Can You Give Real Estate Property As A Gift?
If you own a real estate property, it is probably the most valuable thing you own, and if you own more than one real estate property, your wealth is substantial. By this logic, it would seem that giving someone a real estate property would be a great way to help them be financially secure, even more than giving them an amount of cash equivalent to the value of the real estate property. Transferring ownership of real estate property is not simple, though, and it has recently become even more complicated with the enactment of new laws meant to prevent money laundering through real estate purchases. If you are thinking of giving or receiving a real estate property as a gift, contact a Washington DC real estate lawyer.
The Gift That Keeps on Giving?
The annual gift tax exclusion allows you to give $15,000 per recipient per year without paying taxes on these gifts, until you have given $11.7 million in cash gifts over the course of your life. Whereas cash gifts are a freebie, gifts of real estate are not. Once the recipient of the gift becomes the owner of the real estate property, they become responsible for paying property taxes on it. Not only that, but if the property appreciates substantially in value, the gift recipient will also become responsible for paying capital gains tax. This is not even counting the costs associated with maintaining a real estate property.
If you want to give a house to a family member or friend as a gift, the best thing to do is to leave the house to them in your will or place the house in a trust. If you want them to gain possession of the house while you are still alive, you can add their name to the deed as a joint tenant.
A Probate Dispute Over a Gift of Real Estate
Unless an individual indicates otherwise in a legally binding document such as a will or contract, Maryland law allows you to give real estate property as a gift. A probate dispute over the estate of a woman named Dianne illustrates this. In her will, Dianne bequeathed her house to her niece, nephew, and cousin. She stated that she had a life estate in the house, meaning that she could live there for the rest of her life. Her will also said that she had the right to “sell, mortgage, lease, or otherwise encumber” the house during her lifetime, even if doing so would reduce or eliminate the inheritance of her three aforementioned relatives.
In 2007, 17 years after Dianne wrote her will, a couple moved into her finished basement as tenants. Two years later, she issued a new deed, giving the house to the tenants as a gift. When Dianne died in 2015, a probate dispute ensued between her relatives and the tenants. The relatives argued that, pursuant to Dianne’s 1990 will, she did not have the right to give the house away as a gift, and the court agreed with them.
Let Us Help You Today
A real estate lawyer can help you with unconventional real estate transfers, including giving away real estate as gifts. Contact Tobin, O’Connor & Ewing in Washington, D.C. or call 202-362-5900.