Estate Planning Strategies: Dad Wants to Sell His Land to Me Cheaply in Lieu of Leaving It in His Will

Just to add to what the others have said, if the land is sold to you at below fair market value then the transaction is part-gift, part-sale. This makes it a tad bit more complex in computing the gain for you later when you sell it. But it is one option that may allow the transfer of the property now without even using up any of your dad’s lifetime unified credit against federal estate and gift tax. And usuing up that credit only really matters if he has now or expects to have later assets that will exceed well over $5 million. While getting it out of his estate now might provide him some gift and estate tax benefit, it comes at the cost to you of potentially more income tax gain to pay when you sell it later. If you get the property by inheritance after he dies, the gain may end up being a whole lot less than if he gives it to you now as a gift. Thus, for parents whose estates aren't going to be large enough to be subject to federal estate tax and who live in and have all their assets in a state that has no death taxes (like Texas), it is generally better taxwise to hold on to the property until they die and then pass it on to their kids as it reduces the income tax that the kids may have to pay on it later.