Expert: Jessica Bryan - 9/5/2006

Question
Hello,

My parents own a house in the State of Rhode Island and would like to sell or sign the title of the house over to me (and my wife) before they retire in a few years.

What are the pros and cons for both parties?
I am guessing that the paper work would be quicker and cheaper if they sign the house over.
I would like to know about taxes and all fees that applied to selling and transfering.

My wife and I are currentlt renting.

Thank you for your advice.

Kevin

Answer
Dear Kevin;
Every state has its own fees and laws with regard to the transfer of real property. There will certainly be tax ramifications if your parents sign over the house which will then be considered a gift. It will depend on the value of the home as to how much they will be able to gift without taxation on the rest.  They and you should talk to a real estate attorney and to an accountant.  The attorney will provide you with a schedule of fees for transfer vs. sale of the home. The fees include attorney fees, title insurance, recording of documents and if there is a loan involved, pay-offs and/or loan fees and points on the borrowers part--if you are borrowing to buy the house.  The accountant will show you the benefits of one over the other from the taxation standpoint.  This can be a complicated issue that requires looking over both parties' fincances and assests.  It sounds like the simplest thing to do is to transfer title but this may not be what you and your parents really want after you look at all of the financial and tax issues.  A good tax attorney somethimes has other solutions as well.  Since I am not privy to your parents or your financial status the best thing to do is to sit down with a tax attorney first to decide the best options.

Good luck.

~Jesica Bryan