Gifting Real Estate (Real Property) in Minnesota

A gift deed, or deed of gift, is a legal document voluntarily transferring title to real property from one party (the grantor or donor) to another (the grantee or donee). A gift deed typically transfers real property between family or close friends. Gift deeds are also used to donate to a non-profit organization or charity. The deed serves as proof that the transfer is indeed a gift and without consideration (any conditions or form of compensation).

Valid deeds must meet the following requirements: The grantor must intend to make a present gift of the property, the grantor must deliver the property to the grantee, and the grantee must accept the gift. Gift deeds must contain language that explicitly states no consideration is expected or required, because any ambiguity or reference to consideration can make the deed contestable in court. A promise to transfer ownership in the future is not a gift, and any deed that does not immediately transfer the interest in the property, or meet any of the aforementioned requirements, can be revoked [1].

A lawful gift deed must also include the grantor's full name and marital status, as well as the grantee's full name, marital status, mailing address, telephone number and vesting. Vesting describes how the grantee holds title to the property. For Minnesota residential property, the primary methods for holding title are tenancy in common and joint tenancy. A conveyance to two or more persons is presumed to create a tenancy in common, unless a joint tenancy is specifically created (Minn. Stat. Ann. 500.19(2)).

As with any conveyance of real estate, a gift deed requires a complete legal description of the parcel. Include all relevant documents, affidavits, forms, and fees with the along with the deed for recording as well. When claiming a minimum deed tax or an exemption, include Deed Tax Form 1 (287.21). If there is a well on the property, include a Well Disclosure Certificate, or applicable e-certificate number (103I.235). An Affidavit Regarding Seller by Individual(s) and an Affidavit Regarding Purchaser by Individual(s) must also be signed and notarized. Record the completed deed at the local County Recorder's office.

The IRS levies a Federal Gift Tax on any transfer of property from one individual to another with no consideration, or consideration that is less than the full market value. Gifts of real property in Minnesota are subject to this federal gift tax. In accordance with federal law, individuals are permitted an annual exclusion of $15,000 on gifts. This means that gifts valued below $15,000 do not require a federal gift tax return (Form 709). Even so, grantors should consider filing one for many gifts of real property [2]. The grantor is responsible for paying the federal gift tax; however, if the grantor does not pay the gift tax, the grantee will be held liable [1].

In Minnesota, there is no state gift tax. For questions regarding tax laws, consult a tax specialist.

With gifts of real property, the recipient of the gift (grantee) is not required to declare the amount of the gift as income, but if the property accrues income after the transaction, the recipient is responsible for paying the requisite state and federal income taxes [3].

This article is provided for informational purposes only and is not a substitute for the advice of an attorney. Contact a lawyer with any questions about gift deeds or other issues related to the transfer of real property. For questions regarding federal and state taxation laws, consult a tax specialist.

[1]https://nationalparalegal.edu/public_documents/courseware_asp_files/realProperty/PersonalProperty/InterVivosGifts.asp
[2] http://msuextension.org/publications/FamilyFinancialManagement/MT199105HR.pdf
[3] https://www.irs.gov/businesses/small-businesses-self-employed/frequently-asked-questions-on-gift-taxes

(Minnesota GD Package includes form, guidelines, and completed example)

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