Expert: Dick Dennis - 5/19/2011

Question
My parents want to give me there home, I already live in the main housing area and they live in an inlaw suite, I pay them rent but they actually own the home, there is no mortgage and they have decided that they want to gift it to me, since they are getting older and the living arrangement works out well for my family and them. How would they go about giving me there house without spending alot of money to do so. thanks ~Heather

Answer
If you want to make sure this doesn't blow up in your pocket book sometime in the future, Heather, you should meet with and consult with a good local ESTATE attorney. Yes, it will cost legal fees, but like I said, you do not want the transfer to cost you SO much more later.

The attorney will meet with you and your parents and create a REVOCABLE FAMILY TRUST. This will protect you and them from any probate costs and/or problems that may occur upon their deaths. That's number one. Your parents will be the trustees for the revocable family trust. You would be the trustee in succession. That means upon their death you become the main trustee.

In the meantime, you can indeed control what you do with the property. That's number two. The attorney will explain everything to you. Should you would want to draw any funds out of the equity of the property, the attorney will explain what you must do. Banks, as a rule, do not lend on property with a family trust as the owner. You would have to decide how the title will be held. Again, the attorney will explain. If you do not have any plans of drawing cash out, all the better. Things will run more smoothly. Further, as long as your parents still live somewhere on the property, you will be treating the property properly, taxwise. Again the attorney will explain.

What you will be preventing is you taking over the property at your parents' lower tax basis level. Instead the trust (meaning you in the long run) will be taking over the property at a higher basis, therefore, saving you money sometime in the future, when you sell. That means sometime in the future, it will cost you a tax gain because of your parents' lower tax basis, therefore it will cost you more taxes when you do sell the property. Most likely nothing will happen in the meantime. If you transfer title to the property any other way, you will indeed be sorry you did.

Yes, your parents can gift the property to you in $13,000 increments ($13,000 to you, $13,000 to your husband from one parent, then $13,000 to your husband and you from the other parent. The attorney will explain how you should treat that, this still does not protect you from paying more taxes later on). I do wish you well.

Dick Dennis
dixiedee13@aol.com