In the spirit of giving, there are rules to keep in mind, especially if you’re considering gifting your loved ones real estate in the new year.
Financial planning is key to making sure you or your children don’t pay a high price to Uncle Sam in the form of taxes.
The rising cost of owning a home shows no signs of slowing down. With the national median list price of $415,000 and over a million home listings sitting on the market, it’s no surprise that parents are considering leaving behind a home or second home to their children.
Realtor.com® spoke to financial experts to find out the limits of gifting real estate.
“If the giver’s goal is to avoid gift tax implications, I recommend working with an experienced attorney to set this up properly and in writing so that there are no questions from other children or even the IRS,” Leslie H. Tayne, attorney, finance and debt expert, and founder of Tayne Law Group, tells Realtor.com.
Generational wealth can be passed down, but the Internal Revenue Service has placed limitations on the amount that is no longer considered a gift.
Cash is always great to receive and seems easy to give, but there are limits before you need to declare it to the IRS.
The IRS calls these annual exclusions. This is the amount a donor may give to any single recipient before incurring tax. There are no limits on the number of people or the gifts, but there is a maximum amount of $19,000 per person per year.
“Cash can be a great gift to give. I mean, who doesn’t like to receive cash? To gift cash without triggering gift-tax rules, I recommend gifting below the $19,000 limit per person per year,” Tayne advises.
If you’re a married couple, you can give a maximum amount of $38,000 if filing jointly.
“You can also give in increments. Just keep in mind the gift tax exclusion amount and the requirement to file a gift tax return if you go over the exclusion amount,” Lisa Greene-Lewis, TurboTax CPA and spokesperson, tells Realtor.com.
The IRS also made adjustments for 2026 tax items pertaining to the One Big Beautiful Bill. The estate lifetime gift and estate tax exemption maximum is $15 million.
This is the total amount of money you can gift above the annual exclusion throughout your life and/or leave in your estate before any federal gift estate tax is owed.
“Most families won’t hit that cap, but documenting it properly is still key. For wealthy families, making lifetime gifts is a smart way to move assets out of the estate and reduce potential estate taxes down the line,” Rob Edwards, financial adviser, tells Realtor.com.
As part of estate planning, there are trusts and wills to consider. A will is a legal document that outlines how property will be distributed to beneficiaries after someone dies.
A trust is a legal arrangement that allows a third party to hold assets on behalf of a beneficiary.
“When you have a trust, you can distribute assets within the trust as you please while you are living,” explains Greene-Lewis. “When you only have a will, your assets have to go through probate and distribution is decided by the courts.”
Some opt for an irrevocable trust, which is a legal agreement in which a person permanently transfers assets and can’t change the terms later.
“The trust, not the creator, owns the assets in an irrevocable trust, which offers tax advantages and protection from creditors for the creator. The tax benefits can be attractive, but consumers should keep in mind that irrevocable trusts limit their ability to make updates after establishment,” Tayne says.
A loan document can be a helpful way to pass money to children while treating the transfer as a loan, instead of a gift.
“It’s also helpful in protecting both parties and can help the giver avoid gift-tax issues. A loan document typically outlines payment terms, interest (if there’s any), and any necessary deadlines to adhere to,” Tayne advises.
“From a liability standpoint, there might be some benefits there, because it’s not an asset of theirs. It’s actually a debt stamp to repay it,” explains Matt Lee, director of wealth strategies at Wilmington Trust.
“It can help distinguish between a loan or a gift, providing clarity on whether you are subject to tax since gifting money more than the gift tax exclusion makes you subject to taxes,” Greene-Lewis says.
Passing along generational wealth is thoughtful and considerate, but the experts suggest making sure the next generation is ready for the money.
“I want to transfer my real estate to my child, but kind of thinking through the logistics of it is also really important,” Lee explains. “I think that sometimes people will miss that step, and if you’re a homeowner, you know it’s expensive.”
Lee also says it’s important to look at the big picture when several children are involved.
“Is it really realistic or fair that now your kids are going to be owning this property together. One child is nearby. One child is far away. One’s probably going to be using it more. One’s going to be using it less. How do you address those dynamics? Do both kids even really want it?” Lee advises asking those questions of yourself.
“Avoid passing money without documentation,” Tayne advises. “One of the best tips oo advice for parents hoping to pass down money or real estate to their children is to keep thorough documentation of every step of the process. Having good documentation will help resolve any legal or tax issues that may arise. It’s also best to avoid informal gifting to make sure you align with tax laws.”
“When passing down real estate in a trust, keep in mind the specific rules related to irrevocable trust and revocable. The type of trust, irrevocable or revocable, has an impact on whether the person transferring a house into a trust will be subject to gift tax or estate taxes,” Greene-Lewis says.