Property can be transferred in more than one way – a traditional purchase/sale transaction, though the most common type, is not the only type. Many times family members transfer property to each other for various reasons. Making sure the property transfer is properly performed is key to the transaction. Taxes and other legal requirements must be followed according to federal and state laws. Failure to comply can lead to legal challenges, even fines and other penalties.
At Skalnik Legal Services, we will help make sure your transfer of property is legally carried out. To make sure the real estate transaction is legally valid, contact us at (312) 698-3595 to discuss your situation.
Types of Property Transfers between Family Members in Illinois
There are several types of property transfers that can occur between family members. The most common include:
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Gifts. A gift is a transfer of property without payment or consideration in return. When a gift is given, the giver must relinquish all rights and ownership of the property.
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Sales. A sale is a transfer of property in exchange for payment or consideration. The sale must be for fair market value, and both parties must agree to the terms of the sale.
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Inheritance. An inheritance is a transfer of property that occurs when a family member passes away and leaves the property to another family member in their will or through the laws of intestacy.
Legal Requirements for Property Transfer
To transfer property between family members, there are several legal requirements that must be met, though they may differ according to your state's laws. At a minimum, two requirements must be met regardless of where the transaction takes place.
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Clear title. The property being transferred must have a clear title, which means that there are no liens, encumbrances, or other legal issues that would prevent the transfer.
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Valid contract. A valid contract must be in place that outlines the terms of the transfer, including the type of transfer, the amount of consideration (if any), and any other relevant details.
Each state has its own laws and regulations regarding property transfers, so as mentioned these laws must be followed to ensure that the transfer is valid.
Taxes and Property Transfers
When property is transferred between family members, both the giver and the recipient may be subject to taxes. The tax implications depend on the type of transfer and the value of the property.
If a property is gifted between family members, the giver may be subject to gift tax. The current federal gift tax exemption is $15,000 per year per recipient, which means that a giver can give up to $15,000 worth of property to each recipient each year without having to pay gift tax. If the value of the gift exceeds the exemption amount, the giver may be required to pay gift tax on the excess amount.
If a property is sold between family members, the transaction must be for fair market value to avoid tax implications. If the sale price is below fair market value, the transaction may be considered a gift and may be subject to gift tax.
Inheritance transfers may also have tax implications for the recipient. Inheritance tax laws vary by state, so it is important to consult with a tax professional to understand the tax implications of an inheritance transfer.
Legal Considerations for Property Transfer
There are several legal considerations that must be taken into account when transferring property between family members, including:
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Legal capacity. Both the giver and the recipient must have the legal capacity to enter into a contract, meaning they must be of legal age and must not be under the influence of drugs or alcohol.
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Undue influence. The transfer must not be the result of undue influence, which occurs when one family member uses their position of power to coerce another family member into making the transfer.
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Fraud. The transfer must not be the result of fraud or misrepresentation.
Keep in mind that each situation comes with its unique facts and circumstances, so other considerations may be in order. Speaking to a real estate lawyer with experience in these types of transfers is your best means to ensure you do it lawfully as well as ensuring the transfer suits your purpose.
Contact a Real Estate Lawyer in Cook County Today
A property transfer has significant personal and legal considerations. If you are located in Cook County or the surrounding counties of DuPage, Kane, Lake, McHenry, or Will get the advice you need to transfer property to family members today by contacting Skalnik Legal Services at (312) 698-3595 today.