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My mother-in-law wants to transfer the title of her house into my wife and sister-in-laws names. Does this cause any problems 'tax-wise' down the road?

Yes. It does. A big problem. At least it does for income taxes.

If your MIL holds the property until she passes away, her daughters will get a step up in basis when they inherit the house. They could then sell it and pay no income taxes.

However, by making a gift instead, her daughters will carry over your MIL's basis (which I am assuming is significantly less than the current value of the house). That means when they sell it, they will get a big income tax bill.

Then there's the legal issues. By putting the house in the daughters' names, any financial problems either daughter runs into become the mother's problem, too. Given a big enough problem, either daughter might find themselves on the wrong end of a judgement and losing their 1/2 ownership of the house. That new 1/2 owner can then force a sale of the house to get the dollars they really want. I'm guessing the MIL wants to keep living in the house. After the forced sale of the house, MIL won't be able to keep living there.

I'm sure there are other problems, too. I'm just spelling out the easy ones to spot. Qualifying for Medicaid is another issue that's already been mentioned.

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