Thanks. One big tax difference between transferring a property during your life versus at death is the basis step up at death. If you transfer property during your life, your basis in the property (your purchase price plus any improvements) transfers over to your daughter. If you transfer the property at your death, the basis gets increased to its fair market value. So, if the property has appreciated substantially, you would be better of tax wise to transfer it at your death. On the liability
side, should you think you'll ever need Medicaid assistance, you'd be better off transferring it now to avoid it being considered in your eligibility for Medicaid aid.
Back to the tax side, neither the Federal government
nor Mass. has any inheritance tax. If transferred at death, Massachusetts has an estate tax
payable by the estate, but the first $1,000,000 is exempt
. For Federal taxes
, the first $5,250,000 of your estate is exempt and the estate would only be taxed for amounts in excess of that.
If you gift the property now, there should be no gift tax
consequences. Mass. has no gift tax. On the Federal level, recipients of gifts are not subject to gift tax. And, there should also be no gift tax due from the donor. Each donor can give $14,000 per year per person under the annual gift exclusion. In addition to that, for any amounts in excess of the $14,000 in a year, each person has a $5,250,000 lifetime exemption....which means a person can give a cumulative amount of up to $5,250,000 in gifts over and above the $14,000 annual gift exclusion amount without incurring gift tax....the donor must file a gift tax return
to let the IRS
know how much of the lifetime exemption is being used, but there will be no gift tax until cumulative additional gifts have exceeded the $5,250,000.
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