mother-in-law wants to put us on the deed to her new house...?

[simple girl]

Hello!

Hubby just told me his mother asked if she can put us on the deed to her new house which she hopes to purchase (just put an offer in). He said she thought it would make things easier to manage when she passes. We are the executors of her will. There are 4 other children, but he is the only one she trusts to manage her affairs.

This raised some red flags in my mind - I don't know what the caveats are - tax, legal issues, etc, etc What do I need to investigate before we agree/disagree?

Thanks!

 

[Aeowyn]

The first issue is you miss the step up in basis (of course she is just buying the house but if she lives 30 more years the increase in value could be quite a bit) when she dies. If you are owners of the house when she dies, you basis (of your part of the ownership) is going to be what she paid for it. If you inherit the house from her, your basis is the value of the house when she passes (based on current law that could change).

The other really big issue for her is gift tax. Whatever your percent ownership in the house is, she is basically gifting that to you. Gift taxes are incredibly high. There is a certain amount you can gift each year that doesn't get taxed (currently $14K/person) but above that your MIL could faces huge taxes. There is some legal paperwork that she could do to basically use part of her estate exemption now instead of when she dies (not really familiar with this - legal council would be good if she chooses to gift him ownership in the house).

Finally - is MIL buying the house outright or putting mortgage on it. I would not recommend signing up for any debt together.

I think the more appropriate approach would be for MIL to have her will set up and name her son as the executor of the will. If she needs his help with things while she is alive she can also give him POA to manage her estate.

 

[Sunset]

Interesting question.
I don't see any simplification of issues upon her death since you are the executors.

I'm sure there are legal and tax issues besides the other siblings thinking you weaselled your way into the estate before the death.

Does not seem a clean way to do things.

 

[Meadbh]

This sounds like a recipe for sibling conflict. And the tax issues discussed by Aeowyn sound like a nightmare. I would tactfully decline.

 

[Aeowyn]

And I forgot to ask: MIL wants to put you on the deed - but when she passes is the equity supposed to be split between the siblings? If you give the siblings proceeds from the portion of the house that you owned before she passes, you would be subject to gift taxes too.

 

[simple girl]

The first issue is you miss the step up in basis (of course she is just buying the house but if she lives 30 more years the increase in value could be quite a bit) when she dies. If you are owners of the house when she dies, you basis (of your part of the ownership) is going to be what she paid for it. If you inherit the house from her, your basis is the value of the house when she passes (based on current law that could change).

The other really big issue for her is gift tax. Whatever your percent ownership in the house is, she is basically gifting that to you. Gift taxes are incredibly high. There is a certain amount you can gift each year that doesn't get taxed (currently $14K/person) but above that your MIL could faces huge taxes. There is some legal paperwork that she could do to basically use part of her estate exemption now instead of when she dies (not really familiar with this - legal council would be good if she chooses to gift him ownership in the house).

Finally - is MIL buying the house outright or putting mortgage on it. I would not recommend signing up for any debt together.

She is doing a bridge loan until her current house sells, and then she will buy it outright. No way would we agree to being put on the loan!

Everything you said backs up our concerns that being put on the deed probably isn't a good idea. My husband thought there was some issue with the basis and I also was concerned about gift taxes. We just didn't know the details. Thank you very much - this will give us more details when talking with her about why we don't want to be put on the deed.

I think the more appropriate approach would be for MIL to have her will set up and name her son as the executor of the will. If she needs his help with things while she is alive she can also give him POA to manage her estate.

We already have this set up (at least the executor part - I need to check on the POA - can't recall that for sure!).

 

[simple girl]

Interesting question.
I don't see any simplification of issues upon her death since you are the executors.

I'm sure there are legal and tax issues besides the other siblings thinking you weaselled your way into the estate before the death.

Does not seem a clean way to do things.

Agreed!

 

[simple girl]

And I forgot to ask: MIL wants to put you on the deed - but when she passes is the equity supposed to be split between the siblings? If you give the siblings proceeds from the portion of the house that you owned before she passes, you would be subject to gift taxes too.

I think yes it is to be split between the siblings. Obviously I need to review the will (it's been a while) but yeah...this spells nightmare! Eeeks!

 

[2B]

I think yes it is to be split between the siblings. Obviously I need to review the will (it's been a while) but yeah...this spells nightmare! Eeeks!

If your husband is on the deed as being the full owner upon your MILs death, there is no equity to be split with the other siblings. Your husband owns the house outright. The house would not be part of the estate.

 

[simple girl]

If your husband is on the deed as being the full owner upon your MILs death, there is no equity to be split with the other siblings. Your husband owns the house outright. The house would not be part of the estate.

Wow. We don't want that. We don't need any inheritance and don't want any bad blood to develop between siblings. We expect it to be challenging enough since we'll be the ones "in charge" of everything. Thanks. I'm pretty sure we will be respectfully declining - of course need to confirm with hubby.

 

[INTJ10]

Another issue to consider. Would you be responsible for real estate taxes as the owner?


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[misanman]

I think there are other potential issues should you or your husband pre-decease her. For some couples, the possibility of divorce would also complicate things.


There could also be issues if you try to undo this later.


My in-laws did this, putting the name of the youngest sibling on the deed, but didn't tell anyone. We lost out on the stepped up basis but otherwise everything worked out as the siblings all agreed on an equitable split.

 

[Sue J]

Here's another issue....

Your DH, a very careful driver, is in a car accident and is found to be at fault. Someone was seriously injured or killed and your DH is sued. One of his assets is his mother's house, which would put her home at risk.

I've read about this online, someone correct me if I'm wrong.

