All Forum Posts by: Victoria Britton

You're asking a lot of the right questions, including surrounding the (relatively) new Prop 19 rules, especially if parents want to port their old assessed value to their new residence. Do parents have a large estate that gift/estate taxes are a concern? Do you have any thoughts about what type of income tax basis is important for you and if you will be holding onto the property long-term or not? If you were to do a cash-out refi, can you swing current mortgage rates? Do the parents have preferences as to payment of capital gains if you were to do a sale (sounds like most or all could be shielded)? Might consider a part gift/part sale.

*this post does not create an attorney-client or CPA-client relationship. The information contained in this post is not to be relied upon. Readers are advised to seek professional advice.

Hello Katie, we are just learning about the gift/estate tax rules, but if you are referring to the max limit of them gifting more that 13(?) million in their lifetime, they would not reach that limit. We are planning to hold onto the property long term. I'm not sure what you mean by type of income tax basis, but ideally, both my parents and us would have the lowest tax basis possible? I guess that would mean: they transfer their existing tax basis to their replacement home, AND we keep their existing tax basis of the inherited property - we don't know if doing both is even possible. We would plan to do a part gift/part sale to have a mortgage we could afford, the 415k at the current mortgage rate with the other 500k being the gift.

0 Votes

Riverside, California

Quote from @Sam M.:

Okay, the house is free and clear and parents could deed it to you. The transfer should be made between parent and child to avoid county reassessment. Call the county and ask for the procedure. Once it's in your name, then you can get a cash-out "refinance" mortgage loan on it. However the bank may want it to be "seasoned" meaning in your name for a period of time. For example, I paid cash for houses and had to wait 6-months before I could put a mortgage on it. If your parents can wait that long it's the simplest. Maybe you can call around to mortgage brokers and see if you can get a $415K cash-out mortgage on a house that was recently deeded to you. With a 45% LTV (loan to value), that's low risk for the bank and you can likely avoid putting money down. Your payment will be ~$2600 to $2700 per month not including taxes and interest. Your debt to income ratio (DTI) must be below 40% (depends on the mortgage company). I would talk to mortgage brokers and see what's possible. Research California Prop 19 (2020) because it changed the rules for inheriting property. I believe there is an exception ... if the inherited property is used as the new owner's primary residence, then the property's assessed value is not reassessed and the new owner can continue paying property taxes based on the previous value. The County should have information about it.

Thank you Sam for your well thought out responses. I like the idea of having the deed transferred to us to avoid triggering a sale and county reassessment. But the idea of a cash-out refinance to give that money to my parents, would that trigger a gift tax from us to them? And for my parents to utilize prop 19 for their replacement home, is it mandatory that they sell the house or would this deed transfer of ownership still allow them to transfer their tax base via prop 19?

0 Votes

Riverside, California

Quote from @Victoria Britton:

I forgot to mention that the Riverside house is completely paid for. They purchased it in 2011 for 450K.

@Sam M.

0 Votes

Riverside, California

I forgot to mention that the Riverside house is completely paid for. They purchased it in 2011 for 450K.

0 Votes

Riverside, California

Hello,

We are new here and happy to be part of the community!
My husband's parents (55+) are moving to another city (Temecula, CA) and are selling their home in Riverside, CA, valued at $915K. We love this house and want to buy it. They are very generous and want to help us with the mortgage. We can only qualify for $415K, so the idea is to "leave" or "keep" $500K in equity and have only a $415K mortgage. The parents would need the funds from the 415k mortgage to fund renovations on their new home, among other things. The Temecula home already closed escrow.

What's the best way to structure the deal so we would own the Riverside house, and we both limit our tax burden? I understand we would need an attorney for concrete answers but are open to initial ideas. I've heard of ideas of "gift of equity," "cash out refinance," and "proposition 19." Ideally the parents want to use prop 19 to move their tax basis to their replacement property (worth 925k). Would we somehow also be able to benefit from preposition 19's parent to child transfer?

Thank you for your help!

1 Vote

Riverside, California

All Forum Posts by: Victoria Britton

Victoria Britton has started 1 posts and replied 5 times.

Post: Advice on buying parents house

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