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Author: Goofyhoofy Big funky green star, 20000 posts Top Favorite Fools Top Recommended Fools Feste Award Nominee! Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: of 121333  
Subject: Gift of a house Date: 9/26/2011 8:34 AM
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My father-in-law is aged. He is living with one of his daughters, who is poor. He wants to buy a house (around $80,000), put it in her name, and when he dies she inherits it.

It sounds to me like he is giving her a "gift" of $80,000 now, on which taxes may be due. Is that correct? Would it be any different if he put the house in both his and the daughter's name?
 
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Author: TMFPMarti Big funky green star, 20000 posts Home Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 114022 of 121333
Subject: Re: Gift of a house Date: 9/26/2011 9:21 AM
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My father-in-law is aged. He is living with one of his daughters, who is poor. He wants to buy a house (around $80,000), put it in her name, and when he dies she inherits it.

Ah, our old friend DIY estate planning. Everyone's much better off if he buys the house in his own name and leaves it to her in his will. Tell him to invest a few bucks in seeing a lawyer.

Phil
Rule Your Retirement Home Fool

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Author: Goofyhoofy Big funky green star, 20000 posts Top Favorite Fools Top Recommended Fools Feste Award Nominee! Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 114023 of 121333
Subject: Re: Gift of a house Date: 9/26/2011 9:38 AM
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We are SCREAMING for him to see a lawyer, but he has a know it all daughter who is telling him not to "waste" the money, because she's looking it all up on the Internet. This is the same one who advised putting the daughter on the deed to his house, which has now produced a taxable gain for her on a condo she never owned, never lived in, and barely ever visited,

We have offered to pay for the lawyer ourselves, but he doesn't want to go anyway, which is why I'm asking the "gift" question, to try to find some ammo to convince him that this DIY tactic is so foolhardy.

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Author: vkg Big gold star, 5000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 114024 of 121333
Subject: Re: Gift of a house Date: 9/26/2011 10:13 AM
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A friend had an elderly neighbor living with her for awhile after foreclosure. She had put her house in her son's name. Between drugs and gambling, he mortgaged the property and lost it. She should have been comfortably living in her home for the rest of her life, instead she is in a shared rental, struggling on Social Security and food stamps.

There are many things that can be done, but to do it right requires a lawyer and understanding of your state's inheritance laws.

If the daughter is truly poor, she may not be able to afford the house even if she owns it.

Giving it to her know, means that it is a gift and needs to be declared as a gift. No taxes are currently due. It reduces his lifetime gift allowance (its early and I can't remember the exact term) and the amount that passes tax free from his estate.

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Author: BruceCM Big red star, 1000 posts Top Recommended Fools Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 114025 of 121333
Subject: Re: Gift of a house Date: 9/26/2011 12:08 PM
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My father-in-law is aged. He is living with one of his daughters, who is poor. He wants to buy a house (around $80,000), put it in her name, and when he dies she inherits it.

If he 'puts it in her name' then it would be hers and his dying wouldn't have anything to do with her 'inheriting it' as she'd already own it. So if this were the case, and all $$ for the purchase came from him, then the cost of the house plus closing costs he paid, minus $13,000, would be considered to be a gift to her that year. He would need to file a form 709 (gift tax return), which would calculate the gift tax on this amount and then would subtract that from his unified credit that will be used in his final estate tax after he dies...if his estate is large enough to have to file an estate tax return. For 2011, the unified credit is the amount of estate tax on $5,000,000.

As to him buying the house and then putting it in both he and his daughter's name....assuming the split is 50-50, then it would most likely constitute a gift to her of the 50% in her name. At death his 50% would then be transferred to her.

Depending on what his goals are, there are other options, to include holding his house in trust, naming her as the beneficiary. This involves the cost of setting up the trust and the cost of recording the new ownership, but is generally regarded as the easiest way of avoiding the costs and time of probate.

If he is single, he could transfer up to $13,000/yr gift tax free to her. After the second gift (one gift could be in December and the next annual gift in January), the $26,000 would be enough for a 20% down payment and closing costs, to get her in the house and then subsequent annual $13,000 gifts used to pay against the mortgage so that at 7 years, or thereabouts, the mortgage would be paid.

However, I agree with the foregoing recommendation that if gifting and the house title are involved, he should seek the advice of a local estate planning attorney.

