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Why You Should Talk to an Estate Lawyer Before Gifting Property

Posted Rank Zenit

Why You Should Talk to an Estate Lawyer Before Gifting Property

We’ve seen people give their loved ones expensive items like phones, cars and houses. The thought behind the gifts is the same but the process is different. Gifting a house is a different game entirely and if you’re not careful, it can lead to problems. 

So, before you sign over that deed, there’s one person you need to talk to which is an estate planning lawyer. In this article, you’ll learn about the process and the role an estate planning lawyer plays. Read on:

Understanding Tax Complications

In your opinion, you’re just being generous by gifting your home, but the IRS has a different opinion. When you gift a home or any large asset, you may attract federal gift taxes. For 2025, any gift exceeding $18,000 per recipient per year (or $36,000 for married couples) must be reported to the IRS. So, depending on the value of the property, you may be required to pay federal gift taxes, which comes with their own rules and paperwork. 

Then there’s capital gains tax. If your child or family member sells the property later on, they could owe thousands in taxes on the profit, especially if the property has appreciated a lot over time. An estate lawyer can help you understand how to minimize or avoid these taxes. Sometimes, the best move might be to gift the property after you pass, not before.

Estate Planning Lawyers Help You Avoid Legal and Title Issues

It is not over when you hand over the key of your house to the new owner. You have to make sure the title is transferred correctly, that the deed complies with the law, and that you’re not accidentally setting up future disputes between family members. 

Plus, when a property gift that’s not handled properly can lead to conflicts between family members especially if others feel left out and blindsided. 

An estate lawyer will make sure that the paperworks are filled out correctly and legally. They also walk you through the implications and ensure you’re not creating future legal or financial problems for yourself or your loved ones. 

Protect Medicaid Eligibility and Long-Term Care Planning 

Most people are not aware that gifting property can mess with your eligibility for Medicaid. If you have plans to receive government assistance for long-term care later on, then maybe you should gift out your home.

Medicaid can go back five years on your financial history, this is called the “look back period.” If they discover that you have given your house out for free or less than market value before approving coverage, they could penalize you. This could mean delaying your eligibility or denying coverage altogether. 

That’s why it’s important you speak with an estate planning lawyer before you make any move. They will guide you on how to gift out your home responsibly without jeopardizing your future healthcare options.

Estate Lawyers Can Help you Consider Alternate Options 

Yes, there are other options apart from gifting your home directly. Depending on what you hope to achieve, your lawyer can suggest other options like:

  • Creating a revocable living trust: This allows you to transfer ownership after your  death, avoiding probate and potentially reducing taxes.
  • Setting up a life estate : This allows  you to live in the home for the rest of your life while legally passing future ownership to a beneficiary.
  • Adding someone to the deed with right of survivorship: This means the property will automatically pass to the co-owner upon your death.
  • Creating a Living Trust: This allows you to transfer ownership after your death, avoiding probate and potentially reducing taxes.

These methods can help you stay in control of your property while giving your loved ones future access, without causing unnecessary tax bills or issues with getting your Medicaid.

Conclusion 

Gifting property is a good decision, but it comes with some extra baggage. However, with a professional estate planning lawyer, you’re not alone. 

They’ll help you before you make the move. They’ll walk you through available options, explain the risks, and help you give your gift the best way, so the people you love can truly benefit from your generous gesture. 

Are you thinking of gifting a property? Schedule a free consultation with an estate planning lawyer and get proper guidance.

FAQs About Gifting Property

  • What is the federal gift tax limit for 2025?

The annual exclusion for 2025 is $18,000 per person. Gifts above this amount must be reported using IRS form 709. However, you may not owe taxes unless your lifetime gifts exceed the federal exemption (currently $13.61 million as of 2025).

  • Can I gift my house to my child without paying taxes?

You can, but the gift may still have tax consequences, including the need to file a gift tax return and potential capital gains tax for your child later. Consulting an estate lawyer can help you minimize or avoid these taxes.

  • What happens if I gift my house and then need Medicaid?

Medicaid will review your finances from the past five years. If you transferred your home for less than fair market value, you could face a penalty period that delays your benefits.

  • Is a living trust better than gifting a home outright?

In most cases, yes. A living trust can help avoid probate, reduce taxes, and give you more control over your property while you’re alive. 

  • Do I still need a lawyer if I’m just adding my child to the deed?

Yes. Adding someone to the deed can have major tax, legal, and inheritance implications. It’s not just a simple form, it can affect your ownership rights, future plans, and eligibility for benefits.