1. Is it true that when closing, only people listed in the contract can put their names on the title? My father thought that since they are a married couple, he can put both their names on the title when closing, regardless whether my mom signed the contract.
A: No, it's completely false. Title can be taken in any manner that the buyer requires. There is no legal restriction -- so, I can't point you to a law
that confirms this, because there simply isn't any.
However, if there is a lender involved in the transaction
, the lender may require that the spouse sign as a coborrower -- and that may affect the underwriting of the loan, if the spouse has bad credit
2. What is the purpose of this interspousal deed? Does it mean my mother is transfering her portion of the title to my father? Or does it mean my father is transferring half of the title to my mother?
A: An interspousal deed operates to transfer real property between spouses as a gift, so that there is no "change in ownership" under California and federal tax
law, which would otherwise trigger tax liability
. However, because the parties to this transaction are aliens, the deed transfer will trigger gift tax liability, so do not
use an interspousal deed. The spouse needs to be on the deed when the purchase is completed. 3. Is there any tax consequence after signing this interspousal deed? Would that be considered a gift of $400,000 between my parents? Both of them are foreigners so they only have a $128,000 gift tax exemption. And they don't qualify for the 5 million lifetime estate exemption. Do they have to report and pay gift tax after signing the interspousal deed?
A: I must be clarvoyant. I hadn't read your question before I answered the previous question. 4. If signing the interspousal deed leads to paying gift tax, we will ask the builder to see if we can add my mother's name to the purchase agreement as an addendum so the title company can put both their names on the title when closing. It's a cash purchase so no lenders are involved. Is this feasible?
A: Funny, I hadn't read this question, either, until now. However, now that I think about it a bit more, if both spouses are not named on the purchase contract, then it could be argued that putting another spouse's name on title is effectively a gift, which would trigger tax liability -- so, yes, in my opinion, you need to have the contract modified to add both spouses -- in order to avoid a potential gift tax liability
Hope this helps.
Hope this helps.