Dear Liz: I have a rental house that I would like to give to my sister as an outright gift. (She is the current tenant but cannot afford to buy the house.) How can I do this legally? Do I need a lawyer? If so, what kind? I have already asked a real estate agent, and I’ve been told that I don’t really need her services. She suggested asking an escrow company. The house is in the name of my revocable trust and I own it free and clear. For various reasons, I would like to give her the house now rather than leave it to her in my will. I realize she will be stuck with my cost basis, but she has no plans to ever sell it because she has lived there for 10 years and wants to live in it for the rest of her life.
Answer: Talk to a real estate attorney, who can help you through the multi-step process of transferring a house deed and getting it recorded. You could try to do it yourself, but the attorney can ensure the transfer is done properly and answer any questions you may have.
Because the house probably is worth more than the annual gift exemption limit — which is currently $15,000 and rising to $16,000 next year — you also will have to file a gift tax return. Actual gift taxes aren’t owed until you’ve given away millions of dollars in your lifetime. If you’re wealthy enough to be concerned about that, please also consult an estate planning attorney.
Hi Liz,
Reference the person who wants to give her house to her sibling. Another way she could do this would be to do a quit claim deed from her to her sister and herself that eighter would inherit upon death of the other. That way 50% of the proceeds of the home, should the survivor decide to sell, would get a stepped up bases.