How to Give Your House to Your Child: Deeds, Trusts, and Sales

You have four practical ways to give your house to your child: sign a deed transferring it now, record a transfer-on-death deed that takes effect when you die, put the home in a revocable living trust, or sell it to your child at full or reduced price. The right choice usually turns on two questions: do you want to keep control of the property while you are alive, and do you want your child to avoid a large capital gains tax bill if they ever sell? For most families, transferring at death through a trust or transfer-on-death deed answers both questions better than an outright gift does.

The federal lifetime gift and estate tax exemption for 2026 is $15,000,000, so gift tax itself is not the concern for most parents.¹ Capital gains taxes, Medicaid eligibility, and losing control of your own home are.

Why the Timing of the Transfer Matters More Than the Paperwork

Whichever method you choose, your child ends up on the title. What changes is the “cost basis” they inherit, and that number determines their tax bill if they sell.

Give the home during your lifetime and your child takes your original basis. If you paid $120,000 thirty years ago and the home is now worth $500,000, your child’s basis is $120,000 plus any capital improvements.² Sell at $500,000 and they face a taxable gain of up to $380,000.

Pass the home at death — through a transfer-on-death deed, a living trust, or a will — and the basis resets to the property’s fair market value on the date of your death.³ Same $500,000 sale, zero taxable gain.

At the 15% long-term capital gains rate that most taxpayers pay, that $380,000 gain costs roughly $57,000 in federal tax. The transfer-at-death version costs nothing. If your child plans to live in the home indefinitely and may never sell, the difference matters less. If there’s any real chance of a sale, gifting now is the expensive option.

Gifting the Home Now With a Deed

The most direct approach is signing a gift deed — usually a quitclaim or grant deed — that transfers ownership immediately, with no money changing hands. Once you sign and record it, your child is the legal owner and you have permanently given up your rights. A quitclaim transfers whatever interest you hold without guaranteeing clean title; a grant deed adds limited assurance that you haven’t already transferred the property to someone else.

Because a home almost always exceeds the annual gift tax exclusion, you must file IRS Form 709 for the year you make the transfer. The 2026 annual exclusion is $19,000 per recipient.¹ The rest of the home’s fair market value counts against your $15,000,000 lifetime exemption.⁴ Form 709 is due April 15 of the year after the gift.⁵ You won’t actually owe gift tax unless your cumulative lifetime gifts pass $15,000,000, but the return still has to be filed.

Married couples who own the home together can “split” the gift so each spouse uses their own $19,000 exclusion and their own lifetime exemption. Both spouses file Form 709 and consent to splitting, even when only one spouse’s name was on the deed.⁶

The lifetime gift has two costs beyond the tax return. Your child inherits your carryover basis, as explained above. And the transfer is permanent. If your child is later sued, files bankruptcy, or divorces, the home can be reached by creditors or become marital property.

Using a Transfer-on-Death Deed

A transfer-on-death deed (sometimes called a beneficiary deed) names your child as the person who will receive the home when you die, while you keep full ownership and control during your life. You can sell, refinance, or rent the property — the deed has no effect until you pass away. Roughly 34 states and the District of Columbia recognize some form of transfer-on-death deed.

Your child holds no legal interest in the property while you are alive, so their creditors cannot lien the home during your lifetime. You can revoke or change the deed at any time. When you die, title moves directly to your child without probate.

Because the property passes at death rather than as a lifetime gift, there is no Form 709 to file, and your child receives a stepped-up basis.

Placing the Home in a Revocable Living Trust

A revocable living trust reaches a similar result to a transfer-on-death deed: you keep control during your lifetime, and the property passes to your child at death without probate. The trust is a broader tool — it can hold multiple assets, spell out detailed instructions about how and when your child receives the home, and name backup beneficiaries if your child dies before you do.

To make the trust work, you must “fund” it by signing a new deed that moves title from your personal name into the trust’s name (for example, “Jane Smith, Trustee of the Jane Smith Revocable Living Trust”). You stay on as trustee and manage the property exactly as before. The trust can be changed or dissolved anytime while you are mentally competent.

Check your title insurance policy before transferring. Many insurers extend coverage to transfers into a revocable trust where the original owner remains a beneficiary, but not all do. If yours doesn’t, you may need a new policy or an endorsement to avoid a gap in coverage.

Property passing through the trust at your death qualifies for a stepped-up basis the same way inherited property does.³ The tradeoff is the upfront cost and effort of setting up the trust and re-titling the property.

Selling the Home to Your Child

You can also sell the home to your child, at fair market value or below. A sale at full market value is a normal real estate transaction: your child’s basis equals the purchase price, and there is no gift tax issue. This works well when you need the proceeds or want your child to build equity through a mortgage.

A sale below fair market value is a “bargain sale,” and the IRS treats the discount as a gift.⁷ If the home appraises at $400,000 and you sell for $250,000, the $150,000 difference is a gift. You file Form 709, and that $150,000 (minus the $19,000 annual exclusion) counts against your lifetime exemption. Your child’s basis is what they actually paid.

