An interspousal transfer deed is a legal document that allows a married couple to transfer property from one spouse to the other. It’s a common tool used in situations like divorce, estate planning, or simply to change how a property is owned.
One of the biggest benefits of using an interspousal transfer deed is that it can help avoid property tax reassessment. It can also simplify property ownership, which can be especially useful when planning for the future.
This guide will walk you through everything you need to know about interspousal transfer deeds, including when and why you might use one, and some important things to consider before you do.
What is an Interspousal Transfer Deed?
An interspousal transfer deed is a legal document that transfers ownership of a property from one spouse to the other. It can also be used to transfer ownership from both spouses to only one spouse.
Basically, it’s a way to legally give ownership rights from one spouse to the other.
In some states, like Florida, an interspousal transfer deed acts as a type of grant deed. It’s different from a quitclaim deed because it usually carries more liability for the person transferring the property.
You might also hear it called an interspousal transfer grant deed.
When is an Interspousal Transfer Deed Used?
Interspousal transfer deeds aren’t an everyday kind of legal form. Here are a few situations in which they’re commonly used.
Divorce or separation
One of the most common reasons to use an interspousal transfer deed is to divide property when a couple is divorcing or separating.
For example, if a couple jointly owns a home, they might use this type of deed to transfer ownership to just one of the spouses as part of their divorce settlement. The way the property value is divided depends on how the property was originally owned.
In general, interspousal transfers aren’t taxable, but there can be tax consequences to transfers made within one year after a divorce is finalized, so be sure to consult with a tax advisor.
Estate planning
An interspousal transfer deed can also be used to transfer property for estate planning purposes. This might be done to simplify inheritance or to manage assets more effectively.
Whenever you sign a deed, it’s a good idea to review and update your overall estate plan.
Changing property status
In community property states like California, an interspousal transfer deed can be used to change property from community property to separate property, or vice versa.
It can also be used to add or remove a spouse from the property title.
Other scenarios
In some cases, a mortgage lender might ask for an interspousal transfer deed to protect against future claims if the property goes into foreclosure.
And if one spouse’s credit is negatively impacting the other spouse’s credit, an interspousal transfer might be a solution.
Interspousal Transfer Deed vs. Quitclaim Deed
Both interspousal transfer deeds and quitclaim deeds transfer property ownership. But there are some critical differences.
The biggest difference involves liability. A quitclaim deed simply transfers whatever interest the grantor (the person transferring the property) has in the property without any guarantee. That means the transferring spouse might still be liable for the property’s debts or liens. An interspousal transfer deed can offer more protection.
It’s important to know what you’re getting into before you choose one of these deeds.
When to use each: Use a quitclaim deed for a simple transfer when you don’t need any guarantees about the property’s title. Choose an interspousal transfer deed when you want a clean transfer of ownership, often in situations like divorce or estate planning.
How to Complete an Interspousal Transfer Deed (California Example)
Okay, so you’re ready to transfer property between spouses using an Interspousal Transfer Deed in California? Here’s a breakdown of the process. Remember, this isn’t legal advice, just a general guide. You should really talk to a lawyer or real estate expert for personalized guidance.
- Get the Form: You can usually find a blank Interspousal Transfer Deed form from a title company, a real estate attorney, or even a legal document service.
- Fill It Out Carefully: This is crucial. Double-check everything! Make sure all the information is accurate. Any mistakes can cause problems down the line.
- Get It Notarized: Both spouses need to sign the deed in front of a notary public. Don’t sign it beforehand! The notary needs to witness the signatures.
- Record the Deed: Take the notarized deed to the county recorder’s office where the property is located and file it. This makes the transfer official in the public record.
- File a PCOR: You’ll also need to file a Preliminary Change of Ownership Report (PCOR) with the county assessor’s office within 45 days of the transfer. This helps them assess property taxes.
- Tell the Lender: If there’s a mortgage on the property, let the mortgage lender know about the transfer. They might have specific requirements.
- Get Expert Help: Seriously, consider talking to a real estate professional or a legal document preparer. They can make sure everything is done correctly and avoid potential headaches.
Tax implications and things to consider
Here are some things to keep in mind regarding taxes and interspousal transfer deeds:
- Usually, no gift tax. The IRS doesn’t consider interspousal transfers as taxable gifts.
- Divorce exception. Divorce settlements often have very specific tax rules, particularly if the divorce is finalized more than a year after the property transfer.
- Property tax reassessment. Using an interspousal transfer deed may prevent a property tax reassessment.
- State laws. Property transfer and tax laws vary by state. Be sure you understand the rules in your state.
Closing Thoughts
Interspousal transfer deeds can streamline property ownership, prevent property tax reassessments, and make estate planning easier for married couples. But it’s important to understand what you’re signing.
Before you complete an interspousal transfer deed, talk to a qualified attorney or real estate expert. An experienced professional can ensure you’re in compliance with all applicable laws and that your interests are protected.
When used correctly, interspousal transfer deeds are a valuable tool for managing property ownership between spouses.