Parents house will be passed in will, worried about red tape

Tax, SDIRAs & Cost Segregation
8yFollow

Parents house will be passed in will, worried about red tape

Jake Keating
Marina Del Rey, CA · Member since 2017 · 6 posts · 1 vote

A few years ago I helped my (retired) parents buy their most recent house by directly giving them a $100k cash down payment, and they would like to leave the house to me when they pass in thanks for the assistance (it ended up helping keep their mortgage extremely low since they are on a fixed income).

They are very worried that it will somehow get caught up in probate or red tape when they pass even if my name is spelled out in the will, and wanted to see about just adding me to the title or something so that there is a seamless transition without any hassle. Is this even possible (adding my name to the title), or are there other options we haven’t even thought about that we can discuss? 

Anyway, any insight for an admitted newbie to all this stuff would be appreciated!

Jake

1Reply
35 views

Most Popular Reply

Ashish AcharyaBusiness Member
CPA, CFP®, PFS · FL · Member since 2017 · 5k+ posts · 3k+ votes
8y

@Jake Keating ,

It is actually better to inherit the house after they pass because you will get a Step-up basis in the house. That basically means if you turn around and sell the house, you will pay no taxes. 

If there is a Will, that will avoid probate. 

[email protected]941-914-7779
INVESTOR FRIENDLY CPA®5240 Reviews
WebsiteView Page
TaxMD® | Tax Planning Software
WebsiteView Page
2Reply
See this reply in the discussion

11 Replies

Jump to latestLatest
  • Ashish AcharyaBusiness Member
    CPA, CFP®, PFS · FL · Member since 2017 · 5k+ posts · 3k+ votes
    8y

    @Jake Keating ,

    It is actually better to inherit the house after they pass because you will get a Step-up basis in the house. That basically means if you turn around and sell the house, you will pay no taxes. 

    If there is a Will, that will avoid probate. 

    [email protected]941-914-7779
    INVESTOR FRIENDLY CPA®5240 Reviews
    WebsiteView Page
    TaxMD® | Tax Planning Software
    WebsiteView Page
    2Reply
  • Caleb Heimsoth
    Rental Property Investor · Durham, NC · Member since 2016 · 7k+ posts · 7k+ votes
    8y
    @Jake Keating Listen to @Ashish Acharya. Only other thing to worry about is estate taxes which at 10M exemption don’t apply to most people
    0Reply
  • Carl FischerPro Member
    Rental Property Investor · Ambler, PA · Member since 2015 · 2k+ posts · 1k+ votes
    8y

    @Jake Keating

    I would get an attorney to help in Ca because I believe wills are probated with titleddeeded property, however you may be able to use a trust to avoid probate. Most of the time it is better tax wise to inherit the property vs putting your name ont title. 

    [email protected]215-283-2868
    0Reply
  • Jake Keating
    OP
    Marina Del Rey, CA · Member since 2017 · 6 posts · 1 vote
    8y

    This is all very useful information, thanks so much for all the responses.

    0Reply
  • Kyle J.
    Rental Property Investor · Northern, CA · Member since 2012 · 5k+ posts · 5k+ votes
    8y
    Originally posted by @Ashish Acharya:

    @Jake Keating 

    If there is a Will, that will avoid probate. 

    Not sure about other states but having a will doesn’t necessarily avoid probate in the OP’s state (California). In fact, it likely would have to go through probate based on what’s written. 

    A living trust is a way to avoid probate though. I just handled my father-in-law’s estate and thankfully he had everything (i.e. cars, house, bank & investment accounts, etc) in the trust. It made it so much easier (and cheaper) than going through probate. We basically just notified the companies that the trustee on the accounts was changing from my father-in-law to my wife (the successor trustee) and she took over control of the accounts. 

    @Jake Keating I’d suggest consulting with a local tax and/or estate planning professional for advice on this issue to make sure you get the best advice for your specific situation. 

    2Reply
  • Lance LvovskyPro Member
    Accountant · Fort Lauderdale, FL · Member since 2013 · 1k+ posts · 753 votes
    8y

    A Will is subject to probate. Assets titled to a Trust are not. 

    If your parents add you to title, you need to consider possibly gift tax implications.

    0Reply
  • Jake Keating
    OP
    Marina Del Rey, CA · Member since 2017 · 6 posts · 1 vote
    8y

    Thanks for the additional info. I failed to mention the property is located in Washington state, although I am based in Los Angeles.

    0Reply
  • Lynnette E.
    Rental Property Investor · TN · Member since 2018 · 2k+ posts · 2k+ votes
    8y

    See if Washington still has a transfer on death deed.  If so have them both sign and file it now and when they pass you file an affidavit of death with a death certificate, and the property is yours.    Each state has a different process, so it might vary a little from what I posted, but its similar.  The TOD deeds are a poor man's trust:)

    0Reply
  • Katie L.
    Attorney and CPA · San Diego, CA · Member since 2017 · 590 posts · 422 votes
    8y

    @Jake Keating

    Are your parents also living in WA state then?  You'll want to consult with a Washington attorney then to know the state's probate requirements.  In California, a Will is not sufficient to avoid probate and the assets would need to be held in a family trust or in joint tenancy to avoid the probate process.  Your parents could give a specific bequest of the house in their trust to you and then split the remainder of their assets among whoever they want.  They also could add you to title with themselves as joint tenants but you will likely miss out on a stepped-up basis that you could receive via inheritance.  You also need to be cognizant of the gift tax implications here - if you gave your parents $100k that wasn't a loan - you made a taxable gift and should have filed a gift tax return.  If your parents add you to the title as a joint tenant, they're making a taxable gift too and need to file a gift tax return.  It's unlikely that any actual tax would be due because of the increased $11.18 million lifetime exclusion, but you're supposed to track the exemption used and technically have a filing requirement.

    *This post does not create an attorney-client or a CPA-client relationship.  Readers are advised to seek professional advice.

    1Reply
  • Matt Ott
    Investor · Tacoma, WA · Member since 2017 · 19 posts · 24 votes
    8y
    My attorney (in Washington) set up a revocable living trust for my wife and I for this exact purpose, and explained that thIs would allow us to avoId probate. It cost $1500 for him to set up the will and trust since our situation is relatively straightforward.
    0Reply
  • Jake Keating
    OP
    Marina Del Rey, CA · Member since 2017 · 6 posts · 1 vote
    8y

    This is all great info. Will post back after I talk to an attorney just to make sure we end up doing everything the right way. Thanks again for all the excellent advice.

    0Reply
Join the conversationCreate a free account to reply, vote on answers and follow this thread.
Log InJoin for Free