A Texas gift deed is a written instrument that transfers ownership of real property from a donor to a donee for no payment, signed by the donor, acknowledged before a notary, and recorded with the county clerk where the property sits. The deed itself is not complicated. What surrounds it is: the donee inherits your original cost basis for capital gains, you as the donor handle any federal gift tax filing, a mortgage on the property can trigger acceleration, and a transfer within five years of applying for Medicaid can create a long penalty period. Get those pieces right before you sign, not after.
What the Deed Must Contain
At a minimum, a gift deed needs the full legal names of the donor and donee, a legal description of the property, and an explicit statement that the property is being conveyed as a gift with no consideration. The legal description has to match the county’s real property records: a metes-and-bounds survey, a lot-and-block reference from a recorded plat, or a reference to a prior recorded deed. A street address alone will not do.
Disclose any liens, mortgages, or other encumbrances. They travel with the property. Pull the current title and confirm ownership before drafting, and have recent property tax statements on hand to verify the parcel and its tax status.
If the property is the couple’s homestead or community property, the donor’s spouse must also sign. Texas defines community property as anything acquired by either spouse during marriage that is not separate property.1State of Texas. Texas Family Code Section 3.002 – Community Property Neither spouse can convey the homestead alone, so a gift of the family home requires both signatures regardless of whose name appears on the existing deed. If more than one person owns the property, every owner has to sign; one owner’s signature only transfers that owner’s share.
Choosing the Warranty Language
“Gift deed” describes the purpose, not a form. You still choose how much protection the donee gets.
- A general warranty deed has the donor guarantee clear title and take responsibility for any claims that surface later, including ones predating the donor’s ownership. Strongest protection for the donee.
- A special warranty deed guarantees only that no title problems arose during the donor’s ownership. Anything older is the donee’s risk.
- A quitclaim deed transfers whatever interest the donor has, if any, with no guarantees. Simple, but the donee gets almost no protection.
Because no purchase price changes hands, the donee cannot claim good-faith-purchaser protection even under warranty language. That makes a clean title search before the transfer more important than in a sale. Whatever defects exist come along with the property.
Signing, Notarizing, and Recording
The donor signs voluntarily. Coercion, fraud, or undue influence can void the transfer later. For the deed to be eligible for recording, Texas requires that the grantor’s signature be acknowledged or sworn to before a notary public, or acknowledged in the presence of at least two credible subscribing witnesses.2State of Texas. Texas Property Code Section 12.001 – Instruments Concerning Property Notarization is what county clerks expect to see.
Once the deed is signed and notarized, file it with the county clerk in the county where the property is located. Recording creates a public record of the ownership change. Under Texas law, an unrecorded conveyance is void against creditors and against any later buyer who pays value without notice of the earlier transfer.3State of Texas. Texas Property Code Section 13.001 – Validity of Unrecorded Instrument The unrecorded deed still binds the donor, the donee, and their heirs, but that will not stop a creditor or an innocent purchaser.
The donor’s title insurance policy does not transfer with the property. The donee should consider a new owner’s policy to cover undiscovered title defects.
The Carryover Basis Problem
This is where gift deeds become expensive in ways people do not expect. When you receive property as a gift, you take the donor’s cost basis: what the donor originally paid, adjusted for improvements and depreciation.4Office of the Law Revision Counsel. 26 USC 1015 – Basis of Property Acquired by Gifts and Transfers in Trust If the donor bought a house for $80,000 thirty years ago and it is now worth $400,000, the donee’s basis is $80,000. Sell the property and capital gains tax applies to $320,000 of appreciation.
Inheritance works differently. When property passes at death, the heir gets a stepped-up basis equal to the fair market value on the date of death. Same house, same numbers: the heir’s basis would be $400,000, and an immediate sale produces no taxable gain. For highly appreciated property, the choice between gifting now and leaving by inheritance can be worth tens of thousands of dollars in tax. Think through that math before drafting the deed.
