Transfer of house and tax implications


R

rod

My 75 year old father wants to transfer his house to my
name. He is worried that if he needs nursing home care one
day he will lose all his assets and wants to protect the
house. We understand that he cannot file for medicaid
benefits for 36 months after the transfer of the house.

My question is... will the IRS look at the transfer as a
gift? Since one can only give $11,000 per year to an
individual, is the fair market value of the house minus
$11,000 taxable?

PLEASE help!
 
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D

Dave Woods, EA

rod said:
My 75 year old father wants to transfer his house to my
name. He is worried that if he needs nursing home care one
day he will lose all his assets and wants to protect the
house. We understand that he cannot file for medicaid
benefits for 36 months after the transfer of the house.

My question is... will the IRS look at the transfer as a
gift?
Well what else would you call it?
Since one can only give $11,000 per year to an
individual, is the fair market value of the house minus
$11,000 taxable?
Yes.

--
David M. Woods, EA
Boston, MA 02109

Postings here are general information only and not to be
relied upon as advice.
 
P

Phil Marti

My 75 year old father wants to transfer his house to my
name. He is worried that if he needs nursing home care one
day he will lose all his assets and wants to protect the
house. We understand that he cannot file for medicaid
benefits for 36 months after the transfer of the house.
Much better that I pay for his care, through taxes, than for
him to pay for it with his assets. You need to see a lawyer
who specializes in elder issues to make sure you have all
the Medicaid considerations covered. Your father may also
want to visit some nursing homes in the area and see what
differences there are between the lives of Medicaid and
paying patients.

There are gift tax implications for your father. From your
standpoint, you receive the house with his basis. I assume
he'll continue to live there and that there's no mortgage on
the property. If he continues to pay the property taxes, no
one will be able to deduct them since you're liable for the
tax, but he's paying it.

Phil Marti
Topeka, KS
 
G

Gene E. Utterback, EA

rod said:
My 75 year old father wants to transfer his house to my
name. He is worried that if he needs nursing home care one
day he will lose all his assets and wants to protect the
house. We understand that he cannot file for medicaid
benefits for 36 months after the transfer of the house.

My question is... will the IRS look at the transfer as a
gift? Since one can only give $11,000 per year to an
individual, is the fair market value of the house minus
$11,000 taxable?

PLEASE help!
It is a gift, but that may not matter.

It is reportable, but may not be taxable. The first
$1,010,000 in gifts made by a donor get reported on the gift
tax return, but no cash is due to cover the tax - instead
the gift tax credit takes care of that. So, if your
father's total estate is valued at more than $1,000,000 you
could have some tax due that would need to be paid.

You really should consult with a qualified gift tax
specialist in your area.

Gene E. Utterback, EA
 
C

Christopher Green

My 75 year old father wants to transfer his house to my
name. He is worried that if he needs nursing home care one
day he will lose all his assets and wants to protect the
house. We understand that he cannot file for medicaid
benefits for 36 months after the transfer of the house.

My question is... will the IRS look at the transfer as a
gift? Since one can only give $11,000 per year to an
individual, is the fair market value of the house minus
$11,000 taxable?
Yes, it's a taxable gift. This is a common tactic to protect
a home from future Medicaid liens. Part of the tactic is for
your father to retain a life estate. This has some
advantages: the gift is deferred until his death under the
rules for gifts with retained life estate; the value of the
transfer for Medicaid purposes is reduced by the value of
the life estate; and even if his kids are ingrates, they
can't kick him out. The big disadvantage is that it makes
the home illiquid: nobody will buy it subject to the life
estate, and if he gives up the life estate, he gets income
from the sale that is exposed to Medicaid.

If you're contemplating doing this, get professional estate
planning assistance. This is an easy area to make an
expensive mistake in if you don't.
 
D

Dave Woods, EA

My 75 year old father wants to transfer his house to my
I don't believe we have a presently taxable event here.
Dad will have to file a gift tax return, and the amount of
the gift that exceeds $11,000 will reduce his estate tax
exclusion accordingly. See Form 709.
It is currently taxable. Whether or not the lifetime
exemption reduces or eliminates any current gift tax is
another matter and not determinable based on the facts
provided by the original poster.

--
David M. Woods, EA
Boston, MA 02109

Postings here are general information only and not to be
relied upon as advice.
 
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D

Dave Woods, EA

You are correct, of course. I should have said that there
may be no tax currently due, depending upon such
circumstances as the donor's prior gifting history and the
value of the current gift.
Don't sweat it. In tax law as you know, there are few
absolutes and blanket assumptions usually come back to
bite you.

--
David M. Woods, EA
Boston, MA 02109

Postings here are general information only and not to be
relied upon as advice.
 

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