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. A gift deed 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 includes the grantor's full name and marital status, as well as the grantee's full name, marital status, mailing address, and vesting. Vesting describes how the grantee holds title to the property. For Pennsylvania residential property, the primary methods for holding title are tenancy in common, joint tenancy, and tenancy by entirety. A grant of ownership of real estate to two or more unmarried persons is presumed to create a tenancy in common, unless a joint tenancy with right of survivorship is specifically created. In the case of a married couple, a tenancy by entirety is created (68 Pa.C.S. 110).

As with any conveyance of real estate, a gift deed requires a complete legal description of the parcel. If the document includes a newly drafted legal description, contact the county for directions and verify the type of description required with the local Register of Deed's office. Recite the source of title to establish a clear chain of title, and detail any restrictions associated with the property.

In Pennsylvania, a Statement of Value must be attached with the deed, (91 Pa.C.S. 112) as well as an additional Certificate of Residence, (21 Pa.C.S. 625). If applicable, a Conveyance Document Notice of Coal or Surface Support Severance Notice (52 Ps.C.S. 1551), and/or a Bituminous Mine Subsidence and Land Conservation Act Notice (52 Pa.C.S. 1406.14) must be included as well. For questions regarding these notices, contact a lawyer. Property situated in Philadelphia County requires a recording information summary and real estate transfer tax certification [2]. Record the completed deed at the local Recorder of Deed's office.

The IRS implements 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. 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, donors should consider filing one for many gifts of real property [3].

In Pennsylvania, there is no state gift tax. Transfers of property by gift are exempt from the Pennsylvania property transfer tax (91 Pa.C.S. 193), but are subject to the federal gift tax described above. The grantor is responsible for paying the federal gift tax, and the grantee will be held liable if the grantor fails to do so [1]. Consult a tax specialist with questions.

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 [4].

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://www.phila.gov/records/DocumentRecording/DocumentRecording.html
[3] http://msuextension.org/publications/FamilyFinancialManagement/MT199105HR.pdf
[4] https://www.irs.gov/businesses/small-businesses-self-employed/frequently-asked-questions-on-gift-taxes

(Pennsylvania Gift Deed Package includes form, guidelines, and completed example)

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