiveness of achieving those goals without incurring unexpected adverse consequences. In other words, look and see the benefits, dangers and pitfalls before you jump.