To gift real estate to your child, you sign a new deed transferring the property, have it notarized, record it with your county, and file IRS Form 709 to report the gift. The mechanics take an afternoon. The tax and long-term care consequences are what deserve your attention, because a transfer done without thinking can leave your child with a six-figure capital gains bill or leave you disqualified from Medicaid for years.
The Two Tax Traps to Weigh Before You Sign
Most parents focus on gift tax and miss the two issues that actually decide whether gifting is the right move.
Your Child Inherits Your Cost Basis
When you gift property during your lifetime, your child takes over your original cost basis in the home.1Office of the Law Revision Counsel. 26 US Code 1015 – Basis of Property Acquired by Gifts and Transfers in Trust If you bought the house for $120,000 thirty years ago and it’s now worth $600,000, your child’s basis is $120,000. If they sell for $650,000, they owe capital gains tax on a $530,000 gain.
Property your child inherits at your death works differently. Inherited property receives a stepped-up basis equal to the fair market value on the date of death.2Office of the Law Revision Counsel. 26 USC 1014 – Basis of Property Acquired From a Decedent In the same example, your child’s basis would jump to $600,000, and a $650,000 sale produces a $50,000 gain instead of a $530,000 one. The tax difference can be enormous.
If your child will live in the home indefinitely and never sell, the basis issue matters less. If there’s any real chance of a sale, letting the property pass through your estate is often the more tax-efficient path.
The Five-Year Medicaid Lookback
If you gift your home and then need Medicaid to cover nursing home or long-term care within five years, that gift counts against you. Federal law imposes a 60-month lookback: Medicaid reviews every asset transfer you made during the five years before applying.3Office of the Law Revision Counsel. 42 USC 1396p – Liens, Adjustments and Recoveries, and Transfers of Assets
If Medicaid finds a transfer for less than fair market value inside that window, you’re disqualified for a penalty period calculated by dividing the property’s value by the average monthly nursing home cost in your state. A $400,000 home in a state where care averages $10,000 per month produces a 40-month penalty during which Medicaid pays nothing.
The gift tax annual exclusion is irrelevant here. Medicaid and the IRS operate under separate rules, and a transfer that’s fine for gift tax purposes can still trigger a heavy Medicaid penalty. If you’re over 60 or have any reason to expect long-term care within the next several years, talk to an elder law attorney before transferring the deed.
Federal Gift Tax and Form 709
For 2026, you can give up to $19,000 per person per year without any gift tax filing requirement.4Internal Revenue Service. Frequently Asked Questions on Gift Taxes Real estate almost always exceeds that, so gifting a home will require you to file IRS Form 709, the federal gift tax return.5Internal Revenue Service. About Form 709, United States Gift (and Generation-Skipping Transfer) Tax Return It’s due by April 15 of the year after the gift.6Internal Revenue Service. Filing Estate and Gift Tax Returns
Filing doesn’t mean owing tax. The amount above $19,000 simply reduces your lifetime gift and estate tax exemption, which for 2026 is $15 million per individual.7Internal Revenue Service. What’s New – Estate and Gift Tax A married couple can double that by gift splitting, where both spouses agree to treat the gift as coming equally from each of them. Gift splitting requires both spouses to file Form 709 even if only one actually owns the property. The parent making the gift is legally responsible for any gift tax owed, not the child receiving it.8Office of the Law Revision Counsel. 26 USC 2502 – Rate of Tax
Very few families will owe actual gift tax. But Form 709 isn’t optional, and the IRS tracks cumulative lifetime gifts. Skipping the filing creates problems when your estate is later settled.
If There’s Still a Mortgage on the Home
An outstanding mortgage complicates things. Most mortgages include a due-on-sale clause that lets the lender demand full repayment when ownership changes. Federal law carves out certain exemptions for family transfers involving residential properties with fewer than five units, but those exemptions cover specific situations like transfers at the borrower’s death or into a living trust.9Office of the Law Revision Counsel. 12 US Code 1701j-3 – Preemption of Due-on-Sale Prohibitions Whether an outright lifetime gift to a child fits within a protected category depends on the circumstances.
