Gifts of Real Property (Real Estate) in New Jersey
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 .
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, and vesting. Vesting describes how the grantee holds title to the property. For New Jersey 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 otherwise stated in the conveyance (N.J.S.A. 46:3-17). In the case of a married couple, a tenancy by entirety is presumed unless stated otherwise (N.J.S.A 46:3-17.2).
As with any conveyance of real estate, a gift deed requires a complete legal description of the parcel. Recite the source of title to establish a clear chain of title, and detail any restrictions associated with the property. Deeds in New Jersey must also contain a tax map reference (N.J.S.A. 46:15-1.1). Record the completed deed at the local County Clerk's office.
All Gift Deeds in New Jersey are exempt from the realty transfer fee pursuant to N.J.S.A. 46:15-10(6)(a), and an affidavit stating the basis for this exemption must be attached to the deed. Consult a tax specialist with any questions.
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 New Jersey are subject to this federal gift tax. In accordance with federal law, individuals are permitted an annual exclusion of $14,000 on gifts. This means that gifts valued below $14,000 do not require a federal gift tax return (Form 709). Even so, grantors should consider filing one for many gifts of real property . 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 .
In New Jersey, there is no state gift tax. For questions regarding state taxation 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 .
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.
Deeds.com New Jersey Gift Deed Forms Have Been Updated as Recently as Tuesday January 22, 2019
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