Warranty Deed from Revocabble Living Trust

[akiss4luck]

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

I have found 90 percent of my answers, but I am a missing the last piece of the puzzle.

My Dad (Settlor) has a Revocable Trust leaving everything to me, only daughter.
My Husband is the Trustee, he has every power available to do with what he needs to do such as buy, sale, trade property, stocks ect....

We want to do a Warranty Deed of the home to me now instead of waiting so I can get a home improvement loan, the termites are pretty bad too.

Since caring for my parents, I have no money so I can not buy the home for cash or loan qualify but a title company employee informed me that the Warranty deed can be Warranty deeded for love and or care extended through out my parents lives for the home value.

one problem is that I only see where we can put $10.00 on the Warranty Deed form so how or where would the exact wording go since Dad wants to just give it to me now for my life's work and my care extended?

Would this have to be specially drafted? I hope not I have zero income for spending over 20 years caring for them, Mom is already passed on.

Also the Grantor "Dad" is showing on the revocable trust papers listed as "MY DAD Living Trust" Would that be the same way we would need to put as the Sellers name on the Warranty Deed?

I kind of understand we need to do the Warranty deed from thew trust to an individual.

Thanks if you know these last few loose threads that we need to complete this goal.

I am going to post this in the Wills/Estate forum too because it is just crossing grey lines and I am just too confused.
Thanks! Bless You all! Mrs. V

 

[tranquility]

You'll have to decide if the house is a gift or compensation for your work. I suggest an attorney to guide you.

 

[FlyingRon]

How was the deed written when it was deeded INTO the trust? Typically it's something along the lines of "Joe Smith Trust, Joe Smith Trustee" or whatever the local custom is. You get the deed from the trust presumably with that grantee as the grantor. A trust isn't a will. It only controls what it actually owns (has been deeded or otherwise given ownership of).

You need to figure out if you are HOSING your father's medicare eligibility by doing an other than FMV transaction... There will be gift implications for giving it for such a token amount. Further when your father does pass, you're stuck with his basis rather than getting a further step up.

I'd strongly recommend you go to a lawyer or planner well familiar with elder law and estate planning before making a large irreversible mistake.

 

[akiss4luck]

Wow finally....someone with an apparent brain! Thanks Ron!

How was the deed written when it was deeded INTO the trust? Typically it's something along the lines of "Joe Smith Trust, Joe Smith Trustee" or whatever the local custom is.
>>>The proper Trust was deeded as"The John Doe Living Trust"

You need to figure out if you are HOSING your father's medicare eligibility by doing an other than FMV transaction...
>>>Apparently I have no brain FMV? For Medical Value? huh? *hangs head in stupidity shame*

Ok even though this is not completely about Medicaid eligibility....
>>> Dad already has Medicare and Tricare for Life and he wants to stay at home as long as possible, Medicare does some home things, I can do the rest. Medicaid might get hosed *penalized for x amount of months for x amount of home value) we understand all of this but....This is a case where we would all like to stay out of living in a cardboard box on the curb as a family.

There will be gift implications for giving it for such a token amount.
>>> How is "Given in consideration for the care extended to me and my wife ( Mom & Dad) through out their lives taxable?! I can understand "a gift" as being taxable.
Believe me this is not a gift, I have completely given up everything to care for them including college time to become a lawyer....my biggest mistake yet that I can see was loving my parents too much to desert them like most children too easily do.

Further when your father does pass, you're stuck with his basis rather than getting a further step up.
>>> What's a step up? I am 51 and never seen one of those before. Been caring for Mom & Pop so long I don't even have enough Social Security credit gained for myself. I'll be the one in the worst nursing home possible when it comes my time, believe me, I am planning on becoming an expatriate when I "decide to retire" going for the beach life anywhere but here, Can you tell yet, I have seen too many bad nursing homes. LOL (and yes, I LOL'd)

If Medicare, Tricare for life, Home care and Hospice are already available for Dad here at home (where Dad seriously wants to be) then if I can't care for him here and I do have to give up caring for him to make my own way(what you call a step up) at this age, then the state would just flush him into a low grade nursing home just to get his assets.
Dad was not service injured so there is no VA nursing homes available for him. That's what he got for 30 years of military service and not shooting himself in the foot. Thanks big brother!

Right now he is in for just rehab for tripping, he gets 20 days Medicare and 100 days Tricare, he has been in for only 18 days and is completely sad and miserable and already wants to come home, I want him home too.
I also know once elders get flushed to nursing homes often they grow depressed and mentally deteriorate.

I'd strongly recommend you go to a lawyer or planner well familiar with elder law and estate planning before making a large irreversible mistake.[/QUOTE]

I completely agree now If I can only find the cheapest lawyer on earth living in Texas. Remember I said I have zero money of my own.
So far our largest mistake WAS going to a lawyer because he suggested a revocable trust instead of an unrevocable trust, that revocable trust was filed back in 2002, from what we have learned lately Medicaid can't break an unrevocable trust(Miller's trust?).
That lawyers bad advice already lost Dad 8 years of Medicaid look back even if he ever did need it in the future.