BruceM

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Author: CABob Big gold star, 5000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 114026 of 121333
Subject: Re: Gift of a house Date: 9/26/2011 12:24 PM
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I hate to "pile on," but, this sounds like a bad plan for the reasons others have mentioned.
Once the house is in daughter's name she can do with it what she wants. This could include selling the house or evicting FIL. I know this doesn't happen in good families, but, .... stuff happens.

Bob

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Author: JeanDavid Big gold star, 5000 posts Old School Fool CAPS All Star Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 114027 of 121333
Subject: Re: Gift of a house Date: 9/26/2011 4:25 PM
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My father-in-law is aged. He is living with one of his daughters, who is poor. He wants to buy a house (around $80,000), put it in her name, and when he dies she inherits it.


She cannot inherit it. Once the deed (in her name) is filed, it is hers. She does not have to kill him to get the house. ;-)

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Author: AngelMay Big funky green star, 20000 posts Top Favorite Fools Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 114028 of 121333
Subject: Re: Gift of a house Date: 9/26/2011 6:51 PM
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My father-in-law is aged. He is living with one of his daughters, who is poor. He wants to buy a house (around $80,000), put it in her name, and when he dies she inherits it.

Ah, our old friend DIY estate planning. Everyone's much better off if he buys the house in his own name and leaves it to her in his will. Tell him to invest a few bucks in seeing a lawyer.

Phil
Rule Your Retirement Home Fool

---------------


NOW you tell me.
I bought a house and gave it to my daughter.
As I understand it, the IRS wants to know about it, but I won't have to pay taxes on it. It will be deducted from some maximum lifetime amount that I'm allowed to give or something.

The problem I had with keeping the house in my name was that I was paying for the insurance on it which was becoming a drain. I was also paying the taxes. Furthermore, I'm not sure but if something illegal should go on in that house *I* might be held responsible even though I would know nothing about it since I live across the country from said house.

I also got completely fed up with said daughter and so decided to just go ahead a give her the house. Did a quit-claim deed on the house and now she owns it. Maybe she will mess around and lose it. I wouldn't doubt it. But the worry on my end was just too much to contend with. This is not the Waltons we are talking about here.

Last I heard the power company turned off her power - this - AFTER she took out a cut-throat loan to buy a car she didn't need because she already had a clunker that was running.

I finally just threw my hands up in the air and said "I quit." The stress was just more than I could handle.

I did everything I could think to give her a hand up. A house and furniture to fill it. All paid for. Money in the bank to give her a small cushion. She managed to p|ss away all of it. I guess she still has the house and the furniture though I wouldn't bet my life on it. Since I gave her the house, I haven't heard a word. Not even a "thanks mom - thanks for the house."

:(


AM

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Author: ptheland Big gold star, 5000 posts Feste Award Nominee! Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 114029 of 121333
Subject: Re: Gift of a house Date: 9/26/2011 7:10 PM
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I bought a house and gave it to my daughter.

Your facts are different from the OP.

It appears that the OP wants to give the house he's living in to his child. IMHO, that's an incredibly bad idea.

You wanted (and apparently did) make a gift of a house you are NOT living in to help out your child. That is not nearly as bad an idea, and may be perfectly fine, depending on the particulars.

The big difference is that once you have given the house away, you're done. You don't care what your child does with it. If they screw up and lose the house or squander it away, it doesn't matter to you.

On the other hand, the OP cares very much what happens to the house. That is their home - the roof over their head. Should their child squander away the gift, the OP will not have a place to live. What their child does with this gift will matter very much to the OP.

As I understand it, the IRS wants to know about it, but I won't have to pay taxes on it. It will be deducted from some maximum lifetime amount that I'm allowed to give or something.

That's basically correct. Both you and the OP would need to file a gift tax return if the value of the house is over $13k.

--Peter

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Author: nwvic Two stars, 250 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 114030 of 121333
Subject: Re: Gift of a house Date: 9/26/2011 7:17 PM
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I did everything I could think to give her a hand up. A house and furniture to fill it. All paid for. Money in the bank to give her a small cushion. She managed to p|ss away all of it. I guess she still has the house and the furniture though I wouldn't bet my life on it. Since I gave her the house, I haven't heard a word. Not even a "thanks mom - thanks for the house."

