Grantor Trust

[Jill Graff]

Client (Mom) has a flaky daughter. Mom sets up a revocable grantor trust, buys house for daughter within the trust. Daughter pays rent each month. Trust pays mortgage each month. Mom reports everything on her personal 1040.

Daughter has inherited money from granddad. Daughter is going to put money into Mom's grantor trust. Mom is going to pay off mortgage with the money.

Question: Is there a tax consequence from daughter putting money into Mom's grantor trust?

Thanks in advance.

[Davc]

Daughter is giving a gift to mom. Assuming it's over the limit then a 709 is required.

[erchess]

Could

daughter pay mortgage company directly and avoid gift tax consequences?

Furthermore isn't there a more tax advantaged way for Mom to put a roof over flaky daughter's head while teaching flaky daughter to responsibly make monthly payments?

I love what this Mom is doing for her daughter but I hate to see the tax consequences of doing it this way.

[BOB W]

Life will "Never let a good deed go unpunished"............ When Mom sells to daughter (fmv), if any gain, it will be taxable to Mom. Daughter will be unhappy to pay FMV since she already paid down the mortgage.

I quess it is time to create a rental agreement WITH THE OPTION TO BUY. The option should give credit for rents paid (in full or some portion of rents paid).

Messy............................

Could daughter pay mortgage company directly and avoid gift tax consequences? NO.................