Q: Is there specific language put in survivorship deed to show added name is my child to be exempt from PA transfer tax?
I am adding my daughter's name to my deed with right of survivorship. We have a draft of a special warranty deed with right of survivorship and I want to know if there is specific language that should be included in the deed to show she is my child in order to be exempt from the Pennsylvania transfer tax between lineal family members. There is no longer a mortgage on the house and ownership is going from just me to joint ownership by her and me with right of survivorship.
A:
I do not know all the facts in your situation but before you proceed with adding your daughter to the title of this deed, you should consider the potential that doing so could reduce the benefit of stepped-up basis in calculation of capital gain tax if the house is sold in the future. The inheritance tax you are trying to reduce has a rate of 4.5 percent of the value of the house but the capital gain tax rate could be 15 or 20 percent on the increase in value of the property on the portion that would be owned by your daughter. Depending upon how long you have owned the house and other factors, adding your daughter to the title could result in capital gain tax of an amount greater than the inheritance tax you are trying to save. Also consider that once you add her to the title, you cannot unilaterally change your mind. If you want to sell the house, she would have to agree.
I recommend that you consult with an experienced estate planning attorney regarding your whole estate planning situation before you proceed with this transfer.
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