What are the tax implications of a house gift before death?

Full question:

'Gift in Contemplation of Death.'What are the legal/tax ramifications for giver and receiver in the following; My father, who lived in Okla, recently deeded (gave) his house to me because of his rapidly failing health. Ownership of the house was transferred to me. I then sold the house for $85,000 to use the funds for his nursing home bills. My father died shortly after giving me the house. The value of his estate with the house is approximately $430,000. Should the house be included in my father's estate for estate tax purposes? Please be specific on who owes taxes (if any) in this situation.

• Category: Wills and Estates
• Date: 04/07/2025
• State: Texas

Answer:

A gift is a transfer of property or funds without receiving anything in return. For a gift to be valid, the giver must have the intent to give, and the recipient must accept it. Gifts can be subject to federal and state gift taxes, but gifts to qualified charities are tax-free.

A gift made in contemplation of death refers to personal property given by someone expecting to die soon. If the giver dies within three years of making the gift, the value of that gift is included in their estate for tax purposes, rather than being taxed separately as a gift. If the giver recovers, the gift is treated like any other gift.

The gross estate includes all property the decedent owned at death, including gifts made within three years prior. Estate tax applies to the net value of the estate. In 2004, the tax-free amount was set at $1.5 million, increasing to $3.5 million by 2009. Some states impose an inheritance tax on the recipient instead of an estate tax.

Gift taxes are imposed on gifts made during the giver's lifetime to prevent avoidance of estate taxes. For example, in 2, individuals could give up to $11,000 annually without tax, which increased to $13,000 in 2009. Married couples could give double these amounts. Gifts over these limits may incur a gift tax, but a lifetime credit can offset this tax.

The recipient of a gift or inheritance does not owe gift or estate taxes. The estate's executor is responsible for any estate tax due, while the donor is responsible for gift taxes, if applicable. Additionally, gifts and inheritances are not subject to income tax.