The good news is that giving it to her now doesn't hurt you, just her. If she inherited the house, her basis in it would be its value on the date of your demise. As a gift, her basis is the same as yours, likely quite a bit lower. This means that she may owe more in capital gains tax if she sells the house. But practically, unless your estate is large and the value of the house quite high, it won't make much of a difference.

If you did the best that you could you should sleep well.

Foolish regards,

Vic
ancora imparo

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Author: AngelMay Big funky green star, 20000 posts Top Favorite Fools Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 114031 of 121333
Subject: Re: Gift of a house Date: 9/26/2011 7:23 PM
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The big difference is that once you have given the house away, you're done. You don't care what your child does with it. If they screw up and lose the house or squander it away, it doesn't matter to you.



Well, yeah, it does. No mother wants to know that her child (even if the child is way grown) is living in the streets. I worry still. But I've decided that if I call her to find out what's going on it's like asking for more troubles to be poured down on me and I just can't take any more. I do believe that if I had a million dollars to give her she would p|ss it all away in less than a year. That just upsets me no end. It's hard to make money. And people who don't even TRY to take care of it are, to me, alien creatures from another world.

AM

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Author: JeanDavid Big gold star, 5000 posts Old School Fool CAPS All Star Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 114032 of 121333
Subject: Re: Gift of a house Date: 9/26/2011 8:52 PM
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And people who don't even TRY to take care of it are, to me, alien creatures from another world.

Perhaps they are. What concerns me is they seem to be in the majority. Am I, instead, one of the aliens, the these people the natives?

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Author: Donna405 Big gold star, 5000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 114033 of 121333
Subject: Re: Gift of a house Date: 9/26/2011 9:42 PM
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In South Carolina, as well as other states, he may take title as "John Doe and Mary Doe, joint tenants with right of survivorship." This way, if he dies before his daughter, the property automatically will go to her, and bypass Probate.

In what state is he located?

Donna

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Author: Donna405 Big gold star, 5000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 114034 of 121333
Subject: Re: Gift of a house Date: 9/26/2011 9:42 PM
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Oops. I meant to say "John Doe and Mary Doe, joint tenants with right of survivorship, and not as tenants in common."

Donna

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Author: 2gifts Big gold star, 5000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 114035 of 121333
Subject: Re: Gift of a house Date: 9/27/2011 10:32 AM
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In South Carolina, as well as other states, he may take title as "John Doe and Mary Doe, joint tenants with right of survivorship." This way, if he dies before his daughter, the property automatically will go to her, and bypass Probate.

But that doesn't get rid of all the other issues. He's still got to do a gift tax return because he is giving her half of the house, she will only inherit his half at the stepped-up basis instead of the entire house when he passes, she could mortgage the house since she's on the deed, she could lose the house through a lawsuit because she's on the deed, etc.

I've seen DIY estate planning in action, and it's not pretty. Given that they have already had one unexpected result with the daughter in question having to pay capital gains on a house in which she never lived because of the father's DIY estate planning, I'd say they should have already learned some lessons here, but it didn't seem to stick.

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Author: Donna405 Big gold star, 5000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 114036 of 121333
Subject: Re: Gift of a house Date: 9/27/2011 11:51 PM
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Well, he could vest title in Mary Doe, retaining a life estate into himself. That way, there would be no gift tax. There would be no probate, only filing of the death certificate. However, there would be the problem of a possible judgment against her.

I agree, he really needs to see an estate planner.

Donna

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Author: TwoCybers Big gold star, 5000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 114037 of 121333
Subject: Re: Gift of a house Date: 9/28/2011 1:50 PM
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2gifts wrote I've seen DIY estate planning in action, and it's not pretty. Given that they have already had one unexpected result with the daughter in question having to pay capital gains on a house in which she never lived because of the father's DIY estate planning, I'd say they should have already learned some lessons here, but it didn't seem to stick.

Some fools are dumber than others.

Gordon
Atlanta

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Author: Watty56 Big gold star, 5000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 114041 of 121333
Subject: Re: Gift of a house Date: 9/30/2011 9:40 PM
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It was not clear if he would be living in the house but if so one other potential issue is that in some areas seniors get a major break on their property taxes so it might be better to have the house in his name. For example in my county if you are 62 you do not have to pay the school property taxes wwhich can drop your property tax bill by about two thirds.

