Should I go on Title of my parents Home?

Question

I am 45 yrs. of age, my parents are in 70's and have asked if I want to go on Title? What Tax. consequences would I incure? if any?..is this a good idea tax wise? (California, Los Angeles), and I do own other real estate.

Thank you

Answer 1

Very bad idea. If someone trips on their front steps, and sues them for $5,000,000 and wins, they'll get the house & your parents assets, and if that doesn't meet $5M they'll get all your assets up to the $5M too...

If your parents have a proper will, there is no need to play these sorts of silly games with titles & ownership documents. If their estate is valued in excess of $5M, the IRS might decide they added you to the title specifically to avoid due taxes, and you might get had for fraud!

Talk to an estate lawyer...

Answer 2

From an income tax point of view, this probably would not benefit you. If you are going to inherit the property, you will inherit it at the "stepped up" value, which is the fair market value at the time of the inheritance.

If you then sell the property for the fair market value, you will owe no taxes. If you hold the property and sell it for a gain, you will pay long-term capital gain taxes only on the increase in value from the time you inherited it.

On the other hand, if you take title to the house now, and you pay mortgage interest or real estate taxes, you may get a tax deduction. However, when you sell it, you will pay gains on the basis that your parents had (at least the part you owned, the part you inherit will be treated as above).

There may be other factors at play that you did not address here. If your parents are trying to qualify for Medicaid should they need nursing home care, the "look back" period is five years for Medicaid to claim their assets that have been transferred.

If the issue is avoidance of estate or gift taxes, you and your parents need to talk to an attorney to see what is your best option. There are a number of ways to deal with this besides transferring title.