Estate Planning - Pennsylvania real estate transfer for estate planning

[Carlos Danger]

PENNSYLVANIA - My mother owns her home, no mortgage or secondary loans, as well as a moderate amount of other assets. These assets are mostly in the form of mutual funds. She plans on leaving all to her two children, splitting everything 50/50. My brother plans to move back into her home in the next year. He intends to remain in the house after the eventual passing of my mother, using it as his primary residence. My question revolves around how best to minimize state taxes on the estate for my brother and myself. Should his name be added on the deed now in order to take the house component out of the tax burden? Would it be better for both he and I to be on the deed, as her will indicates a 50/50 split? Would placing his or both names on the deed now actually achieve the desired tax reduction? Would there be deed transfer fees involved in doing so? I should mention that I live out of state. My brother and I have an understanding that when my mother passes, he would get the house and his portion of the remaining assets which would be 50% of her total assets minus half of the value of the house. This would in effect split the estate 50/50.

 

[ecmst12]

Your question is far too complex for this forum. Your mother needs to see an estate planner to make sure that her wishes are properly documented and for advice on how to best protect her assets without breaking the law or running into problems if she needs expensive medical care before she passes.

 

[anteater]

If I remember correctly, there are exemptions to the realty transfer tax for familial transfers and inherited property.

You may be referring to the PA Inheritance Tax. Yes, a transfer to joint ownership would cut down on the inheritance tax due as long as the transfer is done within one year of the transferor's death. For example, if your mother added the two of you as joint owners and then survived for at least a year, only the value of your mother's one-third ownership share would be subject to the inheritance tax.

However... Joint ownership is not some sort of neat little game that only affects the eventual inheritance tax. Joint owners are owners, with all that implies. You or your brother get into financial trouble and there is a nice asset with your name on it dangling in front of creditors. And the transfer to joint ownership is a gift from your mother. If she should need to apply for Medicaid assistance within 5 years of the transfers, that gift for less than fair market value is going to cause problems. Those are just a few things that can go wrong with joint ownership.

So, I second ecmst12's suggestion.