hi,
if my parents change the name on the deed to their property to my name, will i need to pay any taxes on the transfer of ownership? the property's value is under 500K and i do not plan to sell it.
What is the name of your state (only U.S. law)? NY
many thanks
No, but your parents would have to file a gift tax return and it would be deducted from their lifetime exclusion for gifting. Since the lifetime exclusion for gifting is currently well above 5 mil, that in itself is not a big problem. However, being gifted the house rather than inheriting it could be costly for you in the long run.
Let me give you an example...
Your parents bought the house 30 years ago and paid 150k for it. Its worth 450k now. If they gift it to you by putting it in your name, then your basis is their basis, which is 150k. So, when they pass away and you sell the home, you could be potentially responsible for capital gains tax on 300k of capital gain. That could easily be 45k or more. However, if you inherit the house then you receive a stepped up basis to fair market value as of the date of the death of the last parent, and therefore would likely have zero capital gain if you then sell the house.
Now, on the other hand...if they purchased the house for say 100k and the neighborhood has deteriorated to the point where the house could never sell for anywhere near that amount, and the cost of probate would be several thousand, then putting the house in your name to avoid the cost of probate could make perfect sense.
Now, on the other hand there is the possibly more important issue...if its likely or probable that your parents will need nursing home care, then you better be certain that that required care is at least 5 years in the future, (because otherwise it will be an epic fail) and you had best be prepared to accept that your parents will get the minimal care provided to Medicaid seniors.
My mother attempted, after my father died to insist that her home needed to be put in the name of myself and my siblings...to avoid the cost of probate. I informed my mother that we absolutely WANTED the house to go through probate, because probate would cost us far less than capital gains tax. My mother will absolutely never need nursing home care to the extent that her home would be at risk, but even if she did, I would much prefer that she get the level of care that her home would provide her, rather than her being on Medicaid.
