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Category: Estate Law
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I would like some information regarding Inheritance/Estate

Customer Question

I would like some information regarding Inheritance/Estate taxes:
My mom is getting old and needing more assistance all the time. She is going to move in with me or my brother before long. She has a small house and some money. Total value isn't more than 500K - 600K at most. I've heard that Fed tax only applies over 5M, and CA. doesn't charge taxes on this small amount. For the last 25 years, she has promised me the house and a portion of the money. We want to make sure that if she moves to my brother's home that nothing gets changed. Should she transfer the house into my name prior to moving to my brother's? If so, does that change tax issues for me? She is thinking about signing a "Quit Claim" but we don't know what that will do, or if I would be better off (on taxes) by waiting. Can we have her house put in both of our names requiring our 2 signatures to sell the property.
How do we keep her wishes from being changed later? A will can be changed and if she gets senile, she may sign a new will later. Is there some way to prevent a change later?
Irrevocable Trust? What should we do to protect the property? What is the best way to pay as little taxes as possible?
Submitted: 2 years ago.
Category: Estate Law
Expert:  Barrister replied 2 years ago.
Hello and welcome! My name is ***** ***** I will try my level best to help with your situation or get you to someone who can.
If she wanted to add you to the deed as a "joint tenant with rights of survivorship", then she would essentially be gifting you half the house now and when she passed, you would become sole owner.
Once a new deed is filed, it can't be changed, regardless of what happens later, unless you agree to do so.
Tax wise, it won't make a difference as a transfer from parent to child doesn't trigger a Prop 13 reassessment. Further, mother can avoid any gift tax liability for the gift by filing an IRS Form 709 with her taxes in the year of the gift and using up some of her $5.34 million dollar lifetime gift tax exemption.
So she can give you half the house now, tax free, and then you would inherit the other half tax free when she passes. And it can't be changed without your consent.
Customer: replied 2 years ago.
Will I have to pay tax on 1/2 of the house now?
Mom doesn't usually file a tax return. She's low income. Does she have to file form 709 anyway?
Expert:  TaxRobin replied 2 years ago.
Hello and thanks for trusting me to help you today. I am a tax adviser with over 20 years of experience.
Your question was moved to the tax category.
You asked "Should she transfer the house into my name prior to moving to my brother's? If so, does that change tax issues for me?"
Yes this changes everything for you should you sell the house. If you inherit the property you will receive a step up in value to fair market value. So your cost would be same as sale price if you sale quickly. This would mean no gain for you and no tax to pay on the amount you receive for the house. If she gifts you the house now, you retain her cost and would pay tax on the difference in cost and sale price. That is a huge difference in how you would be taxed.
This is true even if she gives to both you and your sibling or just adds you to the deed as owners with her.
If your mother does not need to file a tax return she would file the 709 (to report the gift) by itself.
You may want to think very hard about accepting ownership prior to actually inheriting. This could mean Capital gains tax to pay should you sale or receiving the full amount from the sale tax free.