Expert: Dick Dennis - 3/10/2007

Question

Hello and Thanks for the reply,
If this deed transfer is temporary, and I sign the deed back to her in less than a year, then would anything that you mentioned apply during this period?. BTW, the house is paid off.
Thanks
The text above is a follow-up to ...

-----Question-----
My sister in a legal battle with her daughter-in-law wants to quit claim her home  to me, this is to protect herself from any future suits.
My question is what are the financial or legal consequences to me.
Thanks
-----Answer-----
When you accept a quit-claim deed from anyone, you have taken over that person's basis. That is, the IRS says that when you sell the house in the future your capital tax gain will be based on the basis of your sister. This is considered an investment for you according to the IRS.

If she has a mortgage on the property, unless you can afford making those monthly payments, then you would probably be expected to pay them. If not, then the house may go into foreclosure.

For your information, if your sister is involved in a legal battle, chances are her daughter-in-law's attorney will investigate if your sister has any assets and if those assets have been conveyed to someone else within the last six months he could rescind that transaction or he could ask the judge in the case to do it. I strongly suggest that you and she consult with an attorney before you take title to any property from her. Another reason why you may not want to do this, is if the property has any liens on it that perhaps you are not aware. Another reason why you should talk to a REAL ESTATE attorney.

I wish you well.

Dick Dennis

Answer
Again, I would recommend you see a real estate attorney to make sure you are not violating a county or state law. After all, he/she might give you an idea or two that you might want to pursue. Exchanging quit-claim deeds seems harmless enough, but you really need to make sure you do not step into an IRS event that could cost, especially if your sister is in a courtcase. There is something called aiding and abetting which has nothing to do with real estate. And that is why you need to see that attorney.

Dick Dennis