Parents transferred a home valued at approximately $800,000 to $1 million to an adult child, believing it would be a good solution for everyone. Except it wasn’t, as reported in the article “My parents transferred their $1M home to my brother. When my dad passed, my mother, now in her 90s, moved in with my brother. How do I get my share?” from Market Watch.
The brother who lives in the house with their mother wants to give his sibling half of the original family property in cash, which is acceptable to his sibling but raises many questions. Can the transfer be made in a tax-efficient manner for each sibling? Should they wait until their mother dies? Who can best help them?
Real estate transfers between family members are always more complicated than straight-up sales to a buyer. However, this situation is particularly complex. Parents often transfer family homes to children while they are living, thinking it’s an easy succession plan and hoping the children figure it out later. The children don’t always treat each other fairly, and many families have fractured as a result. However, even if siblings are fair with each other, problems can still arise.
It would have been far easier if the property had been transferred via a trust. This would have protected the step-up in basis if the two children had been named as beneficiaries. While the parents lived in the house, it would have been vulnerable to creditors or claims if the brother had been sued for an accident or any other liability.
Since this is a cash transfer rather than a property sale, neither sibling will owe income tax immediately. However, the payment must be structured to avoid triggering gift taxes or dipping into the lifetime estate tax exemption.
One solution is for the brother to make annual exclusion gifts up to $19,000 per person per year until the sibling has received their full payment. Gifts under this threshold don’t count against the lifetime exemption and don’t require a gift tax return. However, anyone in this situation should speak with an estate planning attorney, as every situation is different.
Another solution is if the sibling is married and has a child, the brother could give each person—the sibling, the spouse, and the child–$19,000 each, or $57,000 per year. If the brother is married, his spouse could also make the same gift each year, reducing the time required to complete the payment.
If the preference is to receive all the money at once, it can be structured as an intrafamily loan, using the IRS’s applicable federal rate (AFR), the minimum interest rate required for family loans. Each year, the brother can forgive up to the annual exclusion limit on the loan, which will gradually turn it into a tax-free gift. There is a drawback: the brother must report the interest as income, whether he collects it or forgives it.
This situation is more complicated than most. The siblings are advised to form an advisory team that includes an estate planning attorney, a CPA and a financial advisor. Together, they can map out the timing and structure, calculate potential capital gains exposure and ensure that the plan aligns with the family’s overall long-term goals. The stakes are too high to try to do this without professional help.
If you’re ready to start planning your family’s future, book a consultation with Hudson Legacy Law today.
Reference: Market Watch (Feb. 7, 2026) “My parents transferred their $1M home to my brother. When my dad passed, my mother, now in her 90s, moved in with my brother. How do I get my share?”