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Sister's home not included in living trust

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swrdmbo

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

My parent's recently completed their living trust, of which I will be trustee when they have both passed.I basically take care of all their business, financial and personal now, but this is just by agreement and there is nothing in writing.

My parents bought my sister a condo in Columbus in 1995.She has lived there that whole time but it is still deeded to my parents.( I just found this out recently).

I now need to make arrangements for my parents to deed this property to my sister.What would be the best way to accomplish this?? A quit claim deed or just a regular warranty deed.

What would be the tax implications?

Should this be in the tax forum questions?

Thanks for any help you may be able to provide.
 
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curb1

Senior Member
Why not put the condo into the trust with the beneficiary being your sister? Has the condo increased in value since 1995? Tax wise it will be considerably cheaper for her to inherit the condo rather than receive it as a gift before death. By inheriting the condo, it will have a stepped-up basis valued at the time of death. If she receives it as a gift the basis will be the original purchase price. When she sells the condo, this basis price will make a big difference on tax owed.
 

swrdmbo

Member
Thank-you for your reply. Will she have any tax liability if they deed it to her now?

My parents paid around 75K for it and I think it's probably worth around 150K now. She says she is never going to sell it...she is going to give it to her son ( because my parents bought her daughter a house...so this will even things out in her mind).

Maybe you aren't wondering but my parents didn't buy houses for any of their other grandchildren...they just worry about my sister and her kids...they figure the rest of us are OK.

So my sister could change her mind. I also think she would be better off with it in the trust but both her and my brother seem to think different.

Maybe if she finds out there would be a tax liability she will change her mind.

Should I ask this under the tax thread?

Thanks again for any help.

We
 

anteater

Senior Member
Will she have any tax liability if they deed it to her now?
There won't be any income tax liability. However, it would be considered a reportable gift from your parents and they would be required to file a gift tax return for the value of the gift greater than $26,000. (Every person is allowed to make annual gifts to any other person up to $13.000 without having to file anything with the IRS. Since each parent could make a $13K gift, that is $26K in total.) Being required to file that return does no necessarily mean that any gift tax would be owed since every person is allowed a lifetime $1M reportable gift exemption. But, the reportable gifts do eat into the estate tax exemption. Whether that is even a consideration depends upon what your parents' estates are likely to be valued at.

The gift/inheritance differences in cost basis only come into play if and when the property is sold. As the tax law stands now, if sister owned and maintained the property as her primary residence for 2 of the 5 years preceding a sale, the first $250,000 of capital gain would be exempt from income tax. ($500,000 if married.) It sounds like there would need to be a good deal of appreciation before that might be a consideration, if sister should ever sell the property. But one can never tell with certainty until that time comes.
 

swrdmbo

Member
Thank you so much for the information. I guess I will just have to see where they want to go from here.



My parents estate will be under a million so will that make giving her the property now OK?

Thanks again for the information.
 
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