Gifting a house in Texas isn’t as simple as handing over a set of keys, but it’s definitely possible to gift a house to someone. And, it can be a meaningful gesture. Whether you’re thinking about passing your home to a loved one, contributing to a charity, or helping a friend, knowing the steps to properly transfer ownership is key. Understanding tax laws is also crucial, as they can have significant financial implications and require compliance with IRS regulations.
Texas law provides several options to make this happen, each with its own unique benefits. By understanding the different ways to gift a house, you can avoid future complications and ensure the transfer is seamless.
Let’s walk through the most common methods so you feel confident about making the right choice for your situation.
Ways to Gift a House to Someone In Texas
If you’re thinking about gifting a house in Texas, there are a few key ways you can make the transfer smooth and legally binding. Each method comes with its own benefits and processes, so knowing which option fits your situation is important. Let’s dive into the most common ways you can gift a house and what you need to do for each.
It is also advisable to consult a real estate lawyer to navigate the complexities of gifting a house.
Transfer by Deed
One of the most straightforward ways to gift a house is by transferring the title through a deed. A deed is a legal document that transfers ownership of the property from you to the recipient. In Texas, there are several types of deeds you can use depending on the level of protection you want to provide the person receiving the home.
General Warranty Deed
This deed provides the highest level of protection for the person you’re gifting the house to. You’re guaranteeing that the title is free from any issues, even those that occurred before you owned the property. It’s a comprehensive way to ensure they get the house with no strings attached. Additionally, understanding the fair market value of the property is crucial for determining the tax implications of the transfer, especially in relation to gift exclusions and capital gains tax.
Special Warranty Deed
If you want to limit your responsibility for any problems with the title, a special warranty deed might be your choice. With this deed, you’re only guaranteeing that the title was clean during the time you owned the house. It’s a bit less protection for the new owner but still provides some peace of mind.
Quitclaim Deed
A quitclaim deed offers no guarantees. It transfers whatever interest you have in the property, without any promises about the title. It’s often used between family members or in informal situations, but it’s important to understand the recipient gets the house “as-is.”
Transfer on Death Deed
A transfer on death deed lets you keep control of your house while you’re alive and gift it to someone upon your death. It’s a simple way to pass on the property without the need for probate. You’ll need to file this deed with the county clerk, and it can be revoked at any time if you change your mind about the beneficiary.
Lady Bird Deed
A Lady Bird deed is another way to gift a house while keeping control during your lifetime. With this deed, you retain a life estate, meaning you can live in the house, sell it, or change the deed’s terms while you’re alive. The house automatically transfers to the beneficiary upon your death, avoiding probate.
Gift Deed
A gift deed is specifically used when you’re giving the house to someone without any money exchanging hands. It clearly states that the property is being transferred as a gift. Once signed and notarized, it must be filed with the county clerk to be valid.
Gifting Through a Will
If you prefer to gift the house after you pass away, including it in your will is an option. While this method does require probate, it ensures the house goes to the person you’ve named in the will.
Keep in mind that probate can take time and add costs, but it’s a secure way to make sure your wishes are carried out. Additionally, transferring property through a will can have implications for estate taxes, which may affect the overall value of the inheritance.
Gifting by Trust
A trust allows you to transfer the house into a legal entity managed by a trustee for the benefit of the recipient. It’s a good option if you want to avoid probate and have specific instructions about how the house should be handled.
Revocable Living Trust
With a revocable living trust, you maintain control of the house during your lifetime. You can live in it, sell it, or change the trust’s terms if needed. Upon your death, the house passes to the named beneficiary without going through probate.
Irrevocable Trust
An irrevocable trust can’t be changed once it’s created. It’s a more permanent way to gift the house, and it can offer tax benefits by removing the property from your estate. However, you give up control over the house once it’s placed in this type of trust. Transferring property into an irrevocable trust can also impact your taxable income, as it may allow you to deduct certain losses from your taxable income, especially if the property was used as a rental.
Property transfers require precise legal handling, and at Jarrett Law, we make sure every step is taken with your interests in mind. If you’re transferring property, dealing with title or lien issues, or need help navigating real estate contracts, contact us today.
Call (832) 831-0833 to schedule a consultation with Jarrett Law and discuss how we can help with your real estate needs.
Gifting Through Joint Tenancy with Right of Survivorship
If you want to share ownership of the house with someone, you can create a joint tenancy with the right of survivorship. This means both you and the other person own the property together.