Even where the lender can’t call the loan, you remain personally responsible for the payments. Your child becomes the owner while you still owe the debt, and if you stop paying, the lender forecloses on property your child now holds. Call your lender before transferring the deed.
Preparing and Recording the Deed
The core document is a new deed transferring ownership from you to your child. You’ll need the full legal names of both parties and the property’s legal description, which appears on the existing deed. The street address alone isn’t enough; the legal description uses metes and bounds or lot and block numbers to precisely define the property.
For gifts between family, a quitclaim deed is common. A quitclaim transfers whatever interest you have without any guarantee about the title’s history, so if there are undisclosed liens or competing claims, your child inherits those problems with no warranty. That’s often acceptable within a family where the property’s history is known. If there’s any uncertainty about the title, a warranty deed or a title search offers better protection.
The deed must state that the transfer is a gift with no monetary exchange. That absence of consideration is what makes it a gift deed rather than a sale. Blank forms are available from online legal form providers, local government offices, or a real estate attorney. Every state has specific formatting rules for recordable deeds — margins, fonts, return address placement — and a deed that doesn’t meet them will be rejected at the recorder’s office.
You sign the deed in front of a notary, who verifies your identity and stamps the document. Some states also require witnesses. After notarization, the deed goes to the county recorder or register of deeds in the county where the property sits. Recording makes the transfer part of the official public record, which is what protects your child’s ownership against third-party claims. Recording fees typically run from about $10 to $100 depending on the jurisdiction and page count. Some states charge a transfer tax on deed recordings, though many exempt parent-to-child transfers or transfers with no consideration. Ask the recorder’s office in advance what fees and forms apply.
Your county will also likely require a Preliminary Change of Ownership Report or similar disclosure form so the assessor can update tax records. Once recorded, the county stamps the deed with a recording number and date and returns the original to the new owner. Keep it safe; it’s the official proof of ownership.
What Changes After the Transfer
Property Tax Reassessment
Changing ownership can trigger a reassessment of the property’s value for tax purposes. If the home has been in the family for decades with an assessed value well below market, reassessment can dramatically increase the annual tax bill. Some states offer a parent-to-child exclusion that prevents reassessment, but the rules vary. Some require the child to use the home as a primary residence, some cap the exclusion amount, and nearly all require the child to file a claim with the local assessor within a set deadline. The exclusion isn’t automatic. Miss the window and it’s gone.
Homeowners Insurance
Homeowners policies cover only the named insured. Once ownership shifts to your child, your existing policy no longer properly covers the property. Your child needs either a new policy in their own name or an update to the existing one, depending on the insurer. Handle this right after recording the deed; a coverage gap is one storm or one lawsuit away from disaster.
Title Insurance
Your owner’s title insurance policy does not transfer with the property. It protects only the insured named in it, and a gift transfer terminates coverage. Your child may want to buy a new owner’s title policy, especially if no title search was done before the transfer or if a quitclaim deed was used. Without it, your child carries the full risk of any undiscovered title defects.
Alternatives That Preserve the Stepped-Up Basis
An outright gift is not the only way to move property to a child, and it isn’t always the best way. Two alternatives address the biggest drawback of lifetime gifting: the loss of the stepped-up basis.
A life estate deed transfers ownership to your child while you keep the right to live in and use the property for the rest of your life. You remain the life tenant; your child holds a remainder interest that becomes full ownership at your death. Because the property is generally included in your taxable estate, it usually receives a stepped-up basis at death. You also keep control during your lifetime. The tradeoffs are that neither of you can sell without the other’s consent, and a life estate can complicate Medicaid planning if you later need nursing care.
The simplest alternative is to do nothing and let the property pass through your will or a living trust. Your child gets the stepped-up basis, avoids the Medicaid lookback problem entirely, and skips the Form 709 paperwork. For a parent whose real goal is making sure a child ends up with the house, inheritance is usually the more tax-efficient path. The reasons to gift during your lifetime are practical ones: you want your child to have the property now, to live in it or manage it, or you’re simplifying your own affairs while you can still handle the paperwork.