Taxes as they relate to real estate are two-fold. First, there is the gift vs estate tax. If you give him real estate valued at $50000, you have made a taxable gift of $37000. You would have to either pay the tax or reduce your exemption amount available at your death. If you have a potentially taxable estate now, that is not a satisfactory outcome. Leaving the RE to him as part of your estate can spread out the estate tax burden, if any, or even allocate it to other beneficiaries.
The other tax is capital gain tax. If you gift the RE to him, he takes your cost basis. If he ever sells the property, his gain is figured back to what you paid for it, plus any improvements. If you allow him to inherit, his cost basis is the value at the time of your death.
Bottom line, gifting real estate is rarely a good idea. Having said that, there may be other ways to structure the gift that address these issues. You should consult an attorney directly for options.
This answer is for informational purposes only and should not be considered specific legal advice, nor does it constitute an attorney-client relationship.
I agree with Jennifer's answer. But I want to lay it out a little more succinctly. Inheritances aren't taxed, so that's better. Second, is this a contract for a time share or a real property you actually have a deed to? If the latter, then you can leave it to your nephew by way of something called a Beneficiary deed. We are one of only a few states that has this - it allows you to file something now at the Recorder of Deeds office that will only take effect after you (or you and your wife) die. See a lawyer to learn more about it.
This is not legal advice. Do not rely on this advice. Discuss all the facts of your case with a lawyer and get good legal advice based on the facts and documents in your case. Remember, you are not my client and I am not your lawyer.
Without knowing more, I would "give" your nephew the real estate interest while you are alive only if the property is expected to dramatically increase in value after you make the gift. In other words, if your nephew's current use and enjoyment of the interest during your lifetime is not the motivation of your contemplated gift, then this transfer only makes sense if you are concerned about the future value increase making your estate more susceptible to estate taxes at your death. [Note: Since such a lifetime transfer would exceed your $13,000 annual gift exclusion, a gift tax return would need to be filed.]
Here's a major downside to a lifetime gift - your nephew receives your "carryover basis" in the real estate. As a result, if he eventually sells it, then he will pay "capital gains taxes" on any appreciation (i.e., increase in value) in the property during the time you owned it and he has owned it.
On the other hand, if your nephew "inherits" the real estate at your death, then the real estate value will be included in your estate value for potential estate tax purposes. However, on the bright side, your nephew will inherit the real estate with its date of death (your death, that is) value as its new basis for capital gains purposes. This can eliminate significant (or all) capital gains tax liability. As opposed to a "carryover basis," this is known as a "stepped-up basis."
For further information on "gifting," follow the link to my website and read the February 2012 archived issue of my monthly estate planning newsletter.
Disclaimer: My answer is provided without a full understanding of all relevant facts, let alone your unique estate planning objectives. Accordingly, no attorney-client relationship is hereby created as a consequence and I highly recommend a consultation with competent legal counsel before taking this or any action when it comes to your estate planning. Sometimes scenarios that appear to be simple are in reality extremely complex. Remember the Titanic. Most of an iceberg's complexity is below the surface and hidden from view. In life we are most vulnerable when we don't know what we don't know.
I agree with both of the other answers. My only hesitation is that you indicated that you only own a "portion" of this property. HOW you own this makes all the difference in the world. While you can certainly do as David suggests, your deed would only affect the portion of the property that you own. Upon your death, you may not own ANYTHING, depending on how your current deed reads. I would urge you to meet with an estate planning attorney and review your current deed to determine how you now hold title and what your best option is for accomplishing your objective of getting the property to your nephew upon your death.
You will also want to make sure you ask the attorney about setting up a durable power of attorney for financial matters and medical treatment. This will name someone who can take care of you and your affairs if you ever become incapacitated. It will eliminate the need for you to go to probate to have a guardian/conservator appointed.
*** LEGAL DISCLAIMER I am licensed to practice law in the State of Michigan and have offices in Wayne and Ingham Counties. My practice is focused in the areas of estate planning and probate administration. I am ethically required to state that the above answer does not create an attorney/client relationship. These responses should be considered general legal education and are intended to provide general information about the question asked. Frequently, the question does not include important facts that, if known, could significantly change the answer. Information provided on this site should not be used as a substitute for competent legal advice from a licensed attorney that practices in your state. The law changes frequently and varies from state to state. If I refer to your state's laws, you should not rely on what I say; I just did a quick Internet search and found something that looked relevant that I hoped you would find helpful. You should verify and confirm any information provided with an attorney licensed in your state.