Adding adult child to Deed

[Gregeney]

What is the name of your state? Kentucky

My aunt died recently and my uncle and cousin want to have the deed changed from my uncle and deceased aunt to my uncle and cousin. (his daughter)

FYI: the real estate is unencumbered and worth ~$120,000.00

I know that there will be no transfer tax to do so, but will there be capital gains tax due for my cousin?

 

[seniorjudge]

This is generally a bad idea for lots of reasons.

Before you do this, get good advice from a tax CPA.

 

[FlyingRon]

As senior judge points out that was a bad idea for all concerned. The daughter will inherit the father's presumably low basis if she receives it as a gift. If she inherits it, the basis will be stepped up to the value at the time of the father's death.

If dad needs money later on, he may have a hard time retrieving the interest he gave the daughter. He can't get a reverse mortgage on the property with a youngun' on the deed as well.

 

[divgradcurl]

And to add to the list of terribles -- dad can't get a second mortgage without the daughter's permission, and he can't sell the property without the daughter's permission. And if he needs medicare within the next 5 years or so, this may raise issues or preclude him from getting medicare, or at least getting covered in a timely manner.

If all you are worried about is probate avoidance, then the father should sit down with an attorney and set up a trust (an attorney is necessary to make sure that the trust doesn't impact his medicare eligibility, in case he needs it down the road). Also, if the daughter is his sole heir, the probate shouldn't be a big deal anyway.

 

[Gregeney]

Thanks folks. I also asked a CPA friend and his response was that it really won't be a bad thing in this particular case, but it really would be a waste of time and effort.