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Dear Mr. Feichthaler:
My husband and I want to gift a portion of our home to our three children over a three-year period, eventually they will own it all. We are transferring the property in stages so we don't exceed the annual gift tax exclusion. Can this be done?
--Jane A.
Dear Jane:
Although most property owners do not consider the estate and gift tax consequences of transactions, they should. Currently, the combined gift and estate tax exclusion exceeds $11 million, so it is not of immediate concern for my clients if they go over the annual gift amount exclusion. The annual gift tax exclusion is now $15,000 per donor, meaning you and your husband can give up to $30,000 in value each year to any beneficiary you choose, without "eating" into your $11 million credit. One thing to consider is this lifetime exclusion used to be much smaller, and is scheduled to be reduced to $5 million in 2025. Still a large amount, but what we don't know is what the current or next Congress may do in relation to estate and gift taxes. So, we must always be aware of those changes, and how they may impact you. Seek advice from a qualified CPA or attorney before taking actions to avoid potential estate taxes.
You can quitclaim a portion of your interest to your three children each year until the full amount is transferred. Note that, while the transfers are occurring, all of you will be on the title to the property. So, all owners would have a legal right to occupy the property, and could hold up a potential sale if the others wished to sell the property. Also, if there is a mortgage on the property, the transfers you propose could be subject to documentary stamp taxes on the recording of the deeds. I have had a few clients attempt to do these types of transfers themselves, and they are frequently defective. I highly recommend you speak with an attorney prior to proceeding with your planned transfer.
Eric P. Feichthaler has lived in Cape Coral for over 33 years and graduated from Mariner High School in Cape Coral. After completing law school at Georgetown University in Washington, D.C., he returned to Southwest Florida to practice law and raise a family. He served as mayor of Cape Coral from 2005-2008, and continues his service to the community through the Cape Coral Caring Center, Cape Coral Historical Museum, and Cape Coral Kiwanis. He has been married to his wife, Mary, for over 20 years, and they have four children together. He earned his board certification in Real Estate Law from the Florida Bar. He is AV Preeminent rated by Martindale-Hubbell for professional ethics and legal ability, and is a Supreme Court Certified Circuit Civil Mediator. He can be reached at eric@capecoralattorney.com, or (239) 542-4733.
This article is general in nature and not intended as legal advice to anyone. Individuals should seek legal counsel before acting on any matter of legal rights and obligations.