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moreland · Jan 7, 2007, 07:44 PM

My father is nearing the end of his life. He has arranged his affairs such that instead of willing me his house, he is in the process of transferring the house to me via deed, reserving life estates to him and my mother who is also dying. Since he is doing this prior to his death ,and as such the house is not mentioned in his will as going to me, will I now be subject to gift taxes?

Thanks.

Fr_Chuck · Jan 8, 2007, 06:51 AM

Most likely yes, Have you considered merely being added to the deed instead of a pure transfer.

Also since I don't know all the laws in all the states ( if you even live in the US) it may be wise to visit a real estate attorney in your area. A couple hundred dollars of adivce to save 1000's can be worth it

ScottGem · Jan 8, 2007, 07:15 AM

How much do you think your father's estate will be worth? Unless you are dealing with a multi-million dollar estate, the whole estate may be exempt from inheritance taxes. So it may not be necessary to go through the life estate thing. I would assume your father is doing this through an attorney so ask the estate attorney about your tax liability.

moreland · Jan 8, 2007, 05:33 PM

I live in MN. The house 350K and cash is about 500K. His attorney suggested this route. My father has some fears about sibling contests. I don't think there would be. So I think you're saying I will end up paying estate taxes. Would this be after his death? Until then he's paying all property taxes and upkeep of the home.

Fr_Chuck · Jan 8, 2007, 06:36 PM

Who am I to argue with an attorney, if the fear is about sibling contests then yes get rid of it before hand, I do believe the taxes this way could be higher, but not as high as lawyers if you have a long probate battle

ScottGem · Jan 8, 2007, 08:11 PM

What I do know is that the estate is well below the $2M threshold for inheritance tax. Which means none of you should have to pay taxes on the inheritance. What I don't know is whether what the attorney is setting up would result in a tax liability to you now.

What I fear is that the attorney can charge higher fees for setting up the life estates etc. then just writing a simple will and that may be why he's pushing this.

moreland · Jan 8, 2007, 09:28 PM

Thank you Fr_Chuck.

ScottGem: I'll look further into what the tax liability may be.

Can you elaborate any on what you mean by... "What I fear is that the attorney can charge higher fees for setting up the life estates etc. then just writing a simple will and that may be why he's pushing this."

Thanks.
Moreland

ScottGem · Jan 9, 2007, 06:54 AM

Lawyers charge their fees generally on the amount of hours they work on case. A simple will might take 2 hours, setting up a life estate might take 6 hours. So its in the lawyer's interest to push for the more complex solution so they can make more money. That doesn't mean they don't feel it's the better solution, but its possible they are recommending it simply to generate more income.