sporting

Anyone know how to transfer ownership of a home (Washington St.) to a son/daughter without any (much) Fees involved?

Is it possible? Everything stays the same except ownership?

KaMLuNg

iTrader: (5)

will their be any exchange of money from your children? i am assuming that the house is owned outright by the parents? usually what i have seen in the past is the parents selling the house for $1 to their children. and the title transfer is done at the town hall... i would check with your local records department...

sporting

No exchange of $, parent to kid. Any tax implication?

hornyleprechaun

Is the house the parent's primary residence?

hornyleprechaun

If the house is given as a gift, not a sale, then I believe the parents will have to pay gift taxes. So if the house is worth $226K. The parents can exclude $13k each, so $26K total, and pay taxes on the $200K.

Mr Marco

You can set up a trust which would include your assets such as the home. This is what my parents, and remaining grandfather has done. If he should pass before my sister & I, we would have access to the funds/property when we need it through my mother, but are not taxed. In the event that she also passes, another older relative is the trustee. Then after they pass, a lawyer is appointed trustee. Etc.
That way the child can get income/live in the property, but not be strapped with that HUGE tax burden right off the bat.

Plus it keeps my greedy little sister in check. The girl is a deadbeat who still lives at home with my parents at age 40.

hornyleprechaun

This is only if the house is the parent's primary residence...

If the parents sell the $226K house for $1 they cannot recognize a loss on the house. However, $1 will be the children's basis in the property. If the children later sell the house for $250K, and the house is their primary residence, they can use the home exclusion of $250K per person ($500K if married file jointly).

I think the sale option is better than the gifting option as you should avoid the gift tax, and the basis for the children would be lower yet they could use the home exclusion of $250K.

I tried researching, and even looked in my tax book, but didn't find anything saying if the sale for $1 occurred that it would be treated as a gift even though it was a sale.

May want to talk to a CPA in your state to confirm what I have wrote though.

sporting

Sounds like either way, tax is with you no matter what.

Thanks.

hornyleprechaun

Not really. If the house is the primary residence of the parents and they sell it to the child for $1 no tax is paid. The tax would be paid by the child when the child sold the house for more than $250,001 (or $500,001 if MFJ).

Part of my brain says it could be treated as a gift, just because the IRS sucks, but I'm not 100% sure. I'm a CPA but I don't do anything with taxes, so my knowledge is somewhat limited.

Will Y.

Best to talk to a CPA here, particularly where state tax and property tax laws may apply.

In CA, reassessment for property taxes also occurs when title changes, unless an exception-- like in interfamily transfer-- applies. Reassessment is a big hit for annual taxes if parents are paying property taxes on a house they bought for $20,000 and the house is reassessed for $500,000.

This is in addition to any gift/income taxes that may be due to both the state and feds, , so check with a CPA, if not the state gov't websites, if this situation applies to you.

chill_dog

The first quote is right, provided the 250/500 is reinvested in the child's next primary residence.

The second quote is great advice. The big question to ask is whether a transfer is considered a gift. If so, avoid it like the plague. Either do a sale for an inconsequential sum (as horny said), or set up a trust (as Marco said).

Mr Marco

^Yep...

OP, like I said, investigate a trust.
It is more expensive, but if you have a trust you can avoid probate on your assets, plan for the possibility of you being incompacitated (like a stroke), control what happens to your property after you are gone, and it can be used for any size estate. In addition, you can prevent your financial affairs from becoming a matter of public record.

After-all, you could win the lotto next year, then have every relative you haven't seen in 20 years chasing after your money.

sporting

Thanks guys!