When one of you passes away, the survivor automatically takes full ownership without the need for probate.
FAQ: Gifting a House to Someone in Texas
1- Which ways to give a house avoid capital gains taxes for the recipient?
When you gift a house, the recipient may still be subject to capital gains taxes down the road, depending on how the property is transferred and what they do with it. If the recipient eventually sells the house, capital gains tax could apply based on the difference between the original purchase price (the donor’s basis) and the sale price. The market value of the property at the time of sale is crucial in calculating the capital gains tax, as it determines the taxable amount.
To help avoid capital gains taxes for the recipient, the house can be passed through a revocable living trust or via inheritance through a will. With an inheritance, the recipient gets a “stepped-up” basis, meaning the property’s value at the time of your death becomes their new basis.
If they sell the house shortly after inheriting it, they may have little to no capital gains tax due, depending on market conditions. Using a Transfer on Death Deed or a Lady Bird Deed can also help, as they transfer the house upon death while avoiding probate and potentially taking advantage of the stepped-up basis.
On the other hand, gifting the house outright through a gift deed or other forms of living transfers typically passes along the original purchase price as the recipient’s basis, which could lead to higher capital gains taxes if the house is later sold for more than that original amount.
2- What is the best way to transfer my house without going through probate?
TODD
If you want to transfer your house without going through probate, Texas offers a few effective options that keep things simple and ensure a smooth process. One of the most straightforward methods is the Transfer on Death Deed (TODD).
With a TODD, you retain full ownership and control of the property while you’re alive, and the house automatically transfers to the named beneficiary upon your death. This deed doesn’t require probate, and you can revoke or change it at any time, making it a flexible and efficient option.
Lady Bird Deed
Another popular choice is the Lady Bird Deed, also known as an enhanced life estate deed. This deed allows you to retain a life estate in the property, meaning you can live in and control the house while you’re alive. Upon your death, ownership automatically passes to the beneficiary without going through probate.
A key advantage of the Lady Bird Deed is that it also gives you the ability to sell or mortgage the property during your lifetime, offering more flexibility than a traditional life estate deed.
If you’re looking for a more comprehensive estate planning solution, a revocable living trust might be the best fit. By placing the house into the trust, you maintain control of it as the trustee while avoiding probate when the time comes to transfer ownership. Trusts are more private and flexible than deeds, and they can be altered or dissolved during your lifetime.
Each of these methods allows you to transfer your home efficiently, without the delays and costs associated with probate.
3- Can I still live in the house after I gift it?
Yes, you can still live in the house after gifting it, depending on how you structure the gift. Several methods allow you to transfer ownership while retaining the right to live in and control the property during your lifetime.
Lady Bird Deed
One of the most popular options for this is a Lady Bird Deed (enhanced life estate deed). With a Lady Bird Deed, you give the property to someone else, but you retain a life estate, meaning you can live in the house and maintain full control over it as long as you’re alive.
You even have the right to sell, mortgage, or revoke the deed if you choose. After your death, the property automatically transfers to the named beneficiary without going through probate.
Revocable Living Trust
Another option is placing the house in a revocable living trust. In this case, you transfer ownership of the house to the trust, but as the trustee, you maintain full control of the property during your lifetime. You can live in the house, sell it, or change the terms of the trust at any time.
Upon your death, the property passes to the beneficiary without probate, ensuring a seamless transition while giving you complete control over the home for as long as you want.
Joint Tenancy With Right of Survivorship
If you’re considering a more informal approach, you could create a joint tenancy with right of survivorship, which allows you to share ownership of the house with someone else, like a family member or friend. You both have equal rights to the property, and when one of you passes away, the other automatically takes full ownership without going through probate.
While this method allows you to continue living in the home, it also means the co-owner has equal control over the property, which may limit your flexibility compared to other options.
4- What happens if I change my mind after gifting the house?
Use a Revocable Method In Case You Change Your Mind
Changing your mind after gifting a house depends on how you structured the gift. If you’ve used a revocable method like a Transfer on Death Deed (TODD) or a Lady Bird Deed, these options allow you to revoke or modify the gift as long as you’re still alive.
- With a TODD, for example, you maintain full ownership and control of the house during your lifetime, and you can cancel or change the deed at any time.
- Similarly, a Lady Bird Deed gives you the flexibility to sell the house, mortgage it, or even revoke the deed entirely without needing the permission of the beneficiary.
