QUESTION
What will my tax obligation be on an inherited home? How?
Asked on Sep 14th, 2015 on Estate Planning - California
More details to this question:
My 80-year-old mother wants to put my name on the deed to her house, which has been paid off for quite some time. The value of the house is between $150K and $200K. Before proceeding with this, what will be my tax obligation when she passes?
12 ANSWERS
Chapter 7 Bankruptcy Attorney serving Lisle, IL
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Mankus & Marchan, Ltd.
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If you inherit the home after your mother dies, there is no income tax to you.
Answered on Sep 17th, 2015 at 10:38 AM
Corporate/Business Attorney serving Beachwood, OH
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Christine Sabio Socrates Attorney at Law
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If the value of the home has increased since your grandmother purchased the home, it may be wise to keep it in her name and file a affidavit of transfer on death instead. It would keep it in her name and transfer to you automatically on her death. If your grandmother holds the home until her death, you will receive the stepped up basis to the value on her date of death so when you later sell the home, you can use that value as your basis. There will be no tax obligation until you sell the home after you inherit it.
Answered on Sep 16th, 2015 at 1:32 PM
If she puts your name on the deed now, they ownership to that portion has already been transferred to you. If she makes it a gift, then their is no tax consequence to you. But you also take it with the same tax basis as she has. If you wait until she dies and you inherit the property, you have to do through probate [but probably a simple one you can handle yourself if that is her only major asset] but the property takes the stepped up basis of its fair market value on the date of her death. If you are going to live there for several years and you are in California with its $250,000 exclusion on capital gains tax on your primary residence, it may not really matter to you. There are other possible legal factors to consider [is she getting any Social Security disability benefits, Medicare, etc.], other potential heirs, liens, etc. so it is worthwhile to spend several hundred to consult with an estate attorney to see what can be done and the consequences. Also, you want to protect her interests; what if you are married, she transfers the house to you, you take it as community property, and your wife hates her and demands you kick her out of the house [happens a lot].
Answered on Sep 16th, 2015 at 3:16 AM
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The issue is what is her basis. Speak with a CPA. You may be better off taking it as an inheritance with a step up in basis. This is opinion is solely based upon the facts presented in the inquiry. Additional facts may be important and may change the analysis. If you are uncertain, seek legal counsel. We are not your attorneys. This answer is being offered to assist you in determining if you need to retain legal counsel to assist you, not to resolve your issue through an email inquiry.
Answered on Sep 15th, 2015 at 4:37 PM
Commercial & Bankruptcy Law Attorney serving Powell, OH
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Ronald K. Nims
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In general, there is no tax obligations on receiving a gift. However, if you ever will sell the house it's better for your mother to change the deed so you inherit the house at her death.
Answered on Sep 15th, 2015 at 10:36 AM
Edwin K. Niles
California no longer has an inheritance tax. There is an issue regarding the tax basis for capital gains tax purposes. You should have a talk with an estate lawyer.
Answered on Sep 14th, 2015 at 5:39 PM
Business Attorney serving Orem, UT
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Kirton & McConkie A Professional Corporation
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Putting your name on the deed causes a gift to occur, and since the value of the gift (an interest in the home) will be worth more than 14k, a gift tax return (Form 709) is required to be filed. No gift taxes will be due since as long as your mother has not used up her lifetime gift applicable exclusion (currently $5.43MM). It will likely be preferable to you to have Mom transfer the home into a revocable trust and make you the beneficiary of the home after she passes. No capital gains tax or gift tax for you.
Answered on Sep 14th, 2015 at 4:19 PM
Appellate Attorney serving Grosse Pointe Farms, MI
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Musilli Brennan Associates, PLLC
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Quickly see an attorney before she changes her mind or passes.
Answered on Sep 14th, 2015 at 3:50 PM
Commercial Attorney serving Chicago, IL
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Ashcraft & Ashcraft, Ltd.
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If you receive the real property as a gift before your grandmother passes your basis in the property will be the basis your grandmother had in the property. If she held the property for a long time the basis may be very low. If you receive the property in a distribution from her Will or Trust after your grandmother dies, then your basis in the property will be the value at your grandmother's date of death (or the value at the elected alternate date 6 months later). When you sell the property you will be taxed on the capital gain which would be the difference between the basis in the property and the sale price, after costs of sale. It is likely that the capital gain, and thus the capital gain tax will be higher if you receive the real property in a gift before death as opposed to from her estate or trust after her death. There are other factors that can affect basis in property. You should consult with an attorney or accountant about such matters.
Answered on Sep 14th, 2015 at 3:48 PM
Probate Attorney serving Newport, OR
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Minor, Bandonis & Haggerty P.C.
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Your mother should discuss this proposed transfer with her estate planning lawyer. (None should have one, honest). If she goes forward with this, she will need to file a gift tax return on the transfer probably there will be no tax, but that depends on circumstances. The tax effect to you is that if you inherit the house, on her passing, you get a "stepped up" basis your tax "cost" for the home is the fair market value on the date of your mother's death. However, if she gives you a half interest, then your tax cost on the half given to you is her basis her cost when she bought the home. Basically, if you inherit the home then all the capital gain on the property is forgiven, up to the time of her passing. There are many other options, which should be discussed with a lawyer. Getting your mom's estate plan right is well worth a few hundred dollars of lawyer fees to do the planning.
Answered on Sep 14th, 2015 at 3:36 PM
There will be no income or inheritance taxes to pay, assuming your mother does not have an additional $5,000,000 or so in other assets.
Answered on Sep 14th, 2015 at 3:22 PM
Depends on purchase price; if you take after death you give FMV as basis. That's a better course.
Answered on Sep 14th, 2015 at 3:22 PM