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- Nov 27, 2014
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- 9,254
In 2011 we bought a house for our daughter. We titled the house in three names, me, DW and DD. DD is married and was married when we bought the house. The house was bought for $60K and we put $30K into it. We think the house is currently worth about $150K (yeah, I wish I’d have bought a couple more at that time).
Since 2011, DD has paid us $600 per month. Not sure what to call this as we have no formal agreement. In DD’s mind, she thinks she’s buying the house. In our minds, we’ve already given her the house and we just use the money to pay for things like property taxes, insurance and repairs. Over time we’ve become the bank so, for example, when they needed a car, we bought it and they increased their payment to $800. Their cell phones are on our Sprint account and that increases the monthly amount they pay us to $900. All this is good. We have no issues with the situation. Please don’t focus on letting my DD fly on her own. We’ll get to that. At this point in time, the “account” sits at $24K. That is the net amount they’ve paid us. Subtractions to the account are taxes, repairs and the car and additions to the account are the payments. All this is just so you understand the situation to date.
So here’s the deal. We want to formally give DD the house. We would probably just keep the $24K (it’s only an account on paper; there are no designated separate funds). What we would be giving her is about equal to what we spent on other daughter for her college so we’re calling this even. So, how do I make the transfer?
If I gift her mine and DW’s share, that doesn’t give her husband any share in the house. If we sell them the house then there would be significant tax consequences. In Michigan, the seller has to pay sales tax (6%). Of course this seems stupid given that DD already owns 1/3 of the house. If we give them our share of the house, I don’t even know how to do that. At some point I want mine and DW’s name off the title and I want DD and SIL’s name on the title. FWIW, we titled the house the way we did to protect against any problems in a divorce. At this point, not only are we comfortable that SIL is a good husband/father, frankly, he’s earned it. Not only is he the only bread winner, he has put up with DD for over 10 years (enough said on that ).
Sorry for being long winded (posting). I’d really appreciate some ideas on how to do this or at least where to look for answers. I know there are people on this forum that have backgrounds in this area (real estate, legal, accountants) and I'd greatly appreciate hearing from you on this.
Thank you!
Since 2011, DD has paid us $600 per month. Not sure what to call this as we have no formal agreement. In DD’s mind, she thinks she’s buying the house. In our minds, we’ve already given her the house and we just use the money to pay for things like property taxes, insurance and repairs. Over time we’ve become the bank so, for example, when they needed a car, we bought it and they increased their payment to $800. Their cell phones are on our Sprint account and that increases the monthly amount they pay us to $900. All this is good. We have no issues with the situation. Please don’t focus on letting my DD fly on her own. We’ll get to that. At this point in time, the “account” sits at $24K. That is the net amount they’ve paid us. Subtractions to the account are taxes, repairs and the car and additions to the account are the payments. All this is just so you understand the situation to date.
So here’s the deal. We want to formally give DD the house. We would probably just keep the $24K (it’s only an account on paper; there are no designated separate funds). What we would be giving her is about equal to what we spent on other daughter for her college so we’re calling this even. So, how do I make the transfer?
If I gift her mine and DW’s share, that doesn’t give her husband any share in the house. If we sell them the house then there would be significant tax consequences. In Michigan, the seller has to pay sales tax (6%). Of course this seems stupid given that DD already owns 1/3 of the house. If we give them our share of the house, I don’t even know how to do that. At some point I want mine and DW’s name off the title and I want DD and SIL’s name on the title. FWIW, we titled the house the way we did to protect against any problems in a divorce. At this point, not only are we comfortable that SIL is a good husband/father, frankly, he’s earned it. Not only is he the only bread winner, he has put up with DD for over 10 years (enough said on that ).
Sorry for being long winded (posting). I’d really appreciate some ideas on how to do this or at least where to look for answers. I know there are people on this forum that have backgrounds in this area (real estate, legal, accountants) and I'd greatly appreciate hearing from you on this.
Thank you!