- A revocable living trust or last will can also allow you to change the terms of your legal document.
Irrevocable Methods Don’t Allow You to Change Your Mind
In contrast, if you’ve gifted the house through irrevocable methods like a gift deed or placed it in an irrevocable trust, undoing the transfer becomes much more complicated, if not impossible.
- Once a gift deed is signed, notarized, and filed with the county, it typically cannot be undone unless you can prove there was some legal issue with the transfer, such as fraud or undue influence.
- Similarly, once property is placed in an irrevocable trust, control over that property is handed over to the trustee, and you no longer have the right to take the house back or change the terms of the trust.
If you’re unsure about your long-term plans for the house, using a revocable option is usually the best route. These options give you the flexibility to adjust your decisions over time, ensuring you’re not locked into something permanent.
It’s always a good idea to work with a real estate attorney to ensure you’re fully aware of the consequences and possibilities for reversing or changing a gift of property, as some decisions may be hard—or impossible—to reverse after the paperwork is filed.
Do I need to worry about gift tax when gifting a home?
Federal Gift Tax
Yes, there are tax implications to consider when gifting a home, particularly the federal gift tax. In the United States, if the value of the house you’re gifting exceeds the annual gift tax exclusion—which, as of 2024, is $17,000 per recipient—you may need to file a gift tax return.
However, this doesn’t necessarily mean you’ll owe taxes right away. You can apply any amount above the exclusion against your lifetime gift and estate tax exemption, which is currently set at $12.92 million per individual. This means you can give gifts worth up to $12.92 million over your lifetime without incurring federal gift taxes, but any amount over this exemption will be taxed.
While the recipient of the house doesn’t directly owe gift taxes, it’s the responsibility of the donor (you) to account for the gift tax. If the value of the house is more than $17,000, you’ll need to file IRS Form 709 (United States Gift and Generation-Skipping Transfer Tax Return) to report the gift. Filing this form tracks how much of your lifetime exemption has been used.
Most people don’t owe gift taxes unless their cumulative gifts over a lifetime exceed the exemption limit, but it’s important to file properly to avoid penalties. The fair market value of the property is crucial in calculating both gift taxes and capital gains taxes, as it determines the taxable amount when the property is transferred.
Capital Gains Taxes
Additionally, there may be capital gains tax implications for the recipient when they eventually sell the house. When you gift the home, the recipient inherits your cost basis (what you originally paid for the house), which can affect the capital gains tax they owe if the property is later sold for a higher amount.
For example, if you purchased the home for $100,000 and it’s now worth $300,000, the recipient’s cost basis would be $100,000. If they sell it for $350,000, they may owe capital gains tax on the difference between $100,000 and $350,000, depending on their eligibility for exemptions or exclusions.
It’s a good idea to consult a real estate lawyer to ensure you understand all the tax consequences before gifting a house.
Transferring Property With Confidence
At Jarrett Law in Houston, Texas, we understand that real estate transactions can be complex and stressful. Whether you’re buying, selling, or transferring property, having the right legal support ensures that you avoid costly mistakes and protect your financial interests.
Our team is here to provide you with the knowledge and guidance you need so you can confidently handle every aspect of your property transfer.
Protecting Your Interests with an Estate Planning Attorney in Every Transaction
Real estate transactions involve more than just signing papers. You’re dealing with contracts, titles, liens, and sometimes disputes that require careful legal oversight.
At Jarrett Law, we represent your interests at every stage, whether you’re transferring a home to a family member or resolving a title dispute. We review every contract thoroughly to make sure there are no hidden pitfalls, and we protect you from potential legal or financial risks.
You can rely on us to handle the complex paperwork and ensure that your rights are fully protected.
Handling Liens, Mortgages, and Title Issues
If your property has existing liens or you’re dealing with mortgage issues, you need to make sure those are resolved before transferring ownership.
At Jarrett Law, we help you navigate liens, mortgage modifications, and title disputes. Whether you’re facing foreclosure or concerned about a third-party buyer’s offer, we guide you through the best course of action.
Without proper legal advice, you could unknowingly lose significant money or fail to protect your future rights to the property.
Ensure a Smooth Transfer Today
Property transfers require precise legal handling, and at Jarrett Law, we make sure every step is taken with your interests in mind. If you’re transferring property, dealing with title or lien issues, or need help navigating real estate contracts, contact us today.
Call (832) 831-0833 to schedule a consultation with Jarrett Law and discuss how we can help with your real estate needs.
