Several readers have asked about transferring real estate to family members. Should they transfer property? How is it done? How much does it cost? Should a lawyer be consulted?
Transferring real estate has many important implications, including tax effects. For instance, a mother wants to put her house in the name of her two daughters, so they will own it after their mother's death. There are many options available. Three of the common choices are:
The two daughters can be added to the deed as joint tenants along with the mother. Upon the death of any of the three joint tenants, the home belongs to the survivors. All joint tenants must sign a deed or mortgage for the property. None can act alone.
The two daughters can be added as remainder men. So long as the mother is alive, she has exclusive rights to the property. All three must consent to any deed or mortgage. After her death, the two daughters own the property, either as joint tenants or as tenants in common, depending on how the deed is written.
The mother can reserve full power to sell or mortgage the property during her lifetime. If the mother still owns the property at her death, it goes to the daughters, either as joint tenants or tenants in common.
Each of the transfers is accomplished by a deed which is recorded in the land records of the county in which the property lies. Transfers between parents, spouses, children and stepchildren and to grandchildren are exempt from Maryland transfer and recordation taxes.
Typically, the only cost is between $25 and $55 to record the new deed and obtain a certificate from the city/county to show that all taxes are current. The deed should be notarized and must be prepared by one of the parties or under the supervision of a Maryland attorney.
When the irrevocable transfer of the property takes effect during the lifetime of the person giving the deed (the "grantor"), there is a gift for federal tax purposes. Depending on the value of the property interest, the grantor may have to file a federal gift tax return. The persons receiving the deed ("grantee") take over the tax basis of the grantor. For example, if the mother deeds a house that cost $25,000 to her daughters, their tax basis is $25,000. If the daughters sell the property for $100,000, they will have a $75,000 capital gain to report on their federal and state returns.
When the transfer of property does not take effect until the death of the grantor, there is no gift. Instead, the value of the property is included in the decedent's federal estate tax return.
Currently, no federal estate tax is paid unless the taxable estate exceeds $650,000. The grantees also must pay a Maryland inheritance tax on the value of the interest passing to them. Currently the inheritance tax is 1 percent of value for transfer to children and grandchildren, and 10 percent of value for transfer to collateral relatives (siblings, nieces and nephews).
Because of the complexities in titling, taxation and other concerns, it is always best to consult a qualified attorney for advice and assistance.
If you need an attorney and do not have one, call a bar-sponsored lawyer referral service. They can be reached at the following telephone numbers: Baltimore, 410-539-3112; Baltimore County, 410-337-9100; Harford County, 410-836-0123; Howard County, 410-465-2721; or the Maryland State Bar Association, 800- 492-1993
Questions?
The Sun invites you to send real estate questions to Mailbag. Questions will be answered by Jonathan A. Azrael of Azrael, Gann and Franz of Towson.
Questions -- including name, address and daytime telephone number -- may be sent in the following ways:
Mailing address: Real Estate Mailbag, Fifth Floor, 501 N. Calvert St., Baltimore, MD 21278-0001. Fax: 410-783-2517. E-mail: real.estate@baltsun.com
Call our Sundial audio-response number, 410-783-1800. Enter code 6170 after the greeting.
Pub Date: 4/25/99