Mother wants to give her son (successful professional) a quitclaim deed on her home in return to live in the home for the rest of her life. What is the downside for either party? All comments appreciated.
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downside
First, son can kick mother out into the street.Last edited by veritas; 08-02-2009, 11:13 PM. -
In my opinion
that is a question to ask a lawyer who practices in the relevant state. There is probably a legal way for her to have the right to live in the house as long as she is able or wishes to while also conveying title to him without exposing the house to Federal or State Estate or Inheritance Taxes. If she has to go into a nursing home for more than a few years the probability is that he will end up contributing to her care in order to keep her from getting substandard care under Medicaid or whatever else the State has. In that event all their planning could be for nothing but it's worth a try.Comment
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Trust
Ray T, if you live in Vancouver WA you are close enough to Veritas to kick HIM out to the street. You two probably know each other.
Most states in the southeast (obviously not WA) allow for the parent to title the property to a "trust" while retaining total control of the property. The property is OWNED by such a trust, which lasts as long as the parent lives. Property passes to beneficiaries upon death of the parent and trust is over with.
Only safe thing to do is to see a lawyer.Comment
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what about itemized deductions for prop tax & mortgage?
Who gets itemized deductions for property tax? And what about mortgage interest, if any?Originally posted by RayT View Post
Who is writing the checks to pay those items, and who is providing the money to pay for those items? How is Form 1098, if applicable, affected?Comment
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I use a Lady Bird Deed also called an Enhanced Life Estate. This avoids all of the problems previously cited with a Quitclaim. Many states have something comparable to this.Originally posted by RayT View PostComment
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This arrangement (which should be in writing in the deed) is referred to as a Life Estate. NATP did a very good article on it in two issues a couple of years ago. Dealt with all the tax consequences, and what happens if it is sold prior to donor's death or after donor's death. (NATP TaxPro March 2007 and April 2007.) See also US Code Title 26. para 2036 and 2037. Also google "life estate" for numerous articles from legal sources. Also check IRC 2702 for gift tax consequences (and your particular state.)Originally posted by RayT View PostComment
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The referenced NATP articles deal primarily with a life estate that is in effect and subsequently sold.Originally posted by RayT View Post
As previously mentioned, the Enhanced Life Estate avoids various problems one of which is avoiding the house may be being sold with the mother having no place to live - which a quitclaim deed would not do. For example, say the child got sued or creditors were after him. The remainder's interest is fair game if not done properly.
A good Life Estate Deed is sometimes called a Defective Life Estate. This does not mean anything is wrong with it, but it is worded in such a way that the mother maintains complete control including the right to sell the property or void the Deed itself and transfer the house back to herself without the remainders approval. A regular Life Estate does not do that.
If not worded correctly, it might end up as a completed gift which you do not want to do. An elder attorney that does these and knows what he is doing is what you need.
There is no consequence to the son if the house is not sold while the mother is living. It avoids probate and as the law now is he would get a step up in basis upon her death.Last edited by solomon; 08-03-2009, 05:38 PM.Comment
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I was in a lawyer's office last
Wed asking the idential questions. For $xxx. here's what I learned. If there is reference on the Certificate of Title that it is subject to "a reservation of a life estate interest in the Home" then the "mother" is allowed to live there but must pay upkeep/taxes/etc of the house. This was done by my client in 1992, but was updated in 2007. As I understand the attorney, that may place the home subject to a lien issued by a nursing home if the mother ends up there. There is a 5 yr window on that.
However due to a change in law in 2003 even if more than 5 yr has passed since Life Estate Deed was signed, the State (MN) can still file a lien against your interest in the Home if the life estate was created after 8/1/2003. Before that are not subj to lien.
Then there are other issues w/IRS as to whether there is a gift tax involved. 2nd advantage is the Life Estate Deed avoids probate of the Home on her death. 3rd advantage is that under current tax law, children will receive stepped up basis of Home. 4th advantage is the transfer of remainder interest starts the look-back period for Medical Assistance.
I really get lost on items like this. hope this helped you.
