RE: Quit Claim and Taxes

[psychcape]

RE: Quit Claim and Taxes

What is the name of your state? Michigan

My mother passed away last July, 05 and a Quit Claim Deed was made out to my younger sister. Another sibling states that we should not do anything until my younger sister - who lives in my deceased mother's home and cared for her - is ready to sell. The other sibling states that if we were to get the deed in my younger sister's name prior to selling the home she would incur unnecessary real estate taxes? Everyone else is unsure whether or not we should take some action now to ensure that the house is entrusted to my younger sister.

Is it safe to wait until the sale of the house and would that indeed avoid unwanted taxes??

Thank you in advance for advice. Befuddled.

 

[lwpat]

I am assuming that the house was transferred through the probate process. If that is the case, the value of the house is stepped up to the value at the time of death. Taxes should be minimal.

 

[psychcape]

Thank you for you're reply.

No, in fact it has not gone through probate - we only have the quit claim and have not done anything since my Mother's death.

Should it go through probate even though we have the quit claim?

Thanks.

 

[pojo2]

Since Mom was dead how could she sign a quit claim?

 

[psychcape]

It was completed prior to death

 

[anteater]

It was completed prior to death

So, younger sister is now the owner of the property? Gifted to her by your mother? (And taking on your mother's cost basis in the property?)

If so, how do the rest of you figure into this?

 

[psychcape]

The home was paid off and we're all trying to help to settle the estate properly.

 

[anteater]

The home was paid off and we're all trying to help to settle the estate properly.

Maybe I am missing something.....

Prior to her death, your mother made a gift of the home to youngest sister by executing a quit claim deed. Youngest sister now owns the home. Home is not part of mother's estate because youngest sister was the owner at the time of your mother's death.

Correct so far?

 

[psychcape]

Yes, that seems accurate. Thanks

 

[nextwife]

Exactly. Sis owns it. There is nothing further anyone other than sis can do.

 

[tranquility]

Was the deed delivered and accepted by sister before mother's death?

What did the mother say about the property? What was her intent?

Delivery is a problem when a family member wants to do a gratuitous transfer at death, but doesn't want to go through all the folderal of a will/probate or a trust. They will make out the deed and keep it in a drawer to be found on death. Using a deed as a will is not a good way to do things. Lack of delivery may not make the deed void or voidable, but it certainly makes for good money to the lawyers to sort out the mess. (What is lack of delivery? It's way harder than if a deed was handed over to the other.)

 

[pojo2]

The other sibling states that if we were to get the deed in my younger sister's name prior to selling the home she would incur unnecessary real estate taxes?

Was the QC recorded at the time it was done? This leaves me to believe the document is still lying about the house somewhere.

So has the QC been recorded and when?

 

[anteater]

The other sibling states that if we were to get the deed in my younger sister's name prior to selling the home she would incur unnecessary real estate taxes?

Was the QC recorded at the time it was done? This leaves me to believe the document is still lying about the house somewhere.

So has the QC been recorded and when?

Good question.

Here's the thing, psychcape..... What you have posted is about what various siblings think and say. In your posts, younger sister may as well be an inanimate object. But, from what you say, she seems to be in the driver's seat - with a presumably valid quit claim deed making her the owner of the home. What does younger sister say and what are her desires and intentions? I guess I can see a couple outcomes:

1) As I believe pojo2 was alluding to, if the quit claim is not recorded and younger sister believes that mother intended for all siblings to share (assuming there is no will and no spouse?), she could toss the quit claim in the fireplace and say "OK, let's probate mother's estate and sell the home and distribute the proceeds or make the heirs owners and then sell it. This way, the home does receive a stepup in cost basis to its value on the date of mother's death and any capital gain income tax consequences, if any, would likely be minimal.

2) Younger sister is indeed already the legal owner by way of the quit claim deed but believes that mother intended for all of you to share in the proceeds. Since it was a gift to younger sister, the home's cost basis is whatever mother's cost basis was (presumably low) and, until younger sister owns and lives in the home for two years, there will likely be a capital gain income tax liability. (There might still be one even if younger sister meets the 2 year rule, but at least she would be able to exclude $250K of capital gain.) Any sale proceeds distributed to the rest of you could mean that younger sister has to file a gift tax return.

3) Younger sister is indeed already the legal owner by way of the quit claim deed and tells the rest of you, "Get lost. It's mine now."

 

[tranquility]

Of course, outcome #1 is tax fraud and #2 and #3 are possible if the deed was delivered and accepted before death. If it was not, (for example it was sitting in a drawer and found after death) then it may not be valid on one hand and not a completed gift on the other. Either hand and the property may remain in the estate.

Either it was a gift or it was not. I don't see the facts to prove either way yet. I don't know how anyone can advise when the true owner is unclear.

 

[psychcape]

First, thanks for the replies

Second, we all want lil sis to have the house - only to her - period

Third, other sib is in possession of the QC and a professional with some related knowledge who the rest of us have depended on for processing

Fourth, since the QC wasn't filed and didn't go through probate the other sibs are worried that lil sis should have something in hand that says the home is hers. If the QC is sufficient and avoids exorbatent taxes than that's fine but if not we'd like the sib in charge to know that something else needs to be done