Free and Clear home given to me

[Liza T. Jones]

Hello All, 

While real estate had been always been on my mind, buying or investing sometimes felt like a good idea without a path of action or my life was too crazy busy.  Nevertheless, my parents have a home and as my mom as passed, my dad is the sole title/deed holder.  He has consistently asked me to take over the deed/title for the last 5 years.  Well my inquiry is simple. 

Is there any RE investment concerns for doing this? Planning to add to my RE portfolio by the end of summer. 

Any suggestions, ideas, good bad experiences. They are welcomed!

[Frank Chin]

The thing that comes to mind are tax issues, such as gifting, capital gains on death, homestead laws. etc.

First thing that comes to mind is if your dad plans to continue living there. My parents and wife's parents thought it was wonderful to gift part of their homes to their kids while they're alive. Sounds good, but bad idea tax wise. My wife's mom gifted 50% of her home to my wife's sister 20 years ago and kept the other 50% in her name as it's her home. She died last year, my wife was named executrix, and inherited her mom's 50% portion on her death. Sister had to pay a capital gains tax for nearly $100K gain on her half, federal and state, since she had it for 20 years, from the date of the gift.  My wife just inherited her half last year, and no capital gains due because of the stepped up bases. Sister was complaining, kicking herself, why no one thought of this 20 years ago.

The best way is to put the home into a trust, allow your dad living there, and you as the beneficiary, and when you inherit it, the tax bases would start then. The other advantage is the property won't go through probate. Had my wife's mom done a trust, her sister as a beneficiary, the property won't have to be probated and her sister would have saved quite a few dollars in taxes on her half. Then you'll have to consider revocable trust or irrevocable trusts. People transfer property to their kids as it helps them with government assistance at old age as you have to spend your assets down, done thru irrevocable trusts, Best time to do it is when dad's still healthy as there's a lookback period, as I recall, now 5 years, before someone goes on Medicaid. That's probably why dad kept asking you.

If he just gifted it to you, quite possibly exceed the annual gifting limit, and would have to report it as a gift, and the lifetime gifting limit applies. But I heard of cases where dad gifted a home to the kid, kid kicks dad out years later, and nothing dad could do.

I suggest getting an estate attorney to guide you through this as I'm not an estate attorney.