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Q: My brother is using a quitclaim form and adding me back to the deed for the house we grew up in. No money is changing hands. What are the tax implications, if any? —Rich P., New York

A: That's a good question—but it raises a related question that might be even more important for you to ask, says Pat Simasko, a partner and attorney at Simasko Law outside of Detroit. The first thing someone in the letter-writer's situation should question, he says, is whether a quitclaim deed is the best way to go about establishing shared ownership of a piece of property.

People like quitclaim deeds because they are easy to execute. They don't require a title search to check for outstanding liens and can be used by parents to pass property to children without having to go through probate. In fact, many people mistakenly refer to these as “quick claim” deeds, an understandable error since the words sound similar, and this kind of a transaction is known for its simplicity and speed.

But the lack of necessary due diligence is also one of the risks.“There are times when you don’t know what you’re getting,” says Kim Dula, a partner at Philadelphia-based accounting and advisory firm Friedman LLP. Court records are filled with accounts of people who found out the hard way that there was a large unpaid tax bill or lien on the property. So in this case, it would be a good idea for the letter writer to make sure he knows for certain that the family home is up to date on taxes and hasn’t been used as collateral for a loan.

An alternative mechanism for transferring property is a warranty deed. Typical in real estate sales, this type of deed requires a title search and title insurance to ensure that there are no liens on the property.

Another potential hitch with using a quitclaim deed to own the family home together is what happens if one brother dies, Simasko says. If the deed specifies that the brothers own the property jointly, then when either passes away, the remaining share of the house would go to the surviving brother rather than to the deceased's children. With an "in common" deed, the two shares of the property remain separate.

As to the tax question, the IRS will view the addition of the letter writer via quitclaim deed as a gift. Under the terms of the U.S. tax code, gift taxes are paid by the giver, so the brother would have to fill out a gift tax form 709, and he can apply the value of half the house to the lifetime maximum of $5.5 million he can give away under current estate tax rules.

But there is a big potential tax hit buried in this transaction: the capital gains tax that will be due if the brothers were to sell the house later. Whether you're on the hook for such a tax depends on how your brother acquired the family home in the first place.

“If he inherited the house by a trust agreement or a will, he wouldn’t owe capital gains tax,” Simasko says. But if the parents also used a quitclaim deed, it’s a different story. “If he was given the house, it’s on a carryover basis, so there would be capital gains tax upon sale,” he says. If the house has been in the family for a long time and is in area where real estate has increased sharply in value, you could be looking at paying capital gains tax of tens of thousands of dollars.

Simasko says one option at this point—provided the brothers plan to keep the house in the family indefinitely—would be for each brother to set up a revocable trust and put their respective shares of the house in those. Trusts let them pass along their share of the house to their heirs without having to pay capital gains tax or go through probate, he explains. Also, details about who pays for maintenance, property taxes, and so on can be hammered out and recorded in the trust documents.

“If you keep using quitclaim deeds, you’re just kicking the can down the road,” Simasko says.