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URL:  http://boards.fool.com/bigdogsfo-quotheres-the-situation-dad-is-24251721.aspx

Subject:  Re: House transfer: Father to Sons Date:  6/20/2006  8:11 PM
Author:  JAFO31 Number:  87485 of 120811

bigdogsfo: "Here's the situation: Dad is passing the 85 year mark this year (mom passed away long ago). My brother and I are thinking of transferring ownership of his home which he owns almost free and clear (about $300k equity) to us as Joint Tennants with Rights of Survivorship. Dad is fine with this plan. We've contacted an estate planning professional who will draw up the title documents to be filed in the county where he lives, with a specific proviso that will allow "Dad" to live in his home as long as he wants - which is what we all want. The idea here is to minimize the hassle if he becomes incapacitated and needs to move elsewhere. We'll be able to sell or rent the home if that happens to pay for his care.

The estate planning professional has indicated that when we sell the home in the future, our cost basis will remain what our father paid for the house - which is quite a bit less that what it's worth now. I am not so sure about this and would like to hear what the Fools on this board think. If our cost basis will not be what the home is worth when we transfer the Title, we will have to re-think this idea."


Does the retained life estate by "Dad" change any of the responses about basis? What about IRC 2036?

(a) "The value of the gross estate shall include the value of all property to the extent of any interest therein of which the decedent has at any time made a transfer (except in case of a bona fide sale for an adequate and full consideration in money or money's worth), by trust or otherwise, under which he has retained for his life or for any period not ascertainable without reference to his death or for any period which does not in fact end before his death -
(1) the possession or enjoyment of, or the right to the income
from, the property, or
(2) the right, either alone or in conjunction with any person,
to designate the persons who shall possess or enjoy the property
or the income therefrom."

Seems like if the value of his house is included in his estate, then the step up in basis would apply? BWDIK. IIC, the step-up in basis is currently scheduled to be eliminated as part of the elimination of the estate tax in 2010.

I am surprised that we did not get one of Phil's rant about DIY estate planning.

Also, on the other board, peter made a good point about exposing the house to claims of the sons' creditors, which should be re-iterated, and someone made a good point about insurance issues.

In addition, life estates are also a potential source of friction between the life tenant and the remainderman, with respect to repairs and capital improvements.

Furthermore, neither son would be legally obligated to sell the house to pay Dad's medical expenses, so I am unsure why Dad would sign off on this.

In addition, no one mentioned the look-back periods on gifts for making determinations for eligibility for Medicaid. I realize that we do not have the whole picture, but if Dad suddenly needed care, he could be SOL.

As you can probably infer, I do not think much of the idea.

If I understand the situtation, a revocable trust with the son's as co-trustee's or a good durable power of attorney might address most of the concerns initially stated.

Regards, JAFO

Disclaimer

Yes, I am a lawyer (and not an elder care or estate planning attorney), BUT THIS IS NOT LEGAL ADVICE; it is only general information. NO CLIENT RELATIONSHIP IS INTENDED TO BE CREATED, NOR IS ANY SUCH RELATIONSHIP SO CREATED. FOR SPECIFIC LEGAL ADVICE YOU SHOULD TALK TO A LAWYER IN YOUR AREA.








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