Gifting Real Estate To Family
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As top-tier estate planning attorneys in Ohio, Linn Legal has helped countless clients protect their families’ futures and secure their legacies. If you have questions about gifting real estate to family, we can help you navigate your legal options. Schedule a free consultation to learn more.
You’ve worked hard to build a lasting legacy, sacrificing and saving to provide your future generations with financial stability. Now, as you look forward to a fulfilling retirement, you want to make sure that your lifetime of diligence doesn’t go to waste.
For many of our clients, that process starts with ensuring the safe transfer of their most valuable assets, such as real estate. It’s important to understand, however, that the method you use to accomplish this could have costly repercussions for your beneficiaries.
The best way for gifting real estate to family (or transferring any asset, for that matter) depends heavily on your specific financial situation, goals, assets and holdings. Unless you’re a legal professional, however, navigating the complexities of estate planning is difficult. Luckily, you don’t have to do it alone.
As a trusted estate planning law firm in Cincinnati, Linn Legal has the expertise and resources you need to secure your estate and protect your future. This article will explain everything you need to know about gifting real estate to family members, including ways to transfer real estate, the potential consequences of doing so and more.
Everyone—regardless of the size of their estate—needs a comprehensive estate plan. Failing to establish one leaves your family vulnerable to financial penalties, excess taxation and liabilities. Call our law office at (513) 426-9443 to explore your options in a free case evaluation.
Transferring Real Estate to a Family Member
When it comes to gifting real estate to a family member, a lack of options isn’t the issue—there are many vehicles at your disposal. For most people, especially those with large estates and significant real estate holdings, the primary concern is finding the method that will incur the fewest financial penalties.
This section will explore three common ways of transferring ownership of real estate: Gifting real estate while you’re alive, with a trust and through inheritance.
Gifting Real Estate While You Are Alive
If you’re interested in gifting real estate to a family member while you are alive, you can accomplish this by using a deed. There are many types of real estate deeds in Ohio, including the following:
- Quitclaim deed. The quitclaim deed is a popular way to transfer real estate ownership, but it doesn’t make any warranties or guarantees about the property’s title. As a result, it’s best reserved for situations in which the parties involved are familiar with and trust each other, such as between family members.
- General warranty deed. As the most comprehensive type of real estate transfer deed in Ohio, the general warranty deed provides a high level of protection to the buyer. It contains guarantees from the seller (or grantor) that they possess a clear title to the property and will defend it against any defects that come to light.
- Special warranty deed. Although you can use a special warranty deed to transfer ownership of real estate, this deed only provides title guarantees for the time the grantor owned the property.
- Bargain and sale deed. A bargain and sale deed is used to transfer ownership of property in Ohio and some other states. Although it implies some warranties and covenants, it doesn’t offer the same level of protection as a general warranty deed.
- Life estate deed. This type of deed allows you to transfer property while retaining a life estate interest, meaning you retain the right to live on or use the property for the duration of your life.
Any deed used for gifting real estate to family members needs to contain certain key elements. It must identify you as the current owner or grantor, name the new owner or grantee and provide a legal description of the property you’re transferring. You must sign the deed in front of a notary public or another authorized officer who will acknowledge the signing.
Transferring Real Estate Through a Trust
Another effective way to transfer real estate is through a trust. A trust removes your personal ownership of a property, meaning it’s an effective way to avoid probate. Many people, regardless of the particular assets included in their estate, make efforts to avoid probate as it can prove a costly and time-consuming process for their beneficiaries.
Transferring real estate through a trust provides the grantor with the ability to continue controlling how real property is used and, just as importantly, when it is actually transferred to a family member. A trust allows the grantor to set parameters and guidelines, as well as to set specific conditions that beneficiaries must meet before inheriting a property.
Giving Real Estate as Inheritance
Property owners may also choose to give their real estate as inheritance, such as through a trust or last will and testament. By transferring real estate in this way, a grantor’s heirs may be able to receive a property without paying capital gains tax.
However, it’s important to understand that giving real estate through inheritance in Ohio typically means it will go through the probate process. This legal process will involve identifying your heirs, appointing an executor or administrator to your estate, completing a property valuation and paying remaining estate taxes and debts.
After your heirs complete these steps, your estate will be distributed to them and your real estate deed transferred. It’s also important to note that when your heirs inherit real estate, their tax basis for the property will be decided by its fair market value, according to Ohio’s “step-up basis.” If they choose to sell it, their tax rate will be based on the difference between the value of the property at the time they took ownership and the sale price or purchase price, rather on than on a cost basis.
What Are Potential Transfer Consequences?
Transferring real estate in Ohio—whether through sale, gift, inheritance or by other means—will have various legal and financial consequences. Understanding the implications can help you decide on the best transfer option for your situation.
Here are some of the potential consequences to be aware of when choosing how to transfer your real estate in Ohio:
- Tax consequences. Depending on your specific situation, the family members to whom you transfer your real estate may be subject to capital gains tax, gift tax or inheritance taxes under Ohio tax laws. Your attorney can help you explore various estate tax exemptions.
- Title concerns. Transferring real estate to family members may uncover title issues such as liens, easements or encumbrances, each of which could affect your grantees’ claim to the property.
- Maintenance and liability. When you transfer ownership of a property, you may also be transferring responsibilities for its ownership and maintenance obligations, including homeowners’ association dues, property taxes and more.
- Mortgage and loans. Transferring ownership of your real estate may require the new owner to pay the remaining mortgage or loan balance to your lender.
- Probate. Without the property estate planning measures in place, your beneficiaries may need to go through the probate process.
- Local regulations. Like many states, Ohio has specific laws and regulations for real estate transactions. Ensuring compliance with local regulations may require you to take additional steps, such as recording a deed with the county recorder’s office.
As you can see, real estate transactions in Ohio are complex. No matter how you choose to transfer property, you will need to understand the legal and tax implications and consequences of your decision. An experienced estate planning attorney can be an invaluable resource in navigating the many complexities in regard to gifting real estate to family.
Frequently Asked Questions About Gifting Real Estate to Family
If this is your first time learning about gifting real estate to family members in Ohio, you probably have a lot of questions. The best way to find answers is by consulting a trusted estate planning lawyer for legal advice. In the meantime, check out the answers to some of our FAQs.
- What are the benefits of gifting property to family?
The benefits of gifting property to family members and loved ones in Ohio depends heavily on the methods by which you complete the transfer. Depending on which tools you decide to use, you may be able to help your beneficiaries reduce their tax burden and avoid probate. Ultimately, though, enacting a comprehensive estate plan can help you simplify your affairs and find peace of mind about how your assets will be handled. - What are the different methods for gifting property to family?
There are numerous ways to transfer real estate to family, but gifting property to a family member typically involves a deed or trust. Commonly used deeds include quitclaim and general warranty deeds; revocable living trusts and LLCs transfers can also accomplish real estate transfers. - Is gifted real estate taxable?
Yes—gifted real estate is taxable. However, the IRS typically does not tax a gifted property based on its entire current value. To find out how much of your gifted property is taxable, you’ll want to speak with an estate planning attorney. They can help you explore whether the property is a taxable gift.
Linn Legal: Top-Tier Estate Planning Attorneys in Cincinnati, Ohio
You’ve worked hard your whole life—don’t put your legacy at risk by failing to make a comprehensive estate plan. An experienced attorney can help ensure your assets are distributed and used according to your wishes, and that ownership of your real estate is transferred to family members.
Ready to get started? Contact Linn Legal online to schedule a free, no-obligation consultation, or give us a call at (513) 426-9443 to speak with a legal professional today.
