Inheriting a house from Parents advice for first time home owner

Member since 2018 · 8 posts · 1 vote

I am a 26 years old and I currently live in Texas. My family owns a few houses in Georgia and wants to transfer one of the houses to me as a the new owner. The house has about 60k left on the mortgage payment and is valued at about 250k and the mortgage will continued to be payed by my parents. As the owner I will only be responsible for maintenance and major fixes when something goes wrong. I'm not sure if I should take over the house and what would be the pros and cons of doing so. Could someone give me some advice?

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Henry ClarkPro Member

Developer · Member since 2020 · 4k+ posts · 4k+ votes

You will have to pay gift tax.

If this was their primary residence for 2 out of any of the last 5 years recommend they sell it to you “subject to”. Have them check with their tax person. This probably won’t work since it will still be in their name.

Otherwise have them do seller financing at minimal down at low interest rate to you. This way their increased value since they owned the house is not taxes. You get the stepped up value. Low min and interest rate. Ask them to put in their trust and not will bequeathing you the mortgage. They can always gift back your payments below certain levels. But you must make the payments.

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Henry ClarkPro Member
Developer · Member since 2020 · 4k+ posts · 4k+ votes
3y
You will have to pay gift tax.
If this was their primary residence for 2 out of any of the last 5 years recommend they sell it to you “subject to”. Have them check with their tax person. This probably won’t work since it will still be in their name.
Otherwise have them do seller financing at minimal down at low interest rate to you. This way their increased value since they owned the house is not taxes. You get the stepped up value. Low min and interest rate. Ask them to put in their trust and not will bequeathing you the mortgage. They can always gift back your payments below certain levels. But you must make the payments.
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Nathan GesnerBusiness Member
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Real Estate Broker · Cody, WY · Member since 2010 · 28k+ posts · 41k+ votes
3y
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Christian White
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Member since 2018 · 8 posts · 1 vote
3y
Quote from @Henry Clark:

You will have to pay gift tax.
If this was their primary residence for 2 out of any of the last 5 years recommend they sell it to you “subject to”. Have them check with their tax person. This probably won’t work since it will still be in their name.
Otherwise have them do seller financing at minimal down at low interest rate to you. This way their increased value since they owned the house is not taxes. You get the stepped up value. Low min and interest rate. Ask them to put in their trust and not will bequeathing you the mortgage. They can always gift back your payments below certain levels. But you must make the payments.

If i choose the second option i will have to make the mortgage payments even though they agreed to make them?
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Henry ClarkPro Member
Developer · Member since 2020 · 4k+ posts · 4k+ votes
3y
Correct. You have to make the payments so the irs treats this as a sale for your parents. But first see if they used the house for a continuous two out of 5 years as their primary residence then it’s not taxable to them.
If you make these minimal payments they can just gift that money back to you.
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Christian White
OP
Member since 2018 · 8 posts · 1 vote
3y
yes they have used it as their primary residence.
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Henry ClarkPro Member
Developer · Member since 2020 · 4k+ posts · 4k+ votes
3y
Have them walk this through with their tax person.
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Basit SiddiqiBusiness Member
Accountant · New York, NY · Member since 2015 · 8k+ posts · 3k+ votes
3y
A lot of different tax implications.

Potential gift tax return of the property

Parents potentially lose step up in basis opportunity.

May be better off to consider you the manager of the property if you are looking for an income source.

Best of luck.
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Basit Siddiqi CPA4.979 Reviews
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