There are always 'taxes' the question is however, how to MINIMIZE the tax consequences. This depends on the tax basis of the property you are transferring, the method of transfer, and the size of the transfer. In brief, while you may be able to exempt the transfer from gift tax (particularly if it is given this year) there will be many other issues that could cause problems if you do this wrong.
Just for example, there are also non-tax issues that you need to consider (e.g., should you need to take out a home equity loan you will need daughters 'permission' to borrow against your house if you place her name on it, and if you 'gift' the house to your daughter you may be ineligible for federal benefits like Medicaid for some time should you need to make such a claim.)
This is NOT something you should do without fully understanding all the ramifications of the transfer, both tax and non-tax! Please spend some time with a local attorney who can advise you not only of federal issues like I've mentioned here, but any quirks PA law may have that I'm not aware of.
Talk with a local estate planning attorney and s/he can advise about the best way to get you that peace of mind without causing more problems for you or your daughter down the line.
There are not likely to be any gift tax ramifications if you give the house to your daughter. The property tax on the house may go up as result of the transfer of ownership. There may be a better way to accomplish your goal without having to transfer the property now, such as a trust. I suggest you consult with an estate planning attorney to assist you with this.
THESE COMMENTS ARE NOT LEGAL ADVICE. They are provided for informational purposes only. Actual legal advice can only be provided after consultation by an attorney licensed in your jurisdiction. Answering this question does not create an attorney-client relationship or otherwise require further consultation.
Hello … John here … Yes, you can deed the house to your daughter and it will not pass through your Last Will. However, then your daughter will own it outright and she can do what she wants to do with it (because you will no longer own it). Absent your daughter’s permission, you cannot mortgage it or take it back. Your daughter can then do as she pleases with it (i.e., mortgage it without your consent, transfer it to someone else, etc.). Please always remember that when you “change the title of an asset” (i.e., house, bank account, etc.), you are changing ownership of that asset. There are alternatives to your situation also. Joint ownership seems prudent (i.e., your daughter and you on the deed) from what you have stated. Your goals will, in essence, be the same, but you will also retain some control over the house while you are alive. In either event, the I.R.S. and the Pennsylvania Department of Revenue will are neither authorized to give out legal advice and the tax issues are not an issue. Despite the common answer provided with all of the attorneys, seeking the help of an attorney who practices in this area of law will, at the end of the day, serve your interests the best. Good luck. John.
I agree with the answers of both of the Attorneys who have addressed your question. But reading your question again, you state your goal for doing this is to make sure your daughter, and not your son receive your home.
My question back to you, if we were in a client meeting, is do you want her to actually have it now or when you are gone?
If the answer is now, the issues to think about include both the tax ramifications and potential personal ramification:
1. Tax Ramifications: (a) Capital Gains: when you gift an asset - any asset stocks, real estate, etc - the person receiving the asset is presumed to have paid what you paid when you purchased whatever it is that you are now giving away. When that person sells that same asset, they will have to pay capital gains taxes on the difference between what your original purchase price was, and what the sale price is. If the asset is highly appreciated, the capital gains tax may be significant.
On the other hand, if the asset will never be sold (e.g. a vacation home that will stay in the family), the capital gains tax is moot. No sale, no gain to report.
(b) Gift Tax: Attorney Zichi addressed this in the first answer, and I believe what the IRS is telling you is that when you gift an asset in excess of the amount allowed per year, you have the option paying any taxes due when the gift happens, or having your estate pay it when you die. Depending on the size of your estate, it may make sense to pay any taxes now, rather than wait. NOTE: this is a question for your CPA.
2. Personal Ramifications: if you give away your home, well, it is no longer yours. A home is generally the single most valuable asset that someone has, and just giving it away should only be done if you are certain you will never need the cash value of the property. For example, if you decide to move to a condo or assisted living, is there enough liquid cash to finance that without using your home?
The next personal ramification involves your daughter. If she is married, and the marriage dissolves, the house is at risk of being lost in the divorce. If she ever files for bankruptcy, again the house could be at risk. If she ever gets sued (what does she do for a living?; does she have teenage drivers in her family?), the house is a risk.
SInce it is your daughter's home, it will be subjected to any unanticipated trouble that she may encounter.
I believe there are better, less risky ways to accomplish your goal, rather than just giving it to your daughter now. I also believe that the reason you are getting different answers from attorneys is because the tax ramifications depend on the size of your anticipated estate when you pass away, the estate tax laws in place at that time, and that the other personal issues presented by your question are complicated.
You should meet with an attorney, and tell him or her your goal. Hopefully, they will be able to provide you with options: maybe a life estate deed or a Trust could accomplish your goal without having to give up ownership while you are living.
THESE COMMENTS SOULD NOT BE CONSIDERED AS LEGAL ADVICE. They are for informational purposes only. By answering this question we have not created an attorney-client relationship.