Giving your child the house now and arranging for them to receive it after your death can have very different consequences. Before changing a Virginia deed, compare the rights you would keep, the tax consequences of a later sale, your mortgage, and any possible need for Medicaid long-term-care benefits. The right choice depends on your home, your goals, and the proposed transfer.
You may want your child to have a place to live, keep the home in the family, or make things easier after you die. Start with that goal. Then choose an arrangement that also accounts for your own housing and financial needs.
What would you be giving away now?
A valid, completed deed that makes a present gift transfers the ownership interest it describes now. An outright gift of your whole interest is different from a deed that reserves an interest for you or transfers only part of what you own.
Before signing, have someone explain exactly what you would still own and what right you would have to remain in the home. Bring up the practical decisions, too: who should pay for repairs, whether you might need to sell, and what should happen if either person’s plans change.
Try writing your goal in one sentence: “I want my child to receive the house after my death, but I want to keep the option to sell it and move.” That is a different planning request from “I want my child to own the house now.” A proposed deed should be evaluated against the request you actually mean.
The tax starting point can be different
For a later sale, one key number is the home’s tax basis: a starting point used to measure gain or loss. It is not necessarily the home’s current value or its original purchase price.
A lifetime gift
A child who receives a house as a gift generally takes over the parent’s adjusted basis for calculating a later gain, subject to adjustments and special rules.
An inheritance
An inherited house generally receives a basis tied to its fair market value at the owner’s death. Exceptions and valuation rules can change that result.
Those different starting points can matter when your child later sells. They do not establish a tax bill by themselves. Ask your tax adviser to compare the actual property and proposed arrangement before you commit. The IRS explanation of property basis covers both gifts and inherited property.
A gift tax return does not necessarily mean a gift tax bill
A house gift may require a federal gift tax return even when no gift tax is payable. Reporting the gift and owing tax are separate questions under the IRS gift tax return instructions.
Before transferring the home, ask your tax adviser what reporting the proposed transaction would require and what records to preserve. “We will not owe gift tax” does not finish the planning conversation.
Medicaid has a separate set of transfer rules
A gift that produces no federal gift tax bill can still affect Medicaid payment for long-term care. Giving away a home for less than fair market value can cause a period when Medicaid will not pay for those services. Exceptions have specific requirements.
If future care costs are part of your concern, raise that issue before the transfer. A family relationship, or the fact that your child helps you, does not by itself establish an exception. The Virginia Medicaid long-term-care manual sets out the transfer rules and exceptions.
This comparison does not calculate a penalty or determine eligibility. It identifies a separate question that needs an answer before the deed is signed.
Check the mortgage as well as the deed
Federal law protects certain family transfers from a lender calling the loan due solely because ownership changed. Those protections do not cover every transfer or every mortgage.
Have the loan documents, who lives in the home, and the proposed deed reviewed together. Mention any reverse mortgage at the start. Do not assume that putting a child on the deed also changes who owes the loan or releases the existing borrower.
Wanting your child to inherit does not require an outright gift today
You can compare a lifetime gift with arrangements designed for a later transfer. For example, a Virginia transfer-on-death deed does not give the named beneficiary a present ownership interest during your life or take away your right to sell the property. Whether it fits your plan requires a separate review.
Our guide to Virginia transfer-on-death deeds explains that option. If you already have a living trust, review how the home fits into your trust-funding plan. The useful first decision is what you want to happen and when; the document comes after that.
What to gather before the planning meeting
You do not need to choose a deed before asking for advice. Gather what you have, and note anything you cannot find:
- The current deed: the document showing how the property is owned.
- Mortgage records: a recent statement and the loan documents, including any reverse mortgage.
- Value and purchase records: an approximate current value, purchase paperwork, and records of major improvements.
- Your existing plan: any will, trust, or earlier transfer-on-death deed.
- Your goals: who should live in the home, who should receive its value, and whether you may need to sell or move.
- Care concerns: foreseeable long-term-care needs and any transfers already made.
Keep these records private. The first phone call can begin with your question and a description of the situation.
Make the home part of the whole plan
Prior Law helps Virginia families with estate planning, including decisions about how a home fits with the rest of the family’s plan. We also help with Medicaid planning before a care crisis.
Start with a free initial phone call to discuss your needs. If you want us to review an existing plan, that substantive review takes place in a paid initial design meeting. We meet with clients in their homes by appointment.
General information for Virginia readers; advice about your home depends on your documents and circumstances.