Currently we are trying to patch the bleeding hole that the last unskilled lawyer left by advising a revocable trust.

Any ideas?

I was thinking about fixing the home up or selling it or getting a small loan or mortgage and buying a small 1 acre property and a house trailer to live in with Dad and banking the rest of it for Dad's future care.
We live near a very prominent high school and the taxes here are high even with Dad's age break.

Well, that's the whole story...please feel free to comment further.
I am off to cook dinner.

 

[TrustUser]

the "step up" referred to by ron is the increase in basis. if you inherit the property, then your basis in the property is its worth at the time of inheritance.

if deeded to you before your dad dies, then your basis is his basis. that can make a huge difference, especially if your dad has owned it for a long time. your dad's basis is the amount that he paid for it.

when you go to sell the property, your gain will be the sales price minus your basis. so you want a high basis.

 

[FlyingRon]

>>>The proper Trust was deeded as"The John Doe Living Trust"

You're still phrasing this oddly. Was there a deed putting the property INTO the trust. This will be a recorded deed just like the house was sold. It's separate from the trust document itself.

>>>Apparently I have no brain FMV? For Medical Value? huh? *hangs head in stupidity shame*

Fair Market Value.

Medicaid might get hosed *penalized for x amount of months for x amount of home value) we understand all of this but..

You seem to have that wired. If he does need a nursing home, he may be screwed because of you putting your interest ahead of his. Another issue that you should think of. Right now, he is eligible for a reverse mortgage on the property if he needs it. As soon as someone under 62 is put on the deed, it becomes ineligible.

Believe me this is not a gift, I have completely given up everything to care for them including college time to become a lawyer....my biggest mistake yet that I can see was loving my parents too much to desert them like most children too easily do.

BELIEVE ME: The IRS will consider this a gift. No significant money changed hands, nor were you declaring the value as income in exchange for the services provided. Giving up "everything" is not a consideration as far as the IRS is concerned.

>>> What's a step up?

TrustUser explained basis. It's an issue if you ever need to sell the house.

.
So far our largest mistake WAS going to a lawyer because he suggested a revocable trust instead of an unrevocable trust, that revocable trust was filed back in 2002, from what we have learned lately Medicaid can't break an unrevocable trust(Miller's trust?).

It was probably not bad advice given your father's situation. There are drawbacks from revocable trusts as well.

That lawyers bad advice already lost Dad 8 years of Medicaid look back even if he ever did need it in the future.

Huh? What are you talking about?

I was thinking about fixing the home up or selling it or getting a small loan or mortgage and buying a small 1 acre property and a house trailer to live in with Dad and banking the rest of it for Dad's future care.

Then leaving it in your father's name and getting a reverse mortgage might be a much better solution.

 

[tranquility]

Quote:
Believe me this is not a gift, I have completely given up everything to care for them including college time to become a lawyer....my biggest mistake yet that I can see was loving my parents too much to desert them like most children too easily do.
BELIEVE ME: The IRS will consider this a gift. No significant money changed hands, nor were you declaring the value as income in exchange for the services provided. Giving up "everything" is not a consideration as far as the IRS is concerned.

I know I'm not considered a member of the OP's brain trust, but I still like my statement:

You'll have to decide if the house is a gift or compensation for your work.

Bartering is more and more prevalent in today's economy and the IRS has a focus group that has the task of finding a way to track it as they feel it's too easy to avoid paying TAXES on the barter INCOME.

From there, the ramifications flow. While some of the discussion above is good, it mostly assumes gift. Good assumption as that's usually the way it works. But, if a person does work for the income of a house, there are other issues as to basis, eldercare planning and tax compliance. The IRS gets to "assume" nothing and there is not a legal presumption this would be a gift. What do the facts and circumstances indicate this will be? Because the transfer has not happened yet, it's best to see an attorney as there may be ways to accomplish the OP's and dad's goals without giving up too much to the government.

 

[FlyingRon]

I alluded to that. It's either a gift or income to the OP. Implications for taxes both ways. Giving up "everything" is not employment or services. It would be a gift. If it was in exchange for specific services, barter or otherwise, taxes would be due on the income.

 

[akiss4luck]

Thanks everyone for your advice.

I feel like I have to gamble and place the best bets on whether Dad will need a nursing home or if he will pass away during some 100 day of Tricare coverage.

All of this makes me so sick, it is so hard to understand and somewhere along the lines either me or Dad has to get screwed.

Q1... If Dad gets a reverse mortgage won't I then loose the home to the loan once he passes? I have no where to go. Am I supposed to care for him here while even more time passes and I loose the home and wind up on the street even later in my 60's?!


and....
Quote:
Originally Posted by akiss4luck View Post
>>>The proper Trust was deeded as"The John Doe Living Trust"
You're still phrasing this oddly. Was there a deed putting the property INTO the trust. This will be a recorded deed just like the house was sold. It's separate from the trust document itself.

