Q: Both of my daughters are on the deed to my house as “joint tenants with rights to survivorship.”

I read about the estate tax changes this year in your recent column. What will my daughters’ cost basis be for tax purposes at the time the house is sold? Will it be the sales price or will it be the rice I paid for the property? Should I take them off the deed and create a trust instead?

A: I wish you (and all other parents who have easy access to quit claim deeds) had spent some time with an estate planner or real estate before giving your property to your children.

I’m sure your motives were pure: You wanted the property to transfer to them more easily after your death. You didn’t want them to go through probate. But they may face other sorts of tax consequences down the line.

In short, if you die this year, based on current tax law that does not include the stepped-up basis, their cost basis would be the value of the property the day you gave it to them. When they sell the property, they may owe tax on the difference between the cost basis and the sales price.

Under the old law, if you inherited property in 2009 and immediately sold it, you would pay no tax on the sale of the property. Your basis (or cost) would have been the value of the property on or about the day you inherited the property.

In 2010 (and only 2010, the way things appear to be going), if you inherit property and then sell it, you have to pay the difference between the basis that the property had with the person that gave it to you and the price you get for the property.

That is to say if your father had a piece of land that he paid $10,000 years ago and its now worth $100,000, you’ll have to pay capital gains taxes on the difference between on the $90,000.

But this rule is in place only this year. Next year if Congress doesn’t get around to fixing the estate tax laws, the old rule kicks back in.

One additional item, if the value of the property has dropped, your basis or cost is the lesser of the cost to the person that gave you the property or its value at the time you received the property.

If you’re confused, you’re not alone. I have received dozens of letters from readers across the country that were not aware that the estate tax laws had changed this year. They also had no idea that the stepped-up basis for inherited assets had disappeared.

For those of asked for more explanation of the current estate tax mess (the only way to describe it), you can check out the following websites: Cornell Law School’s website (http://www.law.cornell.edu/uscode/uscode26/usc_sec_26_00001022—-000-.html) and a briefing prepared by CCH, which is a large tax publisher (http://cch.com/press/news/2009/20091222t1.asp).

IRS Publication 950, Introduction to Estate and Gift Tax, was revised in December, 2009 and provides an excellent explanation of what you have to do if you (or someone you know) died in 2009. But the publication has not yet been revised for the 2010 tax year.

The best advice I can give is to sit down with an estate planner, tax preparer or a real estate attorney who can help you figure out what your long-term goals are, and who can help you assess your legal options and what will happen with each possible course you take.

For other estate tax questions and problems that homeowner’s face, read the following articles:

Estate Planning Can Help Avoid Capital Gains Tax

Estate Planning Nearly Impossible for 2010 and beyond