Would you self-diagnose your own medical problem? Sometimes as a self-help form of estate planning, family members will deed their property to their family, sometimes as a right of survivorship deed, an enhanced life estate deed (a ladybird deed), or an outright transfer. The form of a deed is fairly standard in Texas, so do you need an attorney’s assistance?
The question to ask is, “are you taking the right medicine?”
When you purchase or sell a home, the deed was unquestionably drafted by an attorney at the title company, and you paid that attorney a small fee. It was well worth your money. Mistakes in deeds can have massive consequences, so yes, you should always use an attorney to draft a deed.
The bigger question is, should you be considering the transaction in question? Maybe a non-attorney can draft a proper deed, but have they considered the legal issues? In family gifting transactions, the family usually does not even know the questions to ask. Often, the transaction is contemplated to avoid paying gift taxes, but more than likely, no gift taxes would have been due. Sometimes, the transfer is intended to qualify someone for Medicaid, but instead they made a gift that disqualifies the giver from Medicaid. Often not considered is the tax impact. The recipient of the gift has no basis in the property gifted to them, so when they sell the property, the full amount is taxable. Often when the property is sold out of an estate, there are no taxes due at all.
Finally, the wording matters tremendously. If the deed is a gift, it should clearly state it is a gift. However, most people simply use the formula that the consideration is “$10.00 and other good and valuable consideration.” That language is saying that the transaction is not a gift. That difference can turn a separate property inheritance into a community property transfer to be shared with the recipient’s spouse.
People misunderstand that they hire an attorney to “draft documents.” Drafting the deed is the simple part. The analysis of the gift consequences, estate/gift tax, income taxes, Medicaid planning, and inheritance issues require the help of a qualified estate planning. Attorneys at Pyke & Associates are skilled in this area and advise clients daily. And, yes, we can draft the deed – for us, that is the simple part.
This material has been prepared for informational purposes only, and is not intended to provide, and should not be relied on for, specific tax, legal or accounting advice. We can only give specific advice upon consulting directly with you and reviewing your exact situation.
