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"Home Title Transfer to Judgement Proof"

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BenLoe

Guest
Hi,
The Premise:-

I am 86 Yrs old and I have a son who is 14 Yrs old.

I placed my home in trust for him at least 5 years ago.

I realize that at 86 Yrs old it sounds strange to be getting ready to start a new business venture but I am in good health, my mind is clear and alert and I have an excellent business head. I am about to embark in a business venture that involves some risk in that I am considering applying for an SBA loan to finance the business. I, of course, will be personally liable for repayment of the same and therefore there is the risk of possible future litigation and judgement being levied against me. I want to protct the home that is in trust for my 14 Yr old from any judgement that may be levied against me from being collected by foreclosure on the home should I unfortunately default on the loan. In other words, I am seeking to "judgement Proof" the home for my son against future litigation against ME.

Question #1

Does the "TRUST" I now have, protect the home against a judgement that might possibly be levied against me from some future litigation?

Question #2.
If Not, can I get that "judgement Proof" protection for the home by actually transferring the title to my 14 Yr. old ?

Qustion #3.
If I did transfer title to the home to my 14 Yr old, would there be any tax implications against my son for the value of the home or can I declare the total value as my life time gift to my son so that he will NOT have to pay a gift tax for the value of the home.

Thank you,
Ben Loewy
 


ALawyer

Senior Member
One quick observation -- folks who go out of their way to judgment proof themselves often find out that as they have no assets, they no longer can get any credit from banks or other lenders, such as the SBA.

As far as what you want to do, some more observations.

A lawyer would have to look at the existing trust and see if the transfer was irrevocable. If it is a liviing trust, it would be of little if any practical help to shield it from creditors.

If not, perhaps transferring it to an irrevocable trust for him (it is a BAD idea to give property to young children outright, even if they are of legal age - which he is not) while retaining a life estate may do it for you, protecting the home for you to live while putting it out of reach of creditors.

Transferring it transfers with it your (presumably low) tax basis for capital gains purposes. When son sells it he would have to pay a capital gains tax on the increase over basis. If on the other hand, you continued to own it and he sold it after your death, the home would receive a stepped up basis for capital gains purposes, and there would likely be no income (capital gains) tax payable.

For gift tax purposes the value on date of transfer control, and that comes out of your lifetime $1 million exclusion (and that $1 million goes up with time).
 

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