Dear Len & Rosie,
My father died and left some cash and the house to my mother. She is 82 years old. She has put the house in my name as well as hers. Her doctor has informed her she needs a pacemaker, and now she wants to put the house solely in my name.
I have several concerns. The first is tax purposes for me. How will this affect me and my husband’s taxes for the next year? I also have other sisters and a brother who will eventually inherit part of the home. Mom’s lawyer says that she is safe with just my name on the deed, but I am not sure.
We normally do not recommend to my clients that they add their children’s names to the title of their homes. One reason why is that if you get sued if you declare bankruptcy, your mother could lose her home. Also, she would not be able to sell her home without your permission. But you wrote to us, not her. You’re certainly better off with your name on the deed. Also, if the home is titled in Joint Tenancy between the two of you, then upon your mother’s death, all you’ll need is an Affidavit of Death to remove her name from the title to the home.
If she gives you all of the home, there won’t be any immediate tax consequences. Gifts are not subject to income tax. Your mother will have to file a gift tax return with the IRS, but she won’t have to send a check to the IRS unless she has given away more than $11,200,000 of gifts in excess of the annual gift tax exclusion (currently $15,000). You should be so lucky to have that as a problem.
The property tax of the home will remain the same. Thanks to Propositions 13 and 58 there will be no reassessment. You will lose the $7,000 Homeowner’s property tax exclusion unless you live in the home, but that will increase the property tax by less than $100. It’s no big deal.
The big deal comes in when you sell the home after your mother’s death. If she gives you the home today, it will not get a new cost basis when she dies. If you ever sell the home, you will have to pay capital gains tax on the increase in value since your father’s death, assuming your parents owned the home together. If, however, you inherit the home only upon your mother’s death, you could then sell it completely tax free.
You may also have tax problems even if you don’t sell the home. There is no property tax transfer exclusion for transfers among siblings. If you add your brother and sisters on title the way your mother wants you to the home could get reassessed and the property taxes will increase dramatically.
A better plan would be for you to return the home to your mother, and then your mother could transfer the home to a revocable trust for the benefit of all of her children. She should meet with an estate planning attorney and discuss her objectives so she can revise her estate plan for the benefit of all of her family.
Len & Rosie
Dear Len & Rosie,