Every few weeks someone walks into Grant, Riffkin & Strauss, P.C. holding a deed they signed at a bank branch or printed off a form website, having added a son or daughter as co-owner of the family home. The reasoning is almost always the same: it looked like a simple way to keep the house out of probate. What it usually does instead is create a tax bill, hand a creditor a target, and lock the parent out of decisions about their own property.
Here is what that signature actually does, and what works better in Maryland.
What actually happens when you add your child to your deed?
Signing a new deed that names your child as co-owner is an immediate, completed transfer of a fractional interest in real property. It is not a will substitute that waits until your death to take effect. From the moment the deed is recorded in the county land records, your child owns part of your house.
Two details catch people off guard. Maryland presumes a tenancy in common when a deed conveys property to two or more people; under Section 2-117 of the Real Property Article, a joint tenancy with right of survivorship exists only if the deed expressly says so. A deed drafted without that language may not avoid probate at all, which defeats the entire purpose. The transfer is also a gift for federal tax purposes, and a gift exceeding the annual exclusion requires a federal gift tax return on IRS Form 709 even when no tax is due.
Why does the tax basis matter so much?
Property a child inherits at your death gets a new cost basis equal to its fair market value on the date of death. Property a child receives as a lifetime gift carries your original basis forward. That difference is where most of the money disappears.
Take a Silver Spring house bought in 1988 for $95,000 and worth $625,000 today. If a child inherits the whole property, the basis resets to $625,000 under Section 1014 of the Internal Revenue Code, and a sale shortly afterward produces almost no taxable gain. If the parent instead deeded half the house to that child years earlier, the gifted half keeps a carryover basis of about $47,500. On a $625,000 sale, that half throws off roughly $265,000 of capital gain. Between federal capital gains tax and Maryland state and local income tax, the family can pay tens of thousands of dollars to sidestep a probate process that would have cost a small fraction of that. The Section 121 exclusion for a principal residence will not rescue the child unless the child actually lived in the home for two of the five years before the sale.
What happens if your child is sued or gets divorced?
Your child’s share becomes reachable by your child’s creditors. A money judgment entered in Maryland becomes a lien on real property the debtor owns in that county, stays enforceable for twelve years under Maryland Rule 2-625, and can be renewed. A car accident, an unpaid medical bill, a failed business, or a divorce settlement can all attach to a house you still live in.
Control goes too. You cannot sell or refinance without your co-owner’s signature. If that child becomes incapacitated, dies before you, or simply disagrees with your plan, the path forward may run through a guardianship proceeding or a partition action.
Does adding a child to the deed affect Medicaid eligibility?
Yes. Transferring an interest in your home for less than fair market value starts the sixty-month look-back that applies to Medicaid long-term care coverage under federal law at 42 U.S.C. Section 1396p. Maryland’s Medical Assistance program reviews transfers made in the five years before an application and imposes a penalty period of ineligibility calculated from the value given away. A deed signed in 2023 can still delay nursing home coverage in 2027.
What does Grant, Riffkin & Strauss, P.C. recommend instead?
Maryland has not adopted a transfer-on-death deed for real property, so the workaround available in some states is off the table here. What does work:
- A revocable living trust holding title to the house. You keep full control during life, the property passes outside probate at death, and your heirs still receive the stepped-up basis.
- A properly drafted life estate deed with retained powers, in the narrower cases where long-term care planning is the priority and the five-year clock is being started deliberately.
- Beneficiary and payable-on-death designations on accounts, paired with a will that covers everything else.
Any of these should be coordinated with Maryland’s separate state estate tax, which reaches estates above a $5 million threshold that is not indexed for inflation.
Can a deed you already signed be undone?
Sometimes. The child can re-convey their interest if they cooperate and no liens have attached, though the reversal is itself a transfer carrying its own gift tax reporting and Medicaid timing consequences. Whether that is the right move depends on how the deed was worded, when it was recorded, and what has happened since.
If a child is already on your deed, or you are considering it, have the deed reviewed alongside the rest of your plan before anything further is recorded. Grant, Riffkin & Strauss, P.C. handles estate planning and residential real estate in the same office, which matters here because this problem sits directly between the two. Schedule a review of your deed and your estate plan through the firm’s website.
