How do i give my son a House the "right" way?

[Enuff2Eat]

At some point in my life, i would like my son to take over what i own and would like to find an "appropriate" way to give it to him without paying a fortune to uncle sam, basically kept in the "family" as much as possible and do it legally.

kindly advice... the house is an investment property in which i am collecting rents and writing off depreciation as we speak. The property is around $180k which is $80k increase since i bought it.

Please advice based on your best knowledge. I heard enuff of "go see a lawyer".


enuff

 

[twaddle]

You realize that he'd get a step-up in basis if he got it after you were dead, right?

That's how I plan to give my kid all my "extra" appreciated assets.

 

[Enuff2Eat]

twaddle, could u explain that in simple english for me??

 

[REWahoo]

From Nolo.com:

For tax purposes, a value that is used to determine profit or loss when property is sold. If someone inherits property that has increased in value since the deceased person acquired it, the tax basis of the new owner is "stepped-up" to the market value of the property at the time of death. The stepped-up basis means that when the property is eventually sold, there will be less taxable gain.

 

[twaddle]

If you sell an asset, you're taxed on the gain -- the difference between the selling price and the cost basis.

When you die, whoever inherits your assets gets a cost basis equal to the value of the assets at the time of your death. If they sell right away, for example, they pay no taxes.

Of course, this assumes that the size of your estate is below the estate tax limit. If not, see your lawyer.

(Simulposted with Wahoo)

 

[clifp]

Enuff here is a good write-up on gifts and the gift tax.

Alternatively you could wait until you die to leave him the property in your will. At the point, depending on the every changing estate tax rules, your son would inherit the property, owe no tax, and have the cost basis of the property equal to the value when you passed away.

 

[lazygood4nothinbum]

isn't there currently $1mm lifetime tax-free gifting per person? in any case, before making a decision you might want to see how the next set of estate tax rules read.

 

[Enuff2Eat]

one of the reason that i ask is also because i want to leave the kids something instead of paying 99% of my asset to the Nursing Home.

 

[twaddle]

Shifting assets will help you qualify for medicaid (after the 5-year look-back period), but it won't help with taxes. You'll just be shifting the tax burden to your kid if you gift to him.

 

[travelover]

one of the reason that i ask is also because i want to leave the kids something instead of paying 99% of my asset to the Nursing Home.

You might want to rethink the moral aspects of doing this. We took care of an elderly childless great aunt and uncle of DW. When getting POA work done, the attorney advised us to give away their money to their heirs so they could go on Medicaid when they were ready for the nursing home. Fired the lawyer. After they both died in the nursing home, we distributed the rest of the estate to their heirs (We were not heirs).

 

[twaddle]

I don't make any moral judgements on this issue because it's a big and complex issue. Parents want to leave a legacy for their kids. Society doesn't want to pay for the burden of the elderly.

It's going to get worse. We're getting older as a country. At some point, we'll need to face options other than wasting away in the generally poor environment of nursing homes.

FWIW, there's a beautiful nursing home in a beautiful location not far from me. I jog past there every once in a while. I see the [-]inmates[/-] residents. I see the [-]guards[/-] staff. I hope it doesn't happen to me.

 

[travelover]

I don't make any moral judgements on this issue because it's a big and complex issue. Parents want to leave a legacy for their kids. Society doesn't want to pay for the burden of the elderly.

It's going to get worse. We're getting older as a country. At some point, we'll need to face options other than wasting away in the generally poor environment of nursing homes.

FWIW, there's a beautiful nursing home in a beautiful location not far from me. I jog past there every once in a while. I see the [-]inmates[/-] residents. I see the [-]guards[/-] staff. I hope it doesn't happen to me.

I pray that I never end up in a nursing home either, but if I do, I won't expect you to pay for it so my heirs can enjoy my money.

 

[goodguy1_64]

This mentality has always bothered me..

When a nursing home provides service to someone, they should be paid.

If that individual is indigent, taxpayer dollars are used to pay the bill.

Hiding assets to avoid paying the bill by appearing indigent, thereby passing that bill on to the taxpayers, is wrong.

goodguy

 

[twaddle]

I have only two more words to say on this subject: Soylent Green.

