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Lane
Lane, JD, CFP, MBA, CRPS
Category: Tax
Satisfied Customers: 4167
Experience:  Juris Doctorate, CFP and MBA, Providing Financial & Tax advice since 1986
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My mother and I live in the same home owned by her in a trust.

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My mother and I live in the same home owned by her in a trust. I sold my home to move in with her so this is my primary residence. She has left me the home in her will, but I am worried I would not be able to afford the estate taxes I would have to pay in the future. If she were to put my name on the deed as joint tenancy, would I have to pay additional income taxes next year as if I had acquire an asset? Are there any significant tax implications I should be aware of if we take this action?
Submitted: 1 year ago.
Category: Tax
Expert:  Lane replied 1 year ago.

NPVAdvisor : HI,
NPVAdvisor : Lets take them one at a time
NPVAdvisor : OK?
Customer: ok
NPVAdvisor : If she puts your name on the deed now, to create a joint tenancy, that would be a gift
NPVAdvisor : There is an exemption of 5,250,000 on gifts before they become txable
NPVAdvisor : (and that number will be going up each year)
NPVAdvisor : This gift tax is combined with the "FINAL" gift the estate that transfer to her heirs
NPVAdvisor : Is her asset level such that she would be close to them number (value of everything owned - her estate) when she passes?
NPVAdvisor : sorry "that" number ... $5250,000?
Customer: no her total asset would not come anywhere near 5,250,000. the home is around 435k and then she has an ira that i am the beneficiary which i would not touch until retirement.
NPVAdvisor : OK, then putting the house in you name jointly might be a good option ... (first the gift amount, if you do it as joint tenants would only be 1/2 of the value of the house, so 217500)
NPVAdvisor : this would also let the house pass OUTSIDE of probate.... surviving joint tenants automatically become woners
NPVAdvisor : owners
NPVAdvisor : she will have to complete form 709 (gift tax form) but this is just an informational form that lets the IRS track lifetime gifts to see if she gets to that $5,250,000 during life
NPVAdvisor : the gift and extate tax is a unified tax, meaning, that there is a 5,250,000 exemption on both ....i.e., if she gave away 2,000,000 during life, $3,250,000 would still be exempted from the estate taxes at her death
NPVAdvisor : so doing it that makes the estate planning easier (no probate on the house)and sounds like she's well below the $5,250,000 limit
NPVAdvisor : HOWEVER
NPVAdvisor : make sense so far?
Customer: yes but the however part worries me.
NPVAdvisor : hang with me
Customer: ok
NPVAdvisor : If she simply leaves the house to you in the will, then you will get what's called the step up in basis on the house (which is an income tax for YOU issue)
NPVAdvisor : I she leaves it to you completely, the you turn around and sell it right away you will have a zero capital gain (hence zero capital gains tax) becuse inherited assets get a step up in basis to the fair market value at date of death
NPVAdvisor : now, one more caviat, just to be sure we've covered it completely
NPVAdvisor : If the home become your primary residence and you stay the at least tw years ...
NPVAdvisor : then up to $250,000 of capital gains is excluded anyway
NPVAdvisor : so sorry for the typos (at least two years)
NPVAdvisor : SO depending on your plans one way or the other might make more sense
NPVAdvisor : If you're going to continue tolive there, giving you joint tenancy interes probably makes the most sense, because it makes estate planning easy, and you'll get the capitl gains tax exclusion is you stay there for at least two years
NPVAdvisor : If you plan to sell right away, you'd probably want to just let it accrue to you as an heir
NPVAdvisor : (to get that step up in basis on the full amount of the home)
NPVAdvisor : No ESTATE taxes either way
Customer: I have already been in the home for 5 years but you have given me a lot to thing about. thanks so much for the valuable information.
NPVAdvisor : glad to help
NPVAdvisor : If this HAS helped, I would appreciate a feedback rating of 3 (OK) or better. That's the only way they will pay us here. HOWEVER, if you need more on this, PLEASE COME BACK here, so you won't be charged for another question.
Customer: ok, you have been very helpful.
NPVAdvisor : let me know if I can help further...by the way, feel free to book ark this for future reference
Lane, JD, CFP, MBA, CRPS
Category: Tax
Satisfied Customers: 4167
Experience: Juris Doctorate, CFP and MBA, Providing Financial & Tax advice since 1986
Lane and 2 other Tax Specialists are ready to help you
Expert:  Lane replied 1 year ago.

Thanks so much Diana.

Let me know if you need more on this.


And if you'd like to use me again on nother question, just say "for Lane only," at the beginning of your question

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just go here: NPVAdvisor



And enter your question in the question box



Thanks again,

Lane



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