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How to Gift Real Estate Property to a Family Member

Byline profile imageEdited by Jeff White, CEPF®
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Byline profile imageEdited by Arturo Conde, CEPF®
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Transferring real estate can be difficult and cost you money in taxes, if you don’t do it the right way. So, if you want to gift real estate property to a family member, you’ll need to understand different types of property deeds and weigh the benefits and risks associated with this type of move. For help with estate taxes and gift planning, consider talking with a financial advisor.

Understanding the Transfer of Real Estate

The transfer of real estate is a legal process that involves a change in ownership or title from one party to another. When gifting real estate to a family member, this act may trigger both legal and tax implications. Understanding how gift and estate tax laws apply is key to avoiding unintended consequences.

Under federal law, gifting real estate is treated as a taxable gift if the property’s fair market value exceeds the annual gift tax exclusion—$19,000 per recipient in 2025. If the gift exceeds this threshold, the excess amount counts against the lifetime gift and estate tax exemption, which stands at $13.99 million for individuals in 2025. While no immediate tax may be due if you’re below this lifetime limit, filing IRS Form 709 (the gift tax return) is required to document the transfer.

In addition to gift tax considerations, the transfer of real estate can also affect the recipient’s future capital gains tax liability. When you give property as a gift, the recipient inherits your original cost basis rather than receiving a stepped-up basis. If the recipient decides to sell the property in the future, they could be responsible for capital gains tax on the increase in value since you originally bought it—even if most of that growth happened while it was still in your name.

In contrast, inherited property typically receives a stepped-up basis, aligning the cost basis with the property’s value at the time of death, potentially reducing capital gains exposure.

State and local taxes may also come into play. Some states impose their own gift or inheritance taxes, while others may levy transfer or recording taxes regardless of whether the property changes hands via sale or gift. In certain cases, improperly structured gifts may even impact Medicaid eligibility, particularly if the transfer occurs during the program’s five-year look-back period.

The Property Transfer Process

Legal requirements will vary based on location and the specific circumstances of the real estate transfer. Here are five general steps to help you plan ahead:

  1. Conduct a title search to uncover any issues.
  2. Draft a deed in compliance with local laws.
  3. Have the current owners sign the deed in front of witnesses.
  4. Obtain a notary’s acknowledgment of the deed’s execution.
  5. Record the deed with the appropriate government office.

Risks of Transferring Real Estate

The transfer of real estate within a family is a multifaceted process that involves both tax and legal requirements.

Transferring real estate carries both legal and financial risks.

Your first concern in the process will be to make sure that the deed and title are clear, meaning that the property is free of liens and other legal encumbrances.

Second, you will have to figure out the transfer taxes. These are typically levied based on the property’s sale price or assessed value and are imposed by state or local governments at the time of transfer or the recording of deeds and other legal documents.

Mishandling paperwork or overlooking due diligence can lead to legal disputes, financial loss, delays in transactions, or even the loss of property rights.

How Do I Transfer Property to a Family Member Tax-Free?

Transferring property to a family member without triggering taxes often requires strategic planning. One method is to gradually gift fractional interests in the property over multiple years, staying within the annual gift tax exclusion each time. This approach reduces the taxable value of each transfer and can spread out potential tax exposure.

An alternative approach is to set up a qualified personal residence trust (QPRT), which lets you move ownership of your home out of your estate while keeping the right to live in it for a predetermined number of years. Because you’re retaining an interest in the property, the IRS assigns a lower taxable value to the gift, and any appreciation in the home’s value after the transfer generally avoids being counted in your estate.

For spouses, an outright transfer of property is generally tax-free if both are U.S. citizens. Transfers to irrevocable trusts may also be tax-efficient under certain conditions, especially when coordinated with long-term estate planning goals.

These approaches involve complex rules and potential long-term consequences, so working with an estate attorney or tax specialist is often necessary to implement them effectively.

Types of Deeds to Use When Transferring Property to Family

When transferring property to a family member, here are three types of deeds to consider:

Warranty Deeds

Offering the highest level of protection, warranty deeds come with a guarantee from the grantor of a clear, unencumbered title. This assurance is particularly valuable in intergenerational transfers, when parents could pass down the family home to their children, or another family member.

Quitclaim Deeds

Known for its simplicity and speed, quitclaim deeds transfer whatever interest the grantor has without any warranty of title validity. They are especially beneficial for informal intrafamily transfers, such as when the property is gifted or ownership is restructured within a trust. A common scenario might be when siblings agree to transfer a share of a family estate to one another, prioritizing expedience over formal guarantees.

Grant Deeds

This type of deed can change ownership with the promise that the property has not been transferred to someone else under the grantor’s tenure. It doesn’t cover defects from before the grantor’s ownership, but the grant deed can assure that property has been free from encumbrances during their period of ownership. This could be a solution when family members wish to have some assurance but are willing to accept certain historic title risks.

Bottom Line

You may consider consulting an estate planning attorney or another professional to help you understand the legal requirements.

The transfer of real estate within a family is a multifaceted process that involves both tax and legal requirements. You may consider working with a legal professional to ensure that you have completed all the necessary documentation and are compliant with relevant rules and regulations.

Tips for Estate Planning

  • Whether you want to transfer property to a beneficiary or manage your estate effectively, a financial advisor who specializes in estate planning can help. Finding a financial advisor doesn’t have to be hard. SmartAsset’s free tool matches you with vetted financial advisors who serve your area, and you can have a free introductory call with your advisor matches to decide which one you feel is right for you. If you’re ready to find an advisor who can help you achieve your financial goals, get started now.
  • If you plan on going through the estate plan process on your own, make sure you understand the potential dangers of DIY estate planning.

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