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The Risks of Using a Quitclaim Deed Without Legal Advice

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It’s a familiar scene in Michigan living rooms: parents sitting down with their adult children, hoping to make things “easy” for them. Often, the solution appears to be a Quitclaim Deed that transfers the family home to the next generation while the parents are still living.

We understand the caring intentions behind this choice. You want to be sure your children are protected and provided for. But without a strategic plan, this seemingly simple shortcut can turn into what we call a Technical Disaster. In Michigan, transferring property without professional guidance can create unintended consequences that may cost your family hundreds of thousands of dollars.

Here are the three primary risks of using a Quitclaim Deed without legal advice.

1. The Tax Torpedo: Losing the "Step-Up in Basis."

When you gift a home to your children using a Quitclaim Deed during your lifetime, you’re also gifting them your “tax basis” — essentially, what you originally paid for the property.

For example, if you bought your home years ago for $50,000 and it’s now worth $350,000, and you transfer it to your child, they inherit that $50,000 basis. When they eventually sell the home, they could face a substantial capital gains tax bill on the $300,000 difference.

The Better Way: By using a Living Trust or a Michigan Lady Bird Deed, your children can receive a “step-up in basis” to the property’s fair market value at the time of your passing. This strategic shift can dramatically reduce — and often eliminate — capital gains taxes altogether.

2. The Medicaid Trap: The 5-Year Look-Back

In Michigan, the cost of long-term nursing home care has risen to an average of $12,000 per month, and most families depend on Medicaid to help cover these overwhelming expenses.

However, Michigan law treats gifting a home through a Quitclaim Deed as a “divestment.” If you require nursing home care within five years of signing that deed, you will likely face a Medicaid penalty period. In practice, this can mean being disqualified from receiving benefits, forcing your family to pay out of pocket until your savings are depleted.

3. Exposure to Heirs' Creditors and Life Events

The moment you put your child’s name on your deed, your home is no longer just your asset—it is theirs. This means your home is now vulnerable to anything happening in your child’s life.

If your child faces:

  • A Divorce: Your home could be considered an asset to be split with a former spouse.
  • A Lawsuit: If your child is involved in a car accident or business dispute, a lien could be placed on your home.
  • Bankruptcy: Your family home could be seized to pay off your child’s creditors.

Your Family. Your Legacy. Our Priority.

You’ve worked too hard for your home to let a simple paperwork mistake put it at risk. Before you sign any deed, let’s make sure you’re using the right tools to protect your equity and your family’s future. Our done-for-you process is designed to give you calm clarity and confidence that your legacy is secure.