Transfer land from parents to daughter?

Question

Land is located in San Miguel County in Colorado. My Girlfriend wants me to do some research on this question. Her (middle aged) parents own 200+ acres of land and want to give her ~60 acres of land. What would be the best way to avoid taxes and other payments?

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The property is easily split up and we already have a legal description of the property; so no surveying is required. The property is empty but we plan to build a house on it. All the taxes and fees are up to us to pay for getting the land

The 200+ acres are fully paid of and in the name of the parents and not the bank

Answer 1

You have a couple of problems here to deal with, and a couple of different tax issues.

The problem is that if they give her the property while living, she gets their Basis, which means that when she sells, she pays capital gains tax on anything over what they paid. On the other hand, if they give more than the Annual Exclusion, the amount of Basis transferred in excess of the Exclusion is deducted from their Estate Tax Exclusion later.

However, if their estate is less than about $1.3 million (not sure the total exclusion) it might be better to NOT give it to her now. If it is part of the total estate, the value will be as of the transfer, which means the Basis will be higher than an inter vivos gift, which means less Capital Gains when it is ultimately sold.

It really depends on the total size of the parents' holdings. It may be better to get this property out of the estate NOW to avoid that stepped-up basis being part of the estate, but it may be better to transfer it at the stepped up basis than the actual basis.

My guess is that they will at least exceed the exclusion for one person, which means that if they spend a few thousand for a GOOD Estate attorney, the savings in ultimate estate taxes will be ten times what they spend for the service.

Answer 2

Before they can transfer 60 acres of a 200 acre parcel, they will have to get permission to sever from the San Miguel Authority. That involves making an application, getting tentative approval, posting the required notice, and assuming nobody objects, attend the hearing and getting the severance. This usually takes about 60 - 90 days. You will need a surveyor to draw out the parcel of land and indicate which portion is being severed. You will need to present this survey to the county when you make your application.

Once the severance is granted, you will then register a new deed for the severed land in your girlfriend's name. There should be no tax liability as the grant of title is from parent to child.

This whole exercise shouldn't cost more than $2-3,000 including legal fees, engineering and registration fees.

Good luck with it.

Answer 3

You'll need a survey for the legal description. Colorado has a law allowing for deed upon death in where the grantor (giver) can deed the property out to the heir/s prior to death but retain control and use of the property. That might be the easiest and fastest way. Unless of course the conveyance is needed by the recepient of the conveyance right away. If so then you will need a conveyance instrument (deed) that describes the surveyed property after you check the land use ordinaces allowing for such a land split. Here are some research links
San Miguel County Web site: http://www.sanmiguelcounty.org/
Locating Property Records: http://www.denvergov.org/RealProperty.asp
State bar Association: http://www.cobar.org/
STATE’S WEB SITE: http://www.colorado.gov/
LAWS: http://www.state.co.us/gov_dir/leg_dir/olls/HTML/colorado_revised_statutes.htm
IRS: Estate and Gift Taxes:
http://www.irs.gov/businesses/small/article/0,,id=98968,00.html
IRS: Deductible costs when purchasing real property:
http://www.irs.gov/publications/p551/ar02.html#d0e2000
IRS: Gain and losses on real property:
http://www.irs.gov/publications/p544/ch01.html

Buena Suerte

Answer 4

The land they are willing to give her must be split from the larger parcel. If the 60 acres can easily be defined there may not need to be a survey, but most likely one will be required to properly define the parcel. From there a title company or lawyer can draft a deed from her parents to her. There will be minor costs such as the fee charged to draft and record the documents, deed tax, etc. A local title insurance company could give a run down on any possible fees. If the parents owe any money on the land, they will need to secure a partial release of liability on the land they are gifting.

Answer 5

1) They can add her to the Title of this land - and later - have a separate agreement with her - to show the portion of this plot owned by her.
2) They can also go thru ( More expensive ) DIVIDING this plot to 3 parts - transfer the ownership on 1 of the new plots (65 Acres approx )to your Girlfriend , and keep the other 2 lots .
This will involve a survey , and new Tax lots .
She will not have to pay taxes on her 65 acres if no money changes hands. ( A non-monetary transfer )

There are other - more expensive options.

Answer 6

I would check with a CPA or a Tax Attorney.

Answer 7

sell it for a dollar. with contract and all that.

there will still be taxes. you can't avoid them