I had a title company do a search and she could only locate the original 1970's house deed from the home builder's loan company to my parent's.
When I searched the county documents I found that same old original document.
When I searched for trust documents I did find the multipage document of the "The John Doe Living Trust"

I know it is a mystery as to why the house deed put into the trust isn't showing. A local attorney said the lawyer might be keeping it?!!! WHY?!

Now here's the scary part that I do remember...... After Dad's lawyer filed those trust documents listing the home under schedule "A" I thought that was finished but....

About a few days later my Dad who at the time was still driving and able told us he had to go to the county clerks downtown to do something but he wouldn't say what.
Now I ask you all.. Do you think my Dad was supposed to go file the house deed into the trust with the clerk?
I had assumed the lawyer was supposed to do that part too.

..If the trust was not properly funded what happens? Do we resort back to the original Last Will and endure probate?

My husband was the trustee and all the lawyer ever told him to do was to keep exact records on monies spent, he never told us about funding things into the trust but how could he fund a home deed that we can not find?!

I am beginning to think Dad did something with the house deed and maybe never properly funded it into the trust. We are all so out of luck, but then again it looks like we are completely out of luck no matter which way we turn.

I almost wish I could walk away from all of this if I have to start over but it would break my heart to desert Dad to what ever system does the sweeping up.


-Ron, the 8 years of lookback I was trying to refer to was we thought the revocable trust was protecting us since 2002 when it was drafted.

 

[tranquility]

Goodness, it gets more awesome all the time. I *had* one main question, now I have many.

I recommend an eldercare attorney.

 

[akiss4luck]

I alluded to that. It's either a gift or income to the OP. Implications for taxes both ways. Giving up "everything" is not employment or services. It would be a gift. If it was in exchange for specific services, barter or otherwise, taxes would be due on the income.

Ron! again you come through for me!

Please advice is all this sounds correct without giving me too much information as I have already been lying on my bed today in the fetal position crying my eyes out.
After a really good cry that I desperately needed.
I called the IRS to pick their brains....

I just spent literally hours on the phone to 4 different departments to the IRS to check the future plans just in case the sale of the house were to go a few different ways.
I was surprised the man helped me as much as possible I bet he almost pushed loosing his job to give me the advice he did.

After walking me through several test forms and looking up tax publications which would determine the impacts on both my taxes and my father's taxes the results seem to be in.

It helped me come to the decision to not barter or buy the home as "Services /care rendered" because that would make me tax responsible for the FMV of the home and ene though I could file for a 60 month tax installment to pay the taxes due off which was ok but then it would leave my father responsible for something like $44 thousand taxes for services rendered from me to him.

Now the IRS agent did the same test forms if the sale were to be set up as a simple gift, something I had great fears of.
Apparently my Dad has never "gifted anything to anyone and has something like 300 thousand dollars in something called unified credit that everyone has available to give away that is not taxable, so giving me a 74 thousand dollar home would leave him 0 to pay if he used the unified credit.
Since the Home is a gift to me I would also have to pay no taxes on a gift.

DOES THIS SOUND TRUE?
I always thought gifting was a never go there territory.

I took all the IRS agents id numbers down and have a list of the Publications and forms they gave me to lookup online.

OK, now I know you must know something evil, bad, risky or scary about gifting so go on and let me know now incase I need to cry again. LOL

 

[akiss4luck]

Goodness, it gets more awesome all the time. I *had* one main question, now I have many.

I recommend an eldercare attorney.

Sorry Tranquility but you guy are just so awesome!
I can't afford a local Estate or Elder care Lawyer I have called many....and they all want $3oo just to say, "Hi".


Hay could you and Ron both read my prior post above this the one about the IRS and let me know what you all think pretty please?

 

[akiss4luck]

Never mind

Oh guys just forget everything about the gifting, I just called my regular annual tax lady and she said that unified credit amount can't be used all in one year and could only be gifted to me and my husband at 26 thousand a year, $13 thousand each.

Then she said we could do a mortgage with Dad for the house and he could forgive that same amount but we can't take that long to set a mortgage loan with my Dad to pay off the entire $74 FMV.

Screwed yet again...going back to my bed.
I hope the day of rapture happens while I am there.

 

[HomeGuru]

Sorry Tranquility but you guy are just so awesome!
I can't afford a local Estate or Elder care Lawyer I have called many....and they all want $3oo just to say, "Hi".


Hay could you and Ron both read my prior post above this the one about the IRS and let me know what you all think pretty please?

**A: I charge just $250 to say Hi.

 

[tranquility]

Perhaps you should stop crying and get actual advice. There is nothing in your posts which is that difficult to describe the effects of choices made. There is nothing here which is unusual or bizarre and your continued desire to get advice on the cheap is just confusing you beyond anything the decision is worth.

You need to talk with a person who knows and who can interact with you. There are a number of errors in your thinking and in the interpretation of the advice you've already received. A knowledgeable person can see if you are comprehending the information being given you and try other ways to explain things which happen every day, all the time.

The $300 just to talk will be the best money you've ever spent. Promise.