Federal Gift Tax Filing
Texas has no state gift tax, but federal rules still apply. For 2026, a donor can give up to $19,000 per recipient without any filing obligation.5Internal Revenue Service. Frequently Asked Questions on Gift Taxes Real property almost always exceeds that, so the donor will need to file IRS Form 709 for the year of the transfer. It is due April 15 of the following year and can be extended with the donor’s income tax return.6Internal Revenue Service. Filing Estate and Gift Tax Returns
Filing does not mean owing. The amount above $19,000 reduces the donor’s lifetime exclusion, which is $15,000,000 for 2026.7Internal Revenue Service. Rev. Proc. 2025-32 Most donors never approach it. The donor, not the donee, owes any gift tax that comes due. Married donors can split a gift and effectively double the annual exclusion to $38,000 per recipient, but both spouses must consent and each files a separate Form 709.
Property With a Mortgage
Gifting mortgaged property is one of the most common ways these transfers go wrong. The loan does not disappear when the deed is signed. The donor stays personally liable unless the lender releases the donor or the donee refinances into a new loan.
Most mortgages contain a due-on-sale clause allowing the lender to demand full repayment on a transfer. Federal law blocks enforcement of that clause in some situations, including transfers where the borrower’s spouse or children become an owner, and transfers into a living trust where the borrower remains a beneficiary and continues to occupy the property.8Office of the Law Revision Counsel. 12 USC 1701j-3 – Preemption of Due-on-Sale Prohibitions A gift to a sibling, a parent, a friend, or a non-occupant child may not fit any exception, and the lender could call the loan. Contact the lender before recording. Some will consent or offer an assumption; others will not, and proceeding without permission is a gamble.
Medicaid Lookback
If the donor might need Medicaid-funded long-term care within the next five years, a gift deed can create serious problems. When someone applies for Medicaid nursing home benefits, the state reviews all asset transfers made during the 60 months before the application.9Office of the Law Revision Counsel. 42 USC 1396p – Liens, Adjustments and Recoveries, and Transfers of Assets Any transfer for less than fair market value, including outright gifts, triggers a penalty period of ineligibility.
The penalty is calculated by dividing the uncompensated value of the property by the average monthly cost of nursing home care in Texas. A $300,000 property in a state where nursing home care averages $6,000 a month would produce a 50-month penalty. The clock does not start until the applicant is actually in a nursing facility and has spent down other assets, which means the coverage gap can be brutal. Transfers to a spouse or to a disabled child are exempt. If a transfer has already created an eligibility problem, returning the property to the donor can reduce or eliminate the penalty.
Homestead Exemption Does Not Follow the Property
If the gifted property was the donor’s homestead, the exemption does not carry over. The new owner has to file a separate homestead exemption application with the county appraisal district. The general filing deadline is before May 1, though a new owner who acquires the property after January 1 can receive the exemption for the applicable portion of the tax year.10Texas Comptroller. Property Tax Exemptions The donee must actually use the property as a principal residence and cannot claim a homestead exemption on another property. Missing this step means paying full property taxes without the reduction until the exemption is applied.
Gifts to a Minor
A minor can legally own real property in Texas. There is no age floor for holding title.11Social Security Administration. POMS PR 07215.048 – Texas The practical problem is that a minor cannot sell, mortgage, or manage the property.
The common solution is a custodial arrangement under the Texas Uniform Transfers to Minors Act. The donor names a custodian who manages the property for the minor until age 21 (the Texas UTMA default, not 18). To create the custodianship for real property, the deed has to be recorded with language naming the custodian “as custodian for [name of minor] under the Texas Uniform Transfers to Minors Act.”12State of Texas. Texas Property Code PROP Section 141.010 The custodian owes a fiduciary duty to the child.
A trust is the other option and offers more flexibility over the age of control and the conditions for distribution. Without either a UTMA designation or a trust, a court may have to appoint a guardian to manage the property, which is slow and costly. Rental income or other property income is taxable and gets reported on the minor’s return or the trust’s return depending on the structure.
Undoing a Gift Deed Is Hard
Once a gift deed is executed and delivered, the transfer is generally final. Texas courts are reluctant to unwind completed gifts. A donor can seek revocation only by proving duress, fraud, or a material mistake of fact. The only reliable way to preserve a right to take the property back is to include a reversion clause in the original deed setting out the conditions for return.
Changing a completed gift deed requires the donee’s cooperation. Both parties have to agree and sign a new deed with the same formalities: signing, notarization, and recording. If the donee refuses, the donor has no unilateral fix. That finality is why the drafting stage carries so much weight. Once the deed is recorded, the terms are what you live with.