Often times a parent will own property that they wish to give to a child but do not want to transfer the deed during their lifetime for various reasons. Instead, the parent will draw up and sign the deed but store it until after their death at which time the child, or other recipient, can file it and claim ownership. But there are some pitfalls to this tactic. Medicaid eligibility can be affected particularly when an asset has been deeded, but not delivered and recorded, which will make it appear to be a held asset and disqualify someone who would have been otherwise eligible. The loss of the deed can also be a concern, if the property was intended for a specific person then a lost deed could cause the asset to be divided among heirs that were never meant to inherit. Lastly, allowing the property to pass through inheritance will grant a stepped up basis that will reduce taxes down the road which is an advantage lost when holding the deed until after death. So be sure to keep these risks in mind before using a pocket deed as an estate planning tool.
See, Elder law attorney warns of risks of unrecorded deeds, Iron Mountain Daily News, February 3, 2016.
Special thanks to Brian Cohan (Attorney at Law, Law Offices of Brian J. Cohan, P.C.) for bringing this article to my attention.
