Inheriting a Condo Question

[sharon7]

What is the name of your state (only U.S. law)? Florida

My mother has a condo apartment in Florida. Her will has me as inheriting the house. I have a sister and wanted to make sure she wouldn't fight me for it so my mother put my name on the deed, which I have a copy of. Will I have to pay taxes? Being that I am now co-owner with my mother, will this NOT be looked at as an inheritance?

 

[tranquility]

It is not an inheritance and you will not get a step up in basis on death. Your mother needs to file a gift tax return for the gift.

 

[FlyingRon]

Further, depending on how the deed was done, you mother's share of the house still needs to be probated. You've not gained one thing and lost much by doing it this way.

 

[sharon7]

How else should I have done it? What should I do now? I did this because everyone else put their children on their lease. I don't understand how this will harm me. Could you elaborate? Thank you.

 

[tranquility]

It hurts you because you take the basis of the gift and not a stepped-up basis on death. Also, mom needs to file a gift tax return which will cost a few hundred dollars.

It is better to inherit property than be gifted it unless there is a need for title now.

 

[sharon7]

Tranquility, thank you so much for helping me with this. I think I will need a lawyer as this terminology is new to me. Would just leaving the condo to me in the will have been enough? I was told that my sister would be able to fight me over this whereas if my name is also on the deed, I'd be safe. Can I undo what's been done? Will this cost me a lot in taxes now, the way it is? I am not clear on the step up thing you mentioned. I searched the term but really don't understand it. It took so much work with the condo board, someone going to court, getting the signature of 3 people, etc. that the thought of removing my name seems like a headache but if it is truly for the best, maybe I need to. If you have time, could you answer the above questions? Also, why would my mother have to file a gift tax? What happens if she dies and has not filed this?

 

[tranquility]

Would just leaving the condo to me in the will have been enough?

Enough for what?

I was told that my sister would be able to fight me over this whereas if my name is also on the deed, I'd be safe.

The same reasons one can fight a will, one can fight a deed.

Can I undo what's been done?

Not really. You could gift it back and file a gift tax return and, if mom lives long enough, you can inherit it with a stepped up basis later.

Will this cost me a lot in taxes now, the way it is?

No. The effect will only be when the property is sold.

Also, why would my mother have to file a gift tax?

Because she gave you something worth over $12,000.

What happens if she dies and has not filed this?

The estate could be liable for substantial penalties.

 

[sharon7]

When I said would the will be enough, I meant that the condo is left to me in the will. Would that have been enough to ensure that it is left to me (even if my sister didn't fight for it)?

Can I just see a lawyer and file a quitclaim deed to get my name off the deed now, instead of what you suggested? The only reason I put my name on the list was because all of the people in my Mom's condo did this and I guess they didn't know about all you're telling me. Everyone was under the impression that having their child as the co-owner was the best route to go. After reading the step up information, it looks like I may be hit with penalties that would cancel out any profits from selling the apartment, that I can't afford. Would the step-up only apply if I actually sell the condo? What if I just live there and keep it forever?

 

[tranquility]

I suggest an attorney as you clearly don't understand anything of what I wrote. Last time:

Would that have been enough to ensure that it is left to me (even if my sister didn't fight for it)?

A will will go through probate. A person can fight a will for the same reasons they could fight title transfer.

Can I just see a lawyer and file a quitclaim deed to get my name off the deed now, instead of what you suggested?

That would be giving a gift of the property to the person you quitclaimed to.

The only reason I put my name on the list was because all of the people in my Mom's condo did this and I guess they didn't know about all you're telling me. Everyone was under the impression that having their child as the co-owner was the best route to go.

Looks like everybody was wrong.

After reading the step up information, it looks like I may be hit with penalties that would cancel out any profits from selling the apartment, that I can't afford.

There are no penalties and it is not possible to cancel out any profit from the sale.

Would the step-up only apply if I actually sell the condo? What if I just live there and keep it forever?

A step-up in basis is only relevant for depreciation (if you are going to depreciate the property) or on the property's sale. It affects the BASIS.

For example (Not correct, just as illustration. I am not going to get into the issues related to the amount of the property which was gifted as that would be like Rocket Surgery as to this.):
Mom's basis: $100
Property value at death: $200

Because it was a gift, you take mom's basis on the property. If you inherited it, you would get as your basis the value at death. Now, say you sold the property for $300. The amount you sell the property for minus the basis is your gain. It is a capital gain and you would pay taxes on that amount. In our example, the amount you would pay taxes on:

As a gift: $300 - $100= $200 capital gain.
As inherited: $300 - $200= $100 capital gain.

 

[sharon7]

I did understand most of what you said. I'm not sure I was clear on what I said. My mother did not give me the condo as a gift. Her name is on the deed, she just added mine. Does she still have to file gift tax if I am the co-owner? I will look for a lawyer because this sounds like I need one!

 

[seniorjudge]

My mother did not give me the condo as a gift.


Here is what would've made it a gift: Her name is on the deed, she just added mine.

 

[HomeGuru]

I did understand most of what you said. I'm not sure I was clear on what I said. My mother did not give me the condo as a gift. Her name is on the deed, she just added mine. Does she still have to file gift tax if I am the co-owner? I will look for a lawyer because this sounds like I need one!

**A: good luck.