Best way to transfer title to avoid tax or legal issues

Best way to transfer title to avoid tax or legal issues

Don SpaffordPro Member
Investor · Idaho Falls, ID · Member since 2016 · 935 posts · 629 votes

Hello, looking for some solutions to a problem. 

My Mother has MS, which is the reason I moved my family to be close to her to help care for her. My Father passed away in 2003, so she is alone. The problem is that she knows, as do I, that at some point in the future she will need full-time care in a private care facility. When someone goes to those places, or so I'm told, they acquire all the person's assets including their house to pay for their services. We would like to avoid them doing that. All property has to be out of her name for at least 5 years. 

So here is the question, what is the best way to transfer title of her house to my name while avoiding any tax or legal issues? I was just going to do a quit claim but that would mean that at some point in the future when we need to sell the house, I would probably be hit with the tax burden from her cost basis. Right? Is there a better way to avoid this without paying thousands to open and put it in a trust? And would it matter if the trust is not in her name? I appreciae all tax and legal advice here.

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  • Lance LvovskyPro Member
    Accountant · Fort Lauderdale, FL · Member since 2013 · 1k+ posts · 753 votes
    7y

    @Don Spafford

    There are trusts that can accomplish what you are looking for. But you don’t want to pay for tax or legal advice so you really won’t get far. Transfer the house from your mom to you and file a gift tax return. You will need to pay a cpa to prepare the gift tax return but no trusts involved.

  • Don SpaffordPro Member
    OP
    Investor · Idaho Falls, ID · Member since 2016 · 935 posts · 629 votes
    7y

    @Lance Lvovsky Thanks for your response. The gift tax is not much of a concern since it can be ignored with the lifetime exemption. I'm referring more to the tax cost basis that would transfer to me when we go to sell the house in the future. Since I would not be receiving it as an inheritance after she passes away to get the bumped up basis. I would be getting her basis. So I'm looking for the best overall solution, if that means some form of a trust, so be it and we'll just have to pay to get that set up.

    And it isn't that I don't want to pay for legal advice. I'm just looking for some guidance from wise experts like yourself to have some expectations before going to someone and just accepting what they say as the only solution. I know not just anyone is perfectly knowledgeable on every subject, as has been mentioned many times on some of the podcasts by professionals. So if I have a solid foundation I can bring up some points as well if what they say doesn't feel right to me. I just want to be aware of all options first.

  • Lance LvovskyPro Member
    Accountant · Fort Lauderdale, FL · Member since 2013 · 1k+ posts · 753 votes
    7y

    There are a myriad of ways to accomplish your goals. For example, an irrevocable Medicaid type trust can be drafted to get the asset out of her name. If properly drafted, the house would still be part of her taxable estate, and as such, upon death, you would get a step up in basis.

    I have some advanced trust and estate planning with my clients, as many other professionals do as well. For proper advice and implementation, you should engage a professional and understand that any good professional will not work for free :)

  • Basit SiddiqiBusiness Member
    Accountant · New York, NY · Member since 2015 · 8k+ posts · 3k+ votes
    7y

    @Don Spafford

    You should consult with @Lance Lvovsky regarding the estate planning from a tax perspective. 

  • Ashish AcharyaBusiness Member
    CPA, CFP®, PFS · FL · Member since 2017 · 5k+ posts · 3k+ votes
    7y
    Originally posted by @Don Spafford:

    Hello, looking for some solutions to a problem. 

    My Mother has MS, which is the reason I moved my family to be close to her to help care for her. My Father passed away in 2003, so she is alone. The problem is that she knows, as do I, that at some point in the future she will need full-time care in a private care facility. When someone goes to those places, or so I'm told, they acquire all the person's assets including their house to pay for their services. We would like to avoid them doing that. All property has to be out of her name for at least 5 years. 

    So here is the question, what is the best way to transfer title of her house to my name while avoiding any tax or legal issues? I was just going to do a quit claim but that would mean that at some point in the future when we need to sell the house, I would probably be hit with the tax burden from her cost basis. Right? Is there a better way to avoid this without paying thousands to open and put it in a trust? And would it matter if the trust is not in her name? I appreciae all tax and legal advice here.

     Agreed with colleagues. Trust is the best way to go but if not worked with both attorney and CPA, you might not get what you are looking for.  

    Transferring as an asset to Irricovable trust will get the asset out of her gross estate, but will not get step-up basis when trust transfers you all the asset. Trust needs to be drafted as grantor irrevocable trust to achieve what you are looking for. 

    Your attorney will have to add some specific clauses to make the irrevocable trust defective for income tax purpose to make it grantor trust. 

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  • Don SpaffordPro Member
    OP
    Investor · Idaho Falls, ID · Member since 2016 · 935 posts · 629 votes
    7y

    @Ashish Acharya and @Lance Lvovsky Thank you for getting more specific. That is the kind of information I am looking for. I appreciate the input. I am just looking for the best overall solution to the problem so I can go in as prepared as possible when I discuss this with an attorney.

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