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Author: geocarw Big red star, 1000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 114042 of 121333
Subject: Re: Gift of a house Date: 9/30/2011 10:03 PM
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For example in my county if you are 62 you do not have to pay the school property taxes wwhich can drop your property tax bill by about two thirds.

Where are you? No such luck for me. The school district is raising the tax rate to offset declining revenue. And the local county supervisor is calling for a 2.5% tax increase to give county employees a pay raise! Talk about someone out of touch!

George

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Author: ibnana Big gold star, 5000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 114043 of 121333
Subject: Re: Gift of a house Date: 9/30/2011 10:45 PM
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Where are you?

Several counties in the Atlanta area have such a provision. Atlanta is in Fulton county and the taxes are quite high, but come over the line into my Cobb county and there are no school taxes if you're over 62.

Carol

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Author: Jeanwa Big gold star, 5000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 114044 of 121333
Subject: Re: Gift of a house Date: 9/30/2011 10:46 PM
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I'm in Washington State. Low income seniors get their property tax reduced. I'm not sure if it's all seniors. I'm, also, not sure what they call low income. I think it's $30,000 which is pretty low. I don't think there is an asset test either.

You might check your state. Google your state and senior property tax.

Here's a pdf about Washington State. The age is 61 and income is $35,000.

http://dor.wa.gov/docs/pubs/prop_tax/seniorexempt.pdf

I was going to look yours up but couldn't find a state called "flyover".
<g>

Jean

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Author: Jeanwa Big gold star, 5000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 114045 of 121333
Subject: Re: Gift of a house Date: 9/30/2011 10:52 PM
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Interesting. I don't think exemption varies by county in Washington State, but I could be wrong.

Is there also an income limit on the school tax exemption?

Jean

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Author: ibnana Big gold star, 5000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 114046 of 121333
Subject: Re: Gift of a house Date: 9/30/2011 11:13 PM
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Is there also an income limit on the school tax exemption?

There is no income limit. We couldn't believe it when we moved here 18 years ago. We didn't know about it when we chose Cobb county; we just knew the tax situation was much better than Atlanta's Fulton county. Only one of the property owners listed on the deed need to be over 62 to qualify. I have a friend who is 14 years older than her husband, and they can claim the exemption.

There's also a small state general tax exemption when you're over 65.

Carol

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Author: Watty56 Big gold star, 5000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 114047 of 121333
Subject: Re: Gift of a house Date: 9/30/2011 11:57 PM
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.... Where are you?

Several counties in the Atlanta area have such a provision. Atlanta is in Fulton county and the taxes are quite high, but come over the line into my Cobb county and there are no school taxes if you're over 62.

Carol ...


Howdy neighbor! It's a small world, and a big county.

The local property taxes are relatively low here compared to some areas to start with too. My house is a pretty average house and there is a homestead exemption so currently my property tax is about 1% of the market value which is less than $2,000 a year. My wife is older than me so when she turns 62 it will go down to less than $700 a year.

A few other counties in Georgia do this but some of them have limits on the amount of the exemption or the person's income.

In is interesting that school districts here are usually done by county and Cobb County is one of the better schools districts among the 22 or so counties that are in the Atlanta metropolitan area. This is one of the reasons that we selected Cobb County when I relocated here during a corporate move when my son was in middle school. Part of the reason for this is that the seniors here don't tend to automatically vote against any school property tax like they do in some areas.

In addition last year the Georgia state tax law was changed to raise the retirement income exemption from $35K to be unlimited in the next few years. This was in part to keep people from moving to states like Florida when they retire as well as to attract retirees from out of state. I have not been following it closely but this is apparently controversial so I would not be surprised to see it be more limited someday.

I don't know anything about this web site but here is a quick overview of that change;

http://www.smithhoward.com/resources/articles_detail.asp?id=...

Greg

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Author: BlueGrits Big gold star, 5000 posts Top Recommended Fools Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 114082 of 121333
Subject: Re: Gift of a house Date: 10/9/2011 12:16 PM
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I don't know enough about tax law & such to offer a substantive, technical analysis like some here can do (or have done) in posts but I can say this:

If I were dealing in something as expensive as a home, paying a couple of hundred dollars to have a professional advise me on it would be cheap insurance against doing something really, really stupid.

Not using a professional may be cheap in the short term but may very well wind up being expensive in the long term.

BG

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