Owner Financing and the Minimum Interest Rate

Parents often act as the lender, taking payments directly from the child instead of sending them to a bank. This requires a written promissory note with a repayment schedule and an interest rate that meets or exceeds the IRS’s Applicable Federal Rate (AFR). Charge less than the AFR and the IRS treats the shortfall as a gift.⁸

The AFR changes monthly and varies by loan term. For a loan longer than nine years — common for home purchases — the long-term AFR for January 2026 is 4.63% compounded annually.⁹ Check the current month’s rate when you finalize the note; the applicable rate is the one in effect when the loan is made. The interest your child pays is taxable income to you, and if the loan is secured by the home, your child may be able to deduct the interest.

Medicaid Look-Back: A Warning Before You Gift

If there is any chance you will need nursing home care paid for by Medicaid, gifting the home is dangerous. Federal law requires state Medicaid programs to look back at any assets you transferred for less than fair market value during the 60 months before you apply.¹⁰ Gifting a home to your child is such a transfer.

When Medicaid finds a disqualifying transfer, it imposes a penalty period during which you cannot get nursing home benefits. The penalty equals the transferred value divided by the average monthly cost of private-pay nursing home care in your state. A $300,000 home in a state where care averages $10,000 per month produces a 30-month penalty — thirty months of paying for care out of pocket.

Federal law allows a few exceptions. You can transfer the home without penalty to:

Your spouse, regardless of timing.
A child under 21, or a child who is blind or permanently disabled.
A sibling with an ownership interest who lived in the home for at least one year before you entered a nursing facility.
An adult “caretaker child” who lived in the home for at least two years before you entered a facility and provided care that let you stay at home rather than in a facility.

If none of those fits and you might need Medicaid-covered care within five years, gifting outright is risky. A transfer-on-death deed or living trust sidesteps the problem because you keep ownership until death, and the look-back only reaches transfers made during your lifetime.¹⁰

What Happens to an Existing Mortgage

If you still owe on the home, your mortgage almost certainly contains a “due-on-sale” clause that lets the lender demand full repayment when the property changes hands. The federal Garn-St Germain Act blocks the lender from enforcing that clause when a parent transfers a home to a child, as long as the property has fewer than five dwelling units.¹¹ The same protection applies when you move the home into a revocable trust where you remain a beneficiary.

The loan itself doesn’t vanish. Whoever is on the note still owes the balance. If you want your child to take over payments, they typically need to refinance in their own name or formally assume the mortgage with the lender’s consent. Call your servicer before the transfer to confirm the process.

Preparing and Recording the Transfer

The mechanics are similar whichever method you use.

Drafting the Deed

Pull your current deed and copy the legal description — the lot, block, and boundary information that identifies your parcel — exactly onto the new deed. You are the “grantor,” your child is the “grantee.” Both parties usually need to provide Social Security numbers for tax reporting. Blank deed forms are available from the county recorder’s office, or a real estate attorney can draft one.

Notarization and Recording

Every deed has to be signed in front of a notary public and then filed with the county recorder or registrar of deeds where the property sits. Recording fees vary by jurisdiction, usually a modest per-page charge plus any local or state transfer tax. Some states impose transfer taxes based on property value; many exempt parent-to-child transfers. Ask your county recorder what fees and exemptions apply.

Property Tax Reassessment

In many states, a change of ownership triggers a reassessment that can raise the annual property tax bill to reflect current market value. Some states offer partial or full exemptions for parent-to-child transfers, but the rules differ widely. Contact your local assessor before the transfer to find out whether an exemption applies and what forms you need to claim it.

Homeowners Insurance

Homeowners policies cover the named insured, not the property itself. Once title changes, the existing policy may stop providing coverage until it is updated. After recording the deed, your child should either transfer the policy into their name or buy a new one. For property held in a trust, the trustee should be added as an additional insured. Skipping this step can leave the home unprotected against damage or liability claims.

1
IRS. IRS Releases Tax Inflation Adjustments for Tax Year 2026
2
Office of the Law Revision Counsel. 26 U.S. Code 1015 – Basis of Property Acquired by Gifts and Transfers in Trust
3
Office of the Law Revision Counsel. 26 U.S. Code 1014 – Basis of Property Acquired From a Decedent
4
Office of the Law Revision Counsel. 26 U.S. Code 2503 – Taxable Gifts
5
IRS. Instructions for Form 709
6
Office of the Law Revision Counsel. 26 U.S. Code 2513 – Gift by Husband or Wife to Third Party
7
Office of the Law Revision Counsel. 26 U.S. Code 2512 – Valuation of Gifts
8
Office of the Law Revision Counsel. 26 U.S. Code 7872 – Treatment of Loans With Below-Market Interest Rates
9
IRS. Revenue Ruling 2026-2 Applicable Federal Rates for January 2026
10
Office of the Law Revision Counsel. 42 U.S. Code 1396p – Liens, Adjustments and Recoveries, and Transfers of Assets
11
Office of the Law Revision Counsel. 12 U.S. Code 1701j-3 – Preemption of Due-on-Sale Prohibitions