Suze Orman’s Warning to Parents: That Dollar Deed Could Trigger $520,000 in Capital Gains Tax

A New York father sold his house to his daughter for one dollar, put her name on the deed, and assumed the estate planning was handled. Suze Orman, on her Women & Money podcast, told the caller that a single signature could trigger a tax bill on $520,000 of appreciation when the daughter eventually sells. The fix is simpler than the mistake, but only if the family acts before the parent dies.

Parents transfer property to adult children to avoid probate or keep things simple. Orman’s verdict is direct: the dollar deed is one of the most expensive mistakes families make, and the IRS sees right through it.

Why the IRS treats a $1 sale as a gift

Orman explained the mechanic plainly on her podcast. “Because he sold it to you for $1, that is going to be deemed as a gift because everybody knows that that was a tool used to get the house in your name and they’ll just void it.” Once the IRS reclassifies the transaction as a gift, a specific tax rule kicks in that wrecks the daughter’s tax position.

That rule is carryover basis. When someone receives property as a lifetime gift, the recipient inherits the giver’s original purchase price as their cost basis. Capital gains tax is then calculated on the difference between the eventual sale price and that original, often very low number. The longer the parent held the property before gifting it, the wider the gap and the larger the potential tax bill.

Inherited property works the opposite way. Assets passed at death receive a stepped-up basis equal to fair market value on the date of death, so a sale shortly after produces little or no taxable gain. Congress weighed eliminating the step-up in basis in recent years, but the One Big Beautiful Bill Act, signed on July 4, 2025, left the rule entirely intact.

The $520,000 difference, in real numbers

Orman used the caller’s situation to illustrate what is at stake. Assume the father paid $80,000 for the house decades ago and it is now worth $600,000.

In the dollar-deed scenario, the daughter inherits her father’s $80,000 cost basis. When she sells for $600,000, she owes capital gains tax on $520,000 of appreciation. Because she never lived in the house as her primary residence, she cannot use the home-sale exclusion. At the 15% federal long-term capital gains rate, that comes to roughly $78,000 in federal tax before state tax and the 3.8% net investment income tax. At 20%, the federal hit exceeds $100,000, and state taxes can push the total well into six figures.

The alternative is straightforward. If the house stays in the father’s name and passes at death, the daughter’s new basis becomes the $600,000 fair market value on the date of death. She sells for $600,000. Federal capital gains tax owed: zero. Same house, same daughter, one structural difference in how the transfer was handled.

The second hidden cost: creditor exposure

Tax is only half the problem. Once a child’s name appears on the deed, the house is legally theirs, with all the liability that entails. Orman put it directly: “If you are in a car accident or you do something and you get sued and for some reason they take that house away from you, guess what? Your father’s going to be out of a house.”

A lawsuit, divorce settlement, business bankruptcy, or unpaid medical judgment can attach to any property held in the child’s name. The parent who intended to protect their child has handed a creditor a ready target instead.

The right tools, by state

Orman outlined three structures that accomplish the same probate-avoidance goal without the tax damage.

1. Revocable living trust. The parent retitles the home into a trust they control during life. At death, the home passes to the beneficiary outside probate with a full step-up in basis. The parent retains every right they had before, including the right to sell or refinance.
2. Lady Bird Deed. Available in five states: Florida, Michigan, Texas, Vermont, and West Virginia. The owner keeps full control and the right to sell during life. At death, the property transfers automatically to the named beneficiary with a step-up in basis. No other states currently recognize this instrument, though South Carolina introduced a bill in 2025 that had not passed as of mid-2026.
3. Transfer on Death deed. New York enacted this option effective July 19, 2024, under N.Y. Real Property Law Section 424, part of Governor Hochul’s fiscal year 2025 budget. The mechanic mirrors the Lady Bird deed: full ownership and control during life, automatic transfer at death, and the step-up in basis preserved for the beneficiary. Estate law researchers now count 32 states plus the District of Columbia as permitting some form of TOD deed for real property, a number that has grown steadily. Delaware’s law took effect on December 5, 2025, after Governor Matt Meyer signed it on September 5, 2025. Maryland became the latest state to authorize the instrument when Governor Wes Moore signed the Maryland Transfer on Death Deed Act on May 26, 2026, with an October 1, 2026 effective date.

What to do this week

If a parent has already deeded property to a child for a token amount, the situation is usually fixable. Orman’s advice is to have the child deed the property back, then have the parent establish a revocable trust or record a Transfer on Death deed where state law permits. Acting before the parent’s death is the only way to preserve the step-up in basis.

Start by pulling the deed from the county recorder and confirming whose name is on title. Then ask an estate attorney in the parent’s state two specific questions: does this state allow Lady Bird or Transfer on Death deeds, and what is the cleanest way to reverse a completed gift deed without triggering additional transfer tax? That consultation fee is a small fraction of a potential six-figure capital gains bill.

The cheapest estate planning shortcut a family heard about at a dinner party is often the most expensive document they will ever sign.

Editor’s note: This article was updated to specify that Delaware’s Transfer on Death Deed Act took effect December 5, 2025 (signed by Governor Matt Meyer on September 5, 2025), and that Maryland Governor Wes Moore signed the Maryland Transfer on Death Deed Act on May 26, 2026, with an October 1, 2026 effective date. The count of jurisdictions permitting TOD deeds has been updated to 32 states plus the District of Columbia, and the prior attribution of that figure to the American Bar Association has been softened to a general reference to estate law researchers.

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