How to Transfer Tax in a Quit Claim Divorce Settlement

Generally, quit-claim divorce settlements can be executed without incurring transfer tax fees.

Typically in a divorce settlement involving a quit claim,, one spouse is transferring all ownership interests in the marital home to the other spouse. Quit claim deeds are often used in divorce situations or for the transfer of property between family members. Many states impose a transfer tax when one party quit claims property to another person, except when the transfer takes place between spouses or a parent and child. Deed transfers are also exempt from transfer tax when the quit claim deed is part of a divorce settlement.

Instructions

1. Consult with an experienced divorce or real estate attorney. In a quit-claim divorce settlement involving the transfer of real property, which could be your most valuable marital asset, the proper execution of all steps and documents involved is critical. Many attorneys offer a free initial consultation.

2. Obtain a quit-claim deed form. If you decide to execute a quit-claim deed without the aid of a lawyer, there are numerous places online to find both free and paid quit-claim forms, although it may be worth the nominal cost to obtain a professionally formatted, more credible and well-crafted form. They are usually one page and fairly inexpensive, some costing only a few dollars, and you can typically download the document immediately.

3. Contact a professional tax preparer or accountant. Ask about your state’s statutes regarding property transfer tax or other possible tax implications from a quit claim divorce settlement. As previously stated, deed transfers are generally exempt from transfer tax when the property is conveyed as part of a divorce settlement. However, if the property is conveyed several years after the divorce, there could be transfer tax owed.

4. Decide how much consideration will be provided in exchange for the marital home. The consideration is something of value given by one party to the other in return for the promise to perform according to a written contract. When transferring property between divorcing spouses, the consideration may be a nominal monetary amount, such as $10. Generally, for a contract to be valid there must be some amount of consideration provided.

5. Fill out the quit claim form. The first part of the form requires names and addresses of the grantor and grantee, location of the property and the jurisdiction of transfer. Next, you will need to provide the agreed-upon consideration amount, how the title property will convey (sole ownership, joint tenancy are examples) and a legal description of the property as presented on the original deed, such as a lot or parcel number. You may need to provide documentation, such as a final divorce decree, as proof that your property transfer is exempt from transfer tax.

6. Sign the deed in the presence of a witness. Your signature must be notarized and evidenced by a notary’s signature on the deed. Your spouse will probably not need to sign the form, although some states require both the grantor and grantee to sign. Have the deed recorded at the county recorder’s office to make it valid. You will not owe transfer tax, but you may have to pay a recording fee, which usually runs around $11 to $13 for the first page and another $2 to $3 for each additional page.

References

• The Easy Deeds, LLC: Common Uses Of A Quitclaim Deed During Divorce
• QuitClaim: How to Use a Quit Claim
• McKinley Irvin, PLLC; Divorce and Taxes: Answers to Nine Commonly-Asked Questions; Jason Holloway
• The Free Dictionary: Definition Consideration
• Racine County: Filling Out Quit Claim Deed

Resources

• Law Depot: Quitclaim Deed FAQ
• A Free Consultation: Find a Local Divorce Lawyer
• Federation of Tax Administrators: State Real Estate Transfer Taxes
• TRCB; Divorce and Real Estate Property Transfer - What You Need to Know; Kevin Pratt
• Herald Net; Quitclaim Deeds Can Have Excise Tax Implications; Steve Tytler; May 2009