Best way to take over parent's house?

6 Replies

My mom has a house that is fully paid off. She wants to pass it on to me. What would be the best or easiest way to do that? (While still alive)

Your question is sort of a trick question.  The best way (from a tax standpoint) is not the easiest.  

I mean, she could just quit claim it to you.  That's the easiest, but the gift taxes would be a killer.

Ideally, from a tax standpoint, she should just leave you the house in her will, but you seem to want to do this while she is still alive.

You could set up a complicated long term transfer where she transfers a portion of the property to you in the amount of the maximum non-taxable gift transfer amount.

You could buy the house from her at market rate.

She could just give you an assignable lease so that you pay her rent but are able to collect it from others.

From what I can see, you can get easy or you can get "best" but you can't have both.

Medium cluebussol logo3inLinda Weygant CPA, Clue Business Services, Inc. | [email protected] | Podcast Guest on Show #244

Thank you very much for that information. I knew it wouldn't be as easy as signing a title over. And yes the gift tax, I believe for anything over $14k now, would be a killer. She would like a more short term way to transfer it over than doing it $14k at a time. Might be 20 years going that route. Probably more due to appreciation. So we are left with either paying the gift tax or buying the property from her. I wouldn't sell the property and would be living there so I'm not really worried about capital gains tax.

What is the legal difference if she  just add you to the title as a second person?I am in the somewhat similar situation.

I know there are ways to do it in a FLP and LLC, but you would most likely need an attorney to set that up and it would cost you several thousand. Might be worth it though to be safe and also avoid steeper taxes later on.

Your mom could gift you a percentage of the property each year worth about $13,000, unless it is worth a ton of money and will take too long to get the full house. I personally would just speak to a real estate attorney. I knew a guy who wanted to buy a mobile home, but didnt want to pay California sales tax or luxury tax so he told the seller to put the mobile home in a trust and he would buy the trust from him. I am not sure if that is legal or not, but he did it. I would check with an attorney, personally.

I found this online, might be helpful: http://www.elderlawanswers.com/should-my-parents-g...

Originally posted by @Manuel Diaz :

I just read something about a lifetime gift tax exemption. http://wills.about.com/od/understandingestatetaxes/qt/calculategifttax.htm

Any thoughts on this?

 This is an exemption that applies to the giver.  It means that they can gift as much money as they want WITHIN THE ANNUAL GIFT TAX LIMIT over their lifetime, tax free up to the lifetime gift tax exemption.

So using today's numbers, they can give as many $14,000 gifts as they want, up to $5,340,000.  Once they gift over the $5.3 million figure, everything becomes taxable no matter how small the gift and no matter who it is given to.

Medium cluebussol logo3inLinda Weygant CPA, Clue Business Services, Inc. | [email protected] | Podcast Guest on Show #244

Free eBook from BiggerPockets!

Ultimate Beginner's Guide Book Cover

Join BiggerPockets and get The Ultimate Beginner's Guide to Real Estate Investing for FREE - read by more than 100,000 people - AND get exclusive real estate investing tips, tricks and techniques delivered straight to your inbox twice weekly!

  • Actionable advice for getting started,
  • Discover the 10 Most Lucrative Real Estate Niches,
  • Learn how to get started with or without money,
  • Explore Real-Life Strategies for Building Wealth,
  • And a LOT more.

Lock We hate spam just as much as you