 

[travelover]

I have only two more words to say on this subject: Soylent Green.

Dr. Kevorkian lives just a few miles from me and he's back from the slammer.

 

[Gumby]

..

 

[Milton]

You might want to rethink the moral aspects of doing this. We took care of an elderly childless great aunt and uncle of DW. When getting POA work done, the attorney advised us to give away their money to their heirs so they could go on Medicaid when they were ready for the nursing home. Fired the lawyer.

Perhaps I'm missing something here. But on its face, the above makes no sense.

The lawyer provided legal advice, which does not appear to be obviously incorrect. You may take issue with its "moral" aspects, but such concerns are not a lawyer's job. Keep in mind Milo O'Shea's remark to Paul Newman in The Verdict: "You see the padre on your way out; he'll punch your ticket ... you follow me?".

After they both died in the nursing home, we distributed the rest of the estate to their heirs (We were not heirs).

Perhaps you might have acted differently if you were heirs and had an incentive to preserve the estate.

 

[travelover]

Perhaps I'm missing something here. But on its face, the above makes no sense.

The lawyer provided legal advice, which does not appear to be obviously incorrect. You may take issue with its "moral" aspects, but such concerns are not a lawyer's job. Keep in mind Milo O'Shea's remark to Paul Newman in The Verdict: "You see the padre on your way out; he'll punch your ticket ... you follow me?".


Perhaps you might have acted differently if you were heirs and had an incentive to preserve the estate.

There is a big difference in my mind between saying you could ditch the assets and you should ditch the assets. This lawyer recommended the latter.

I hope you didn't mean this to be as offensive as it sounds.

 

[Dawg52]

You might want to rethink the moral aspects of doing this. We took care of an elderly childless great aunt and uncle of DW. When getting POA work done, the attorney advised us to give away their money to their heirs so they could go on Medicaid when they were ready for the nursing home. Fired the lawyer. After they both died in the nursing home, we distributed the rest of the estate to their heirs (We were not heirs).

Many many years ago I was having lunch with my parents and the nursing home topic came up. I mentioned the above asset transfer strategy and my mom let it be known that she didn't want the government paying for her nursing home care. I felt like she had just wore out my behind with a belt like the old days.

Needless to say, I never mentioned that again. But in full disclosure, she has given my brother's family and myself nice checks on our birthdays for the last few years. Not for the above purpose, but just for her personal satisfaction.

 

[kaudrey]

To try to get back to the question....

As twaddle noted, it is probably most effective to give your son the house when you die, due to the step-up provision.

As for other assets, you can give away $12,000 each year to anyone you want ($24K if you are married) without paying gift taxes, and you can do that anytime. If you want to reduce your estate over time, this is one way to do it.

 

[Gworker]

My parents put a Time Of Death rollover on their house papers. When they died it rolled right over to my brother and I and we sold it almost immediately, thus avoiding any profit. It was easy.

 

[maddythebeagle]

I know one older lady that just went into a nursing home at 92...she had transferred her property to her son years ago and he was paying the taxes and letting her stay in the house...one problem that I saw was it gives a lot of control to the kids...and frankly, I think there are different levels of homes and going in as an indigent might not be the most desirable just so your kids can squander your hard earned money....

 

[Martha]

To expand on the basis issue, one advantage of simply leaving him the property in your will is that when you die he will be able to calculate depreciation of the investment property off of the value at death. And your estate will not have to recapture any depreciation you took and pay taxes on it.

I know you don't want to see no stinking lawyers, but when the time comes to make decisions I would see an estate planner. You or your heirs may save a lot more money than it will cost. Also, I have no idea if you want or need to do any medicaid planning, but it is a dangerous area fraught with issues that are best left to the experts.

 

[In-control]

Talk to a lawyer - especially one dealing with real estate. We re-did the deed of my mothers house so when she passed it transfered to me automatically. It must be done prior to the person passing though.

 

[twaddle]

Also, I have no idea if you want or need to do any medicaid planning, but it is a dangerous area fraught with issues that are best left to the experts.

I think there was a time when it was illegal for lawyers to offer medicaid "planning" advice. Is that still the case?