Derek Cordier, Esquire
319 South Front Street
Harrisburg, PA 17104
Phone: 717 919-4002
Fax: (717) 230-1931
Partnered and buying a home or already own a home and want to add a significant other’s name to the title – its time to talk deed. First there is the question of the mortgage. In Pennsylvania, the name on the deed must match the name on the mortgage. Lenders decide who qualifies for the mortgage. So if only one person qualifies, only one person’s name is on the deed and is therefore the legal owner of the property. If you are able to have more than one person on the deed, having an ownership interest in the property may be accomplished in a few different ways. For LGBTs the tenancy, or ownership interest, that affords two parties the most protection is that of joint tenants with right of survivorship. If one person named on the deed dies, a joint tenancy with right of survivorship will allow the property to pass to the survivor without going through probate and thus no one can object, as with a last will and testament. However, the joint tenants with right of survivorship tenancy do not avoid all taxes.
At death there will be an inheritance tax on the share of property that passes. That tax for unrelated persons is currently 15%. If you already own the property and wish to add an unrelated significant other to the deed with a joint tenant with right to survivorship clause, there will be a 2% transfer tax on half of the value of the property.
By doing some simple math, if you transfer half of the property now, you will pay 2% on half of the value of the property, and 15% on half of the value if one party dies. The alternative is to leave the property by last will and testament. However, if you leave the property by last will and testament to someone who is not related, there will be a 15% tax on the entire value of the property. So in the long run you may save money on taxes by transferring now rather than at death.
Both parties should keep a record of the contributions to the mortgage and upkeep of the home. If there is a breakup, the person that is not able to be named on the deed could end up with nothing to show for their contributions. A cohabitation agreement that specifies what the unnamed partner shall receive if there is a breakup should provide adequate protection. Emotions run high when couples are contemplating the purchase of a home. They run even higher if the couple breaks up.
You must be sure that owning a home together is in both parties’ best interests. If you are partnered, but only one person is able to be named on the deed, the person whos name is not on the deed should require some protection if they are contributing to the household and/or the mortgage.