Quitclaim deeds and gift deeds accomplish similar ends, but there are slight differences in the two that inform under what circumstances they should be used. In this week’s blog, we’ll discuss the differences between quitclaim and gift deeds, when they should be used, and their limitations.
Quitclaim deeds can be used to transfer ownership of a property between two parties, with or without compensation. If there is a payment involved, it has to be noted on the deed, reported on federal tax returns, and sales tax will be assessed to the grantor. Quitclaim deeds are commonly used in a divorce as a way for one spouse to transfer his or her ownership of the property to the other. However, although the grantor transfers his or her ownership, quitclaim deeds “do not relieve the grantor from any debt or encumbrance on the property, including mortgage payments or tax liens. Neither do quitclaim deeds transfer ownership of any possessions on the property’s premises.”
Gift deeds are usually used when the sole owner of a property wants to transfer ownership to another party. This makes them common among relatives and friends. Gifting property has to be reported on federal tax returns. If there are any encumbrances on the home, the donor of the property is still financially responsible for them.
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