I hope to God that your parents did not get this advice from an attorney, because IMHO he/she committed malpractice.Yes, the business card from the firm that did this says "Attorneys at Law".I don't know what state your parents are in, but there might be state law problems too.They live in Massachusetts. I live in NH. This seems to be a very common practice in Mass, so I assume it isn't against state law. I know of at least a dozen others who have done this in Mass using various different attorneys, not just the one they used.This type of transaction is what the IRS might consider a "sham".Actually, there was no intent to affect federal tax liability here, and I don't think it does (but what do I know). Only to shelter the property from potential future state medicare seizure, and to avoid tying the property up in probate when they die.You will have income tax problems, because I am assuming that although they live there, they are not paying you any rent.Please tell me more. There's obviously something here I don't understand. I've never looked into this stuff because I've never had any desire to own rental property. (Actually, I guess the truth is that I've never had any desire to MANAGE rental property.)I caution you about relying on "free" advice on this board or any other place, because you cannot rely upon it when your transaction gets discovered by the IRS. But if you pay a professional for his/her advice you can rely on it and at least avoid the negligence penalty.Absolutely! I'm just looking for a place to start understanding this. I'm not looking for free gospel advice, just hoping to avoid the first month or two of bouncing from office to office looking for the right people to talk to. And to walk in knowing enough that I can skip the first couple of expensive hours of learning the lingo and the basics.Also, I don't know what bearing this may have on things, but they have owned and lived there since around 1971. In going through some other papers that were also given to me, I see that my parents have a quitclaim deed from a different attorney selling the property to them for $1 in the late 80s. It looks like this involved straightening boundary lines between this property and a neighbor. It appears the $1 sales must be a common thing in Mass. It sort of looks like it's common there for people to transfer property to an attorney who then causes legal stuff to happen and sells it back to the owners for $1. I don't pretend to understand this, but my parents lead a very simple life and are not wheelers and dealers. Their entire estate is probably not worth $200,000. They rely on attorneys they have known most of their lives who tell them what's the right way to do things (at least that's what they believe).I am looking at the deed to me, and it appears to be a standard quitclaim deed, but with the added paragraph at the end stating "The grantors reserve to themselves and to the survivor of them a life estate in the granted premises." I'm not enough of a legal eagle to even know what that means, other than that it means I couldn't kick them out even if I wanted to, which is fine with me.
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