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Lane
Lane, JD, CFP, MBA, CRPS
Category: Tax
Satisfied Customers: 4013
Experience:  Juris Doctorate, CFP and MBA, Providing Financial & Tax advice since 1986
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My mom put the deed to her house in my name in the year 2000.

Resolved Question:

My mom put the deed to her house in my name in the year 2000. She lived in the house until October of 2012. She is now living in an assisted living community. There was a clause in the deed that said she had the right to live in her house for the rest of her life. I put the house on the market and closed on it today. I never lived in the house, she continued to pay all of the household expenses and taxes on the property. I have not benefited in any way from this house until I got the check for it today. Just found out that there was never a form 709 filed back in 2000. Did she need to fill one out because it wasn't a present gift? Does she need to fill one out if I open a joint savings account with her and she is the only one who uses that account? Since its been over 12 years ago, does the IRS still want a 709 from my mom.
Submitted: 1 year ago.
Category: Tax
Expert:  Lane replied 1 year ago.

NPVAdvisor :

The gift and estate tax exclusion is now 1,000,000 so ...

NPVAdvisor :

if she's well under that, it's effectively s moot point .... However,

NPVAdvisor :

If you want to really dot the i's and cross the T's do the 709 and at the top write, See attached explanation... and

NPVAdvisor :

you'd be erring on the conservative side

NPVAdvisor :

BUT, as you understand, it wasn't a gift of present interest, so the appropriate time to file the 709 is now

Customer:

If I open a savings account with her name on it, doesn't that eliminate any sort of 709 to be filed?

NPVAdvisor :

To whom was the check made out?

Customer:

Me

NPVAdvisor :

Well, your idea is good ... technically since you've had construtive receipt, you'd be gifting half of it back to her

NPVAdvisor :

and as I think about it you could make the case that you're disclaiming the gift

NPVAdvisor :

BUT, the joint account would still technically be gifting 1/2 to you

NPVAdvisor :

Hang on a sec

Customer:

So there wouldn't be any capital gains then either?

NPVAdvisor :

When she put it in your name, how was it done?

NPVAdvisor :

What she had was a life estate

Customer:

Wait a sec please

NPVAdvisor :

sure

NPVAdvisor :

The life tenant can only sell the life estate. A life tenant has already conveyed away the remainder interest, and thus cannot sell the remainder interest. The buyer of a life estate gets the same rights as the life tenant, except the duration of the life estate remains limited by the life of the original life tenant.

Customer:

Not sure at the moment. My understanding was that she had the right to stay in that house until she passed or wasn't able to live there any longer. But the title was totally in my name alone. She did not have to attend the closing.

NPVAdvisor :

Ok just a moment ... I'm guessing that the laws of your state allowed the sale to g youo through because it's the remainder interest that you sold

NPVAdvisor :

I think we've come full circle

Customer:

Okay thanks, XXXXX XXXXX I'll probably sleep a little better tonight.

NPVAdvisor :

By you're being able to sell it, she is effectively gifting to you the remainder of her life interest, and therefore would very possibly be under the gift tax annual exclusion (which is 14,000 for 2013)

NPVAdvisor :

There ARE tables for valuing a life interest, but again if what she gifted is under 1,000,000 then the NET effect is that it's not a taxable event ... and even possibly not even a reporting event

Customer:

I only got 54000 for it but the check was for 49000 after real estate fees and closing fees. Not a whole lot of money, but she needs all she can come up with for assisted living. Hell, that cost 3605 a month

NPVAdvisor :

I think you're fine

NPVAdvisor :

Ok.if she's never giftet anything else you're way under .. and it won't become an issue unless the assets when she passes would even be close to 1,000,000 (and we expect that number to go up)

Customer:

Thanks, XXXXX XXXXX to bed now. You did good, or else you're just telling me what I want to hear.

NPVAdvisor :

Think through the logic, bookmark this, and ask the attoreys that did the closing .. . Look at my other work here, and I think you'll arrive at teh conclusion that I do not do that

Lane, JD, CFP, MBA, CRPS
Category: Tax
Satisfied Customers: 4013
Experience: Juris Doctorate, CFP and MBA, Providing Financial & Tax advice since 1986
Lane and other Tax Specialists are ready to help you
Expert:  Lane replied 1 year ago.


Thanks for the feedback.

And again, use the ideas we've discussed to get a reality check from someone locally.

But, again, the remainder interest is yours ... legally a holder of a life estate can only sell the life estate.

And the remaining value of that life estate here, is VERY probably under the annual exclusion ... and most certainly under the estate and gift tax exclusion of 1,000,000.

Thanks again,
Lane

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