NEW YORK, NY – Property owners considering transferring real estate to family members in New York can face significant tax consequences if they act without a structured plan, including gift tax exposure, capital gains liability, and potential estate tax issues. New York estate planning attorney Natalia A. Sishodia of Sishodia PLLC (https://sishodia.com/how-do-i-transfer-property-to-a-family-member-tax-free/) explains the exclusions, exemptions, and planning tools that allow families to transfer property efficiently while remaining compliant with federal and state law.
According to New York estate planning attorney Natalia A. Sishodia, several strategies allow individuals to transfer property to family members with little or no immediate tax. The annual gift tax exclusion permits up to $19,000 per recipient in 2025 without triggering gift tax, and married couples can effectively combine their exclusions for a total of $38,000 per recipient. “For owners who are not in a hurry, gifting fractional interests over several years can move significant value tax-free while keeping the process compliant,” Sishodia explains. “Accurate documentation, including appraisals and Form 709 filings, is what makes this strategy hold up over time.”
New York estate planning attorney Natalia A. Sishodia notes that the lifetime gift tax exemption, set at $13.99 million in 2025, allows much larger transfers when the annual exclusion is not enough. Any portion of a gift exceeding the annual exclusion counts against the lifetime amount, which is shared with the estate tax exemption. A $1 million gift to a family member, for example, would use the $19,000 annual exclusion and reduce the lifetime exemption by the remaining $981,000, leaving the donor’s available shelter for future gifts and estate planning at roughly $13.009 million.
A Qualified Personal Residence Trust, or QPRT, can play a powerful role for higher-value homes that are likely to appreciate. The owner transfers the residence to the trust, retains the right to live in it for a fixed term, and then passes the property to the named beneficiaries at the end of that term. Because the value of the gift is calculated at a discounted rate based on the retained interest, the taxable value of the transfer can be considerably lower than the property’s current market value. If the grantor survives the trust term, the property leaves the taxable estate; if not, the property reverts and may be subject to estate tax.
Inclusion of property in a will is another option, with a different but important tax effect. Attorney Sishodia points out that inherited property generally receives a stepped-up basis equal to its fair market value at the date of death. “That single rule can erase decades of unrealized gain,” Sishodia notes. “A property purchased for $200,000 and worth $800,000 at death gives the heir a new basis of $800,000, so a sale at $850,000 produces only $50,000 of taxable gain rather than $650,000.”
By contrast, a gift made during the donor’s lifetime carries a different result for capital gains. The recipient generally takes over the donor’s original cost basis, which can produce a much larger taxable gain on sale. A property bought for $150,000 and gifted at $600,000 leaves the recipient with the original $150,000 basis, so a later sale at $600,000 produces $450,000 of taxable gain. The trade-off between gifting now and inheriting later is one of the most consequential decisions in real estate succession planning.
The firm regularly walks clients through specialized scenarios. Adding a family member to the deed creates co-ownership and can avoid probate when title is taken as joint tenants with right of survivorship or as tenants by the entirety, but it is treated as a partial gift equal to the value transferred and may complicate cost basis. A life estate allows the owner to retain the right to live in the property while transferring future ownership and provides a stepped-up basis on the remainder interest at death, although it cannot be easily reversed and may interact with Medicaid recovery rules. Selling below market value to a relative creates a gift of equity equal to the difference between market value and sale price, which can be applied against the annual exclusion and lifetime exemption.
Sishodia adds that certain transfers fall entirely outside the gift tax. “Tuition paid directly to an educational institution and medical expenses paid directly to a provider are excluded, regardless of amount,” she advises. “Spousal transfers between U.S. citizens are also generally exempt, which makes the unlimited marital deduction one of the most flexible tools in estate planning.”
Recipients who later sell gifted property should also consider holding period rules, the primary residence exclusion of up to $250,000 for individuals or $500,000 for married couples, and New York state-level capital gains taxes, all of which affect the after-tax outcome. Documenting fair market value at the time of transfer with a qualified appraisal makes future tax filings significantly easier.
For New York property owners thinking about gifting a home, adding a family member to the deed, or building real estate into a long-term estate plan, the right structure depends on the family’s goals, the property’s basis and value, and the timing of the intended transfer. Consulting an estate planning attorney before signing any deed can preserve options that are difficult or impossible to reverse later.
About Sishodia PLLC:
Sishodia PLLC is a New York City-based law firm focused on estate planning, probate, real estate, and cross-border tax matters. Led by managing partner Natalia A. Sishodia, Esq., LL.M., the firm advises domestic and international clients on property transfers, trust planning, and intergenerational wealth strategies. For consultations, call (833) 616-4646.
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