USA Buying home from parents below value

[DBSarasota]

Hello, I would really appreciate and help or input with this situation.

I live in a home owned by my parent's revocable trust. I now want to buy it, and the sale price will be around $150K below value. They are in Delaware and I am in Florida. In Delaware, for Medicaid purposes, they can sell the property for 2/3rds value without it being considered a gift. I will likely need a gift letter for the lender however. The letter would be for around $70K.

My questions are: if I sell the property in two years, will I have to pay capital gains?; is there a better way to transfer the property or equity?

Thanks so much!

 

[BIG E]

You need an attorney to advise you on a special circumstance like this.
When the home was first put into a trust, was there a FMV made, or a cost basis
determined on record somewhere?
Once the valuation to you is determined, and you use the home for 2 years, then you can get
the Section 121 exclusion for its sale.

 

[DBSarasota]

Thank you for this. It was put in trust as a new home 4 years ago. However, I am the only person that is lived in the home. My parents never occupied. Basically, they lent me the money since I didn’t have it, but it was titled in their trust. Now I have the money and can buy it for that original price. So FMV at that time was the new home price.

 

[MoneyMoo]

Hey there!

Totally understand wanting some guidance on this tricky situation. Buying your childhood home below market value sounds awesome, but navigating gift letters and Medicaid rules can get complex. Selling later could trigger capital gains, and other transfer options might be worth exploring depending on your specific circumstances.

 

[Samir]

The easiest way to transfer without a taxing event would be to make you in charge of the trust. You actually have it titled the way most people want--not in an individual's name. So no need to undo that.