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Author: BruceCM Big red star, 1000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: of 121061  
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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