Should You Add Your New Spouse to the Deed of Your Home?

add new spouse to deed

When you get married, it’s common to merge the majority of your financial lives. After all, when you live together, it’s normal to both be involved with handling expenses and planning for the future. However, if you owned your home before you wedding. Figuring out if you should add your new spouse to the deed of your home isn’t always easy. Ultimately, there are advantages and disadvantages to adding them. As well as leaving them off. If you’re trying to decide which option is right for you. Here’s what you need to know.

The Benefits of Adding Your New Spouse to the Deed of Your Home

Avoiding Probate If You Pass Away

One of the biggest benefits of adding your spouse is the ability to avoid probate if you happen to pass away. If your spouse isn’t listed on the deed – and certain other arrangements have not been made – they have no legal claim to the house. As a result, they may have to head to court and attempt to get a judgment to keep the property. This is something that may be easier said than done depending on the nature of the full situation.

Since your partner would be listed on the deed as an owner. They could automatically keep the property if you died unexpectedly. They don’t have to deal with probate to maintain their rights to the house. Which could be a major weight off their shoulders during a difficult time.

Capital Gains Exemption

As a single person, up to $250,000 in capital gains for selling a home can be tax-exempt. While this may be sufficient for many people. If your gains exceed that mark. You would have to pay capital gains taxes when you sold the property.

However, married couples get a larger exemption. It goes up to $500,000, allowing you to reduce your tax liability, potentially dramatically, when you sell the house.

The Drawbacks of Adding Your New Spouse to the Deed of Your Home

Loss of Full Control Over the Property

Once you add someone to the deed of your home, they legally have partial ownership of the property. This means you can’t make certain moves without their consent. For example, if you wanted to sell the house, you and your spouse have to both sign-off.

While this usually isn’t an issue for happily married couples, it can become difficult should the relationship become contentious or if there is a divorce. In either case, dealing with a major joint asset can be difficult, or you may get strong-armed into doing something you’d rather not.

Additionally, your new spouse would legally have the right to transfer their share of the property to someone else. This could financially tie you to someone else, which may not be ideal.

Debt and Liability Exposure

When you add your new spouse to the deed, they become a partial owner of a major financial asset. This could increase your overall exposure to liability, as well as certain debt-oriented issues.

There would be a chance that the property could be attached to a debt without your consent, putting your home at risk should a default occur. Your spouse’s actions could also potentially cause a lien to be placed on the property, suggesting that they owe a creditor or certain service providers money and that creditor or provider is able to secure a court judgment.

Loss of Benefits or Aid

A home is regarded as a financial asset, the value of which may be considered when calculating certain benefits or aid. For example, shifting an asset could impact a person’s Medicaid eligibility or expected family contribution (EFC) on their Free Application for Federal Student Aid (FAFSA) if they own another home. While the value of a primary residence is typically excluded, secondary residences usually aren’t.

Alternatives to Adding Your New Spouse to the Deed

If the benefits of adding your spouse to the deed don’t outweigh the drawbacks in your mind, there are alternatives you can consider. First, you could leave your spouse the house in your will. While a will doesn’t mean your spouse would completely avoid the probate process, it does streamline the transition.

You can also use a transfer on death deed (TODD). With a TODD, you can name the person who you want to have receive your home if you die. In this case, that would be your spouse.

At times, a TODD allows your spouse to avoid probate when it comes to your home. However, it also allows you to maintain full control of the property while you are alive, which may be beneficial in your eyes. You can also revoke a TODD at any time, allowing you to remove the arrangement should you get divorced or would prefer to give the home to someone else, such as a child or other family member.

Did you add your spouse to the deed of your home? Why or why not? Share your thoughts in the comments below.

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Tamila McDonald

Tamila McDonald is a U.S. Army veteran with 20 years of service, including five years as a military financial advisor. After retiring from the Army, she spent eight years as an AFCPE-certified personal financial advisor for wounded warriors and their families. Now she writes about personal finance and benefits programs for numerous financial websites.