Changes in Family situation requiring a change of house deed?

[Charles Gray]

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

A few years ago, after the death of my father, we put the hosue into a Reserving life estate with (revocable quitclaim deed) with me as the individual reciving a 100% interest in the property. Mom retained: 1. exclusive possession and the use of enjoyment of her own right, rents and profits of the real property during her life time;

2. the right to revoke this deed or any portion therof.

3. The right to sell or encumber any or all of the property.


Now this was done mainly to avoid probate, however, as of a few months ago, Mom was diagnosed with severe dementia. I'm not worried about her "signing the house away" because she's moved well beyond that point, and can no longer make her desires known. The Doctor believes that in a few months or years, she may have to be transferred to a skilled nursing home.

So my question is this: Is there any reason to feel that changing the deed, either transferring it into my name, making it irrecoverable, or some other change will be of benefit in this situation or should we simply leave it as is? I honestly don't know, and before i speak to a lawyer, I felt I should ask a few questions so I can at least know what he's talking about.

 

[TrustUser]

i cant say that i know what a reserving life estate is.

but there are consequences when a parent gives property to an heir during his lifetime, as opposed to doing so after they pass.

for one, you wont receive a step-up in basis, which could mean a lot in terms of taxes when you sell it.

in general, the best way to hold property is in trust, so that the trustee can take care of it until the grantor passes, and then the beneficiary will receive the stepped-up basis.

 

[tjk]

In addition to what TrustUser explained about the basis, if the property is transferred while your mom is still living it would be viewed as a gift by the IRS and your mom would be required to file a gift tax return.