LarryComment
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. What is the downside for either party? All comments appreciated
Downside?? The son dies before mother, and his wife, children, whoever inherits the house and then decides to do something with the house other than origianl agreement. I guess if it's all set up legally it could prevent this, but this is something to think about. Another scenerio son owns house, gets sued and looses it. Then what happens to mother? She could loose her home if not careful.
From personal experience, I know someone who had an only son and he was in charge of all his mother's finances, business, etc. He unexpectedly died of a heart attack at an early age. At this time, his wife took charge of all the business of the mother-in-law. But the daughter-in-law and mother-in-law had never gotten along very well. Thus some decisions about care of mother-in-law were made that were probably not in her best interest and probably wouldn't have happened if son had lived. Sometimes things pass on to others who are not the one you would want to have the them. Never know what tomorrow will bring and how things will change.Comment
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Here is a copy of an Enhanced Life Estate Deed from father to son with the names and location removed. This covers most of the aforementioned downsides and then some. Take this to an attorney and if he/she looks puzzled, find another attorney.
Prepared by and Return to:
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ENHANCED LIFE ESTATE DEED
This indenture made this _______________________, 2007 BETWEEN:
NAME __________ of ADDRESS ___________, GRANTOR,
to: NAME _________ , as Sole Owner, ADDRESS __________, as GRANTEE.
WITNESSETH, That said Grantor, for and in consideration of Love and Affection for Grantor’s son as GRANTEE, does hereby remise, release, transfer, and forever convey to Grantee the following described property located in the county of NAME ______, State of NAME _____, to-wit:
Lot 47, of HIGHWAY Village, UNIT TWO (2), a subdivision in NAME ____ County, STATE _____, according to the map or plat thereof recorded in Cabinet B, Slides 41-42, Plat Records, of NAME _______ County, NAME .
Together with all the estate and rights of Grantor in such property, with the following Reservations and Exceptions to Conveyance and Warranty:
All easements, restrictions, and reservations of record and taxes for the current and subsequent years.
GRANTOR reserves unto himself, for and during his lifetime, the exclusive possession, use, enjoyment, and right of income of the property described herein.
GRANTOR further reserves unto himself, for and during his lifetime, the right to sell, lease, encumber by mortgage, pledge, lien, or otherwise manage and dispose, in whole or in part, or grant any interest therein, of the property described herein premises, by gift, sale, or otherwise so as to terminate the interests of the GRANTEE, as GRANTOR in his sole discretion shall decide, except to dispose of said property, if any, by devise upon his death.
GRANTOR further reserves the right to cancel this deed by further conveyance, even to GRANTOR, which may destroy any and all rights which the GRANTEE may possess under this deed.
GRANTOR, Binds GRANTOR and GRANTOR’S heirs and successors to warrant and forever defend all and singular the property to GRANTEE and GRANTEE’S heirs, successors, and assigns against every person whomsoever lawfully claiming or to claim the same on any part thereof, except as to the Reservations and Exceptions to Conveyance and Warranty.
GRANTEE shall hold a remainder interest in the property described herein and upon the death of the GRANTOR, if the property described herein has not been previously disposed of prior to GRANTOR’S death, all right and title to the property remaining shall fully vest in GRANTEE as sole owner subject to such liens and encumbrances existing at that time.
IN WITNESS WHEREOF, Grantor has hereunto set grantor’s hand and seal this day and year first above written.
WITNESSES: Grantor:
1. _____________________________ _________________________
2. _____________________________
STATE OF NAME _______
COUNTY OF NAME _______
I HEREBY CERTIFY that on this _________________________, 2007, before me personally appeared NAME _____, who produced a STATE ______ driver’s license as identification, and who acknowledged executing the foregoing Enhanced Life Estate Deed.
Sign __________________________, Notary Public
Print Name
My Commission Expires:Comment
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Maybe I seemed harsh
But quitclaim deeds are one of the most abusive forms of property conveyance I have seen.Originally posted by Snaggletooth View PostComment
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O.k.
Sorry, Mr. Veritas, I thought you were being facetious with Ray T. Didn't realize there was a hidden message. At least give me credit for knowing that there IS another Vancouver which is not in British Columbia...
I suppose every state has its own quirks and devices concerning the subject.Comment
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