Instead, she keeps the house in her name only and files paperwork to designate that the house goes to your DH or your DH and his siblings at her death. In Ohio this is called a Transfer On Death Affidavit and the property does not go through probate.

https://www.ohiobar.org/ForPublic/Resources/LawYouCanUse/Pages/LawYouCanUse-195.aspx

Check how to do this in MIL's state.

 

[simple girl]

Another issue to consider. Would you be responsible for real estate taxes as the owner?


Sent from my iPhone using Early Retirement Forum

Good point. Thanks!

 

[simple girl]

Here's another issue....

Your DH, a very careful driver, is in a car accident and is found to be at fault. Someone was seriously injured or killed and your DH is sued. One of his assets is his mother's house, which would put her home at risk.

I've read about this online, someone correct me if I'm wrong.

Instead, she keeps the house in her name only and files paperwork to designate that the house goes to your DH or your DH and his siblings at her death. In Ohio this is called a Transfer On Death Affidavit and the property does not go through probate.

https://www.ohiobar.org/ForPublic/Resources/LawYouCanUse/Pages/LawYouCanUse-195.aspx

Check how to do this in MIL's state.

Great information. Thank you!!!

 

[jIMOh]

Ask an attorney

One possibility is form an LLC and put the LLC on the deed, then add who you want to the LLC

Another possibility is a land trust- put house in a land trust, then make sure the trust is referenced on the will properly.

The idea of putting names on deed might solve one problem with probate and create 2-3 others. Focus on goal setting- what is the GOAL for the house when the MIL passes?

 

[Walt34]

This is one of those time when paying for an hour or three of an estate attorney's time will be well worthwhile. It sounds like what MIL is trying to do is make things easy for your DH when she passes, but in reality it has the potential to make things horribly complicated and is ridden with the landmines of unforeseen relationship changes and so on that others have mentioned.

Even if MIL doesn't want to pay for it, it may be in your best interest to pay for the estate attorney's fee to keep yourself out of a potentially disastrous situation. That way MIL can explain to the attorney what she wants to do and the attorney can structure things to accomplish that without having it all blow up in your face 20 years from now.

 

[MRG]

This is one of those time when paying for an hour or three of an estate attorney's time will be well worthwhile. It sounds like what MIL is trying to do is make things easy for your DH when she passes, but in reality it has the potential to make things horribly complicated and is ridden with the landmines of unforeseen relationship changes and so on that others have mentioned.

Even if MIL doesn't want to pay for it, it may be in your best interest to pay for the estate attorney's fee to keep yourself out of a potentially disastrous situation. That way MIL can explain to the attorney what she wants to do and the attorney can structure things to accomplish that without having it all blow up in your face 20 years from now.

+1
My DF thought he had everything lined up, just a simple TOD to his heirs. Somehow what his attorney told him(he did it solo) and what he told the executor(my wonderful sister), the states mandatory inheritance tax was forgotten about.

Looking back DF was hiding his dementia from the family. I'd be at the meeting with DH, and MIL listen to what she wants. It's time and money(even if you pay) well spent.

 

[38Chevy454]

Agree, talk to an estate attorney and get the best advice form a trained and knowledgeable professional in this area.

I think an easy solution is to just upgrade the MIL's will to be a revocable trust, and put the property in the trust. Then when she passes and your husband is the executor trustee, the house gets a new value based on date of death. The trust sells the house and proceeds split between the siblings per the trust's distribution instructions.

 

[aja8888]

Agree, talk to an estate attorney and get the best advice form a trained and knowledgeable professional in this area.

I think an easy solution is to just upgrade the MIL's will to be a revocable trust, and put the property in the trust. Then when she passes and your husband is the executor trustee, the house gets a new value based on date of death. The trust sells the house and proceeds split between the siblings per the trust's distribution instructions.

+1 a Revocable trust is a good option.

 

[marko]

Agree, talk to an estate attorney and get the best advice form a trained and knowledgeable professional in this area.

I think an easy solution is to just upgrade the MIL's will to be a revocable trust, and put the property in the trust. Then when she passes and your husband is the executor trustee, the house gets a new value based on date of death. The trust sells the house and proceeds split between the siblings per the trust's distribution instructions.

+1 Get a lawyer!

 

[unno2002]

[FONT=&quot]If authorized in your state, a “beneficiary deed” bypasses probate, preserves the step up in basis for tax purposes, and protects the current owner against the liabilities of the prospective beneficiary.[/FONT]
[FONT=&quot] [/FONT]
[FONT=&quot]For preliminary info on the states with this option, see:[/FONT]
[FONT=&quot] [/FONT]
[FONT=&quot]States that Allow Transfer-on-Death Deeds for Real Estate | Nolo.com[/FONT]

 

[Brat]

I agree that creating a revocable trust and titling the house in the name of the trust is an excellent idea. MIL can designate DH as the residual trustee and state how she wishes the trust's assets to be distributed.

 

[jim584672]

In NY we have something called a "Life Estate Deed". This is used to protect real estate from Medicaid claims. The current occupant has the right to live in, pay taxes, take care of the property. Upon death the "remainderman" gets the Title. This is irrevocable, unless all parties agree otherwise. By avoiding Probate court Medicaid can't claw back the property.

 

[MikeWillRetire]

In NY we have something called a "Life Estate Deed". This is used to protect real estate from Medicaid claims. The current occupant has the right to live in, pay taxes, take care of the property. Upon death the "remainderman" gets the Title. This is irrevocable, unless all parties agree otherwise. By avoiding Probate court Medicaid can't claw back the property.

Same in Maryland. My father-in-law assigned my wife as the remainderman for his home. They worked with a lawyer that specializes in elder planning.