Gifting Property to sole beneficiary question

[apempel]

What is the name of your state? Florida

My elderly parents in Georgia (I'm in Florida) want to sell/give me their Florida condo. It's not their primary residence. They rent it out. They just don't want the hassles and costs associated with it anymore. We wouldn't live there, but rent it out as well.

I am their sole beneficiary as their only child. Someone told me they could gift/sell the condo to me and my husband at fair market value ($350K, they paid around $90K years ago) by us signing promissary notes in the amount of $22,000 for each note (allowable annual gift of $11K each for myself and my husband), or 16 notes, and then, by Dec. 15 of each year, they would "forgive" one of the notes.

Is this right? And since they will probably pass away long before all the notes were forgiven and I'm their sole beneficiary, how would that work? Would I still owe their estate the remaining notes even if I inherit all the assets in their estate? Would I then owe myself?

I'm confused by how this would work.

 

[BlondiePB]

What is the name of your state? Florida

My elderly parents in Georgia (I'm in Florida) want to sell/give me their Florida condo. It's not their primary residence. They rent it out. They just don't want the hassles and costs associated with it anymore. We wouldn't live there, but rent it out as well.

I am their sole beneficiary as their only child. Someone told me they could gift/sell the condo to me and my husband at fair market value ($350K, they paid around $90K years ago) by us signing promissary notes in the amount of $22,000 for each note (allowable annual gift of $11K each for myself and my husband), or 16 notes, and then, by Dec. 15 of each year, they would "forgive" one of the notes.

Is this right? And since they will probably pass away long before all the notes were forgiven and I'm their sole beneficiary, how would that work? Would I still owe their estate the remaining notes even if I inherit all the assets in their estate? Would I then owe myself?

I'm confused by how this would work.

I'm confused by how that would work too. It's not a good plan. See an estate attorney regarding putting the property in trust or adding you to the deed with joint tenents rights of survivorship. And, don't listen to that "birdie" anymore.

 

[seniorjudge]

I'm confused by how this would work.

And for good reason. This is a scam.

Listen to BlondiePB.

 

[anteater]

I have to tentatively disagree with the "scam" label. I say "tentatively" because I don't if there have been any changes in the tax law or IRS interpretations in the last few years. But there is nothing legally wrong with forgiving a loan through gifting. I don't even believe that you have to mess with however many promissory notes other to make it nice and convenient. And if the loan is to both you and your husband, you can probably get the forgiveness up to $44,000 per year, $22,000 each to you and your husband.

Of course, I do believe that you will have to make this a real loan, with a real interest rate and such. And, since a giftee takes on the giftor's cost basis, as the loan is forgiven, your cost basis will be decreased. If you inherit, the cost basis would be the fair market value on the deceased date of death. And the parents have no problem paying capital gains taxes?

What you haven't mentioned is if this is intended to solve some estate problem or if it is only that your parents are tired of being landlords. Maybe you could just manage the property for them for a reasonable fee.

I disagreed with the "scam" part, but I do agree with BlondiePB about consulting with an estate planner before you forge ahead. There may be better ways to accomplish the goal. And, if you do go ahead, consult with a tax professional to get it right.

 

[GaAtty]

GAAtty

What is the purpose of all of the gifting? Is it to avoid gift tax, as I suspect? That really seems useless, since you will inherit the property anyway. Why don't you just become joint owner on the property with them? It would solve a lot of problems. No, you would not owe the estate if you were the sole beneficiary of the estate.