Jameson Stone Law handles property transfers within families and through estates across Central Pennsylvania, and Daniel Jameson leads both the real estate and the estate planning work. There are several ways to move a house to the next generation. They cost very different amounts, and the difference is frequently tens of thousands of dollars.
The Costly Mistake
The most common plan we are asked to carry out is also the most expensive one. A parent wants to deed the family home to a child now, usually to avoid probate or to save the 4.5% inheritance tax that applies to a transfer to a child. It works, on its own terms. Gifts made more than a year before death fall outside the Pennsylvania inheritance tax entirely.
What it also does is destroy the stepped-up basis. Inherit a house and your basis resets to its value at the date of death, so decades of appreciation are never taxed. Receive it as a lifetime gift and you take the parent’s original basis instead, which on a house bought forty years ago can mean a capital gains bill several times larger than the inheritance tax it was meant to avoid. On an appreciated long-held home, gifting it is very often the worse outcome by a wide margin.
Transfer Tax
Pennsylvania charges realty transfer tax on most conveyances, but transfers between parents and children, between spouses, and between grandparents and grandchildren are exempt regardless of which method is used. Which is useful to know mainly because it removes a distraction. Transfer tax is rarely what decides the right approach for a family.
The exemption still has to be claimed correctly. Every deed transfer in Pennsylvania requires a Statement of Value filed alongside it, declaring the consideration and the exemption relied on. And a deed does not do anything until it is recorded with the county Recorder of Deeds, which is what makes it effective against creditors, later purchasers and everyone else. Deeds sitting unrecorded in a drawer are a recurring and entirely avoidable problem.
The Options
An outright gift now is the simplest and usually the worst for an appreciated home. A genuine sale at market value avoids the gift and Medicaid questions but requires the child to actually pay. A life estate deed lets the parent keep the right to live there while the remainder passes at death, preserving the stepped-up basis and avoiding probate, at the cost of being an irrevocable gift that cannot be undone alone. A revocable trust keeps full control and full basis while avoiding probate, without avoiding the inheritance tax. Leaving it by will is the simplest of all and keeps every option open.
Two further considerations cut across all of them. Any transfer starts the five-year Medicaid look-back, so a gift made to protect the house from long-term care costs can produce exactly the ineligibility it was meant to prevent. And adding a child to the deed as joint owner exposes the property to that child’s creditors, divorce and judgments while you are still living in it.
What We Handle
Parent to child, spouse to spouse, and grandparent to grandchild, prepared, recorded and correctly exempted.
Retaining the right to live there while the remainder passes at death with basis intact.
Moving a property into a revocable trust so it avoids probate without disturbing the basis.
Conveying property out of an estate, whether to a beneficiary or to an outside purchaser.
Our Process
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What the property cost, what it is worth now, and how much unrealized gain is actually sitting inside it.
Inheritance tax against capital gains against Medicaid and control, because no single one of them decides it alone.
The deed, the Statement of Value, the exemption claimed properly, and the recording completed rather than left pending.
Almost everyone arriving at this has a method in mind already, usually adding a child to the deed or signing the house over outright. Both are legitimate options. Neither is the right one as often as people assume, and the reason is arithmetic rather than law.
Usually not, and the reason is capital gains. If your children inherit the property they receive a basis equal to its value at your death, so all the appreciation over your ownership escapes tax. If you gift it to them, they inherit your original purchase price as their basis instead, and pay capital gains on everything above it when they sell. On a home bought decades ago that difference commonly runs to six figures, against a 4.5% inheritance tax you were trying to avoid. There are situations where a lifetime transfer is right, but it needs the numbers run first rather than afterward.
No. Transfers between parents and children, spouses, and grandparents and grandchildren are exempt from Pennsylvania realty transfer tax, and that holds whichever route you take. The exemption does have to be claimed properly on the Statement of Value filed with the deed, which is a formality rather than a difficulty. What it means practically is that transfer tax should not drive the decision, and if someone has told you a particular method saves it, that is not a real advantage over the alternatives.
This is the most common reason people ask, and it is the one where the answer is most often no. Any transfer starts a five-year look-back period, and an application for Medicaid long-term care inside that window treats the gift as disqualifying, producing a penalty period during which benefits are unavailable. The house has gone and the care is not covered, which is the worst of both. Planning further ahead than five years changes the picture, and so does a life estate arrangement, but this is not something to do quickly in response to a diagnosis.
A deed is quick to prepare and effectively impossible to reverse. The right route depends on what the property cost, what it is worth now, and what the family is actually trying to protect. Daniel Jameson handles both the estate planning and the real estate work, and the first conversation costs nothing.