My wife and I are separated. We both hold title to a house with a mortgage (in both our names) on it. The house is in Michigan. She left in 2015 and lives out of state. My son(23) and I live in the house and I have been paying the mortgage, taxes, property insurance. I would like to know if I can quit claim my half of the house to my son. I understand that my wife and I are still the ones liable to pay the mortgage. My son and I will still be living here and I will continue to pay the mortgage. I am just looking to get my half out of my name. There will be no money changing hands between my son and I. I would also like to know if it will reset my property taxable value.

  • This is more a legal question than a personal finance one. Consider asking the moderators to move it to law.SE.
    – Dilip Sarwate
    Commented Jul 23, 2017 at 21:11
  • The age of the child is also important. If they are a minor they can't sign the paperwork if you need them sign it back to you. Commented Jul 23, 2017 at 22:10

1 Answer 1


The answer is "yes, but . . . "

Due on Sales Clause Issues

You have the ability to transfer your half of the house to whomever you wish (you cannot transfer your wife's half). But, your mortgage probably contains a "due on sale clause" which states that if you transfer any interest in the property to someone else that the entire balance of the mortgage is immediately due and payable, unless you obtain the advanced consent of the lender, which would usually be denied.

Often, mortgage companies make no active efforts to police due on sale clauses when interest rates are low (on the theory that refinancing could cost them a higher interest loan currently in place), and then actively research to see if anyone has violated them when interest rates are high, on the theory that they can force someone to refinance at a higher interest rate.

Waste and Fraudulent Transfer Issues

It isn't clear what reason you have to transfer the property to your son, i.e. why you want it out of your name, and the reason has multiple legal implications.

Waste In A Divorce Context

Since you are separated, but might be divorcing at some point, a transfer of the house could be considered "waste" for divorce purposes and as a result you might be treated as if you still owned the property for property division purposes in a divorce, even though you transferred it to your son.

Fraudulent Transfers

If the purpose is to avoid your creditor's claims, this may constitute a "fraudulent transfer" and creditors may be allowed to disregard this transfer. If your net worth is less than your outstanding debts (including pending claims not yet reduced to a fixed dollar amount), then this would probably be a fraudulent transfer if any of the equity in the house could otherwise be claimed by your creditors.

Tax Issues

Federal Gift Taxes

If the fair market value of the entire property is at least $26,000 more than the value of the entire mortgage (i.e. so your equity in the house is worth more than $13,000), then a transfer to your son would be taxable gift and would have to be reported on federal tax form 709. It would probably be necessary to secure an appraisal in connection with the transfer and filing of this return to be squeaky clean. Usually, no actual tax payment would be due, but the return would still have to be filed.

Capital Gains Taxes

For capital gains tax purposes, your son would be treated as if he purchased half of the house for your share of the price that you paid. He would need to own the house for at least two years before he would be eligible for the exemption from capital gains taxes for the sale of a personal residence, in addition to having to live there for at least two years (not necessarily the same two years he owned it).

Michigan Property Taxes

Your son might not be liable for the mortgage, but as an owner he would still be liable for property taxes that went unpaid, and for other legal liabilities associated with ownership. In some mortgages, the property tax is paid as part of the mortgage, but in other mortgages, it is not.

Unlike California, which is the only state which revalues property for property tax purposes only when it is sold, Michigan revalues property for property tax purposes annually whether you sell it or not. So this transaction would probably have no effect for property tax purposes.

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