If you have property that has been in your family for generations or a home that you have taken special care of and want to pass it to someone who will appreciate this work, passing real estate can be tricky. Transferring property between family members can become even more complicated, especially when emotions are added to the equation.
Finding the best legal route and strategy for passing property to a family member will help you avoid major legal ramifications or losing a large investment. Here are some further insights into how you can better transfer property to children, grandchildren, or extended family.
Gifting Real Estate
When you transfer a home, apartment building, or any piece of real estate out of your name and into another, expecting nothing in return, this is seen as gifting. The definition of gifting is when the title is completely changed, and the current owner relinquishes all property rights. Selling a property to a family member at a loss may be able to be claimed on your taxes, but giving a gift can not be written off.
Deeding A Home
Deeding a house or transferring the ownership to a family member starts with identifying the recipient and coming to an agreement on terms and conditions together. Both parties will complete a change of ownership form that is then filed with the recording office. A notarized deed and paperwork will also need to be drafted if you deed a home to a family member. Depending on your state, you may come across a grant deed or a gift deed when transferring ownership to a family member.
Bequeathing Property To Heirs
Transferring the home or property after you die is one of the more common ways property is transferred to family. Often, individuals choose from three options when bequeathing property to living relatives, including, as part of a will, a part of a living trust, or setting up a transfer on death deed.
If the property is part of a will, the owner of a will can decide which heir the property will go to after their death. You can also split up the property between multiple heirs if you wish. Putting your home or family property in a will is often the easiest choice, but it will have to go through probate court after your death, which could be a lengthy or expensive process for your family members.
A revocable living trust is the best way to avoid probate and provides you with more control over how the property is handled and managed even after you are gone. A living trust may indicate that the home is in a certain state before it can be sold. The trust can sell the property if none of your heirs want to live there. The proceeds will then be divided among the heirs as laid out in your trust.
Finally, a transfer-on-death deed is similar to a payable-on-death bank account and is another way to avoid probate. However, these are not available in every state, so you will need to see if your location offers them before deciding to pass your property this way.
Transferring Real Estate With An Attached Mortgage
If your home or property has a mortgage, that doesn’t make it impossible to transfer to family, but it does become more complex. Most mortgages have a due on sale clause, meaning that the new property owner may not be able to take over the monthly mortgage payments. More often than not, the buyer may need to take out their own loan and assume their own interest rate when obtaining property from a family member.
Can You Avoid Taxes When Transferring Property Between Family?
Gifting property between family members will always result in taxes, which is why some opt for donating rather than gifting. Donations can include a conservation easement, which allows both parties to avoid paying capital gains tax in the exchange that the property will not be changed or used for more dense uses (developed). Transferring property this way helps homeowners to own property while also protecting the scenic surroundings, which may also result in a significant tax credit for certain owners.
Working with an estate planning attorney or a real estate lawyer will help you understand the complexities of taxes and transferring property between family in your specific area. All of these options may not be available to every homeowner, property type, or state.
Real Estate Law And Estate Planning With WW Partners
Whether you are looking for the best way to transfer property between family or want to set up a living will before your time is up, the team at WW Partners is here to help. Our legal team offers a variety of legal services to those in Salt Lake and surrounding areas, helping you to have peace of mind about your legal standing, finances, and your end-of-life requests. Contact us and get started on a better path today!