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    #1

    planning for inheritance

    Clients Mom is in a nursing home and not doing well. Mom's liquid assets are nearing depletion. Mom has a vacation home that client will inherit. Gains if house were to be sold would be large.

    Are there any rules that I'm not aware of to prevent client from gifting to Mom amounts needed to meet expenses to preserve vacation home for inherited property with step up?
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    #2
    Originally posted by kathyc2 View Post
    Are there any rules that I'm not aware of to prevent client from gifting to Mom amounts needed to meet expenses to preserve vacation home for inherited property with step up?
    There may be some court cases with similar fact patterns, I wouldn't know. On one hand, gifts by definition have no strings attached -- so any understanding that the "gifts" were to be used for a specific purpose would call into question whether they were gifts. But why not set up a personal loan to accomplish the same thing? For the cost of a relatively small amount of taxable interest income to your client, I'd think with a written loan agreement there would be no questions at all about compliance with tax laws.
    "You said it, they'll never know the difference. Come on, we'll paint our way out!" - Moe Howard

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      #3
      Gifting to mom would be a limited amount yearly and probably won't cover the nursing home for more than 3 months at the most. Does mom qualify as dependent? Can daughter afford to support mom's need until? How about renting mom's home to increase support income? Can you provide more detail? What about mom gifting the house to the daughter?
      Believe nothing you have not personally researched and verified.

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        #4
        Originally posted by taxea View Post
        Gifting to mom would be a limited amount yearly and probably won't cover the nursing home for more than 3 months at the most. Does mom qualify as dependent? Can daughter afford to support mom's need until? How about renting mom's home to increase support income? Can you provide more detail? What about mom gifting the house to the daughter?
        Gifting is not limited to an annual amount. The only limit is the amount that can be gifted without filing a 709. Since the goal is to keep house title with Mom to get step up basis your idea of Mom gifting house to daughter is the exact opposite of the goal.

        I like Roberts idea of loan rather than gifting. I've suggested to client that Mom looks at taking a LOC on the property even if daughter needs to co-sign.

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          #5
          won't some agency step in and force the sale of the vacation home to cover nursing home costs?

          Comment

            #6
            FWIW, I concur with everyone's suggestions above (except the one that says there is an annual limit on the amount someone may give another). Direct gifts to the mother, direct payments of her bills, loans to mother, or a loan on the vacation property itself are all viable possibilities. The last option may be somewhat difficult, as the lender would likely want the loan proceeds to be advanced all at once, up-front. However, an open-ended LOC may be possible using the house as security. I have never seen that done except for home equity loans, so I don't know if that is an option. A rev-mo loan is not an option, as those are only available for owner-occupied residences.

            The best option might be for your client to pay the mother's medical bills him/herself. If your client pays over 50% of the mother's support, he/she can deduct the medical bills. The mother does not have to live with your client to quality, and the income threshold for a "QR" (about $4,000) does not apply either. In fact if the mother's income is under the "QR" limit, she may qualify as your client's dependent for tax purposes.
            Roland Slugg
            "I do what I can."

            Comment

              #7
              Originally posted by Roland Slugg View Post
              The last option may be somewhat difficult, as the lender would likely want the loan proceeds to be advanced all at once, up-front. However, an open-ended LOC may be possible using the house as security. I have never seen that done except for home equity loans, so I don't know if that is an option.
              That's exactly what I have. An open LOC with no primary mortgage that I can draw on or pay how I choose. The only requirement is that interest needs to be paid each month, but I can take an advance and use that money to make payment if needed. I didn't realize that it's an unusual setup.

              I told client that CU may want a co-signer because of the situation. They are meeting w/ attorney next week, but threw it out as a possibility.

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