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My mom lives in large house and is having trouble taking care of it.
My wife and I are thinking of buying her a smaller house and moving
into her house. We hope to take over ownership of her old house and
have her take ownership of the new house.
Some things to consider: This will all take place in California. My
wife and I do not currently own a home and have qualified for a loan
large enough to buy a house my mom is interested. My mom is concerned
about losing her low property tax rate. My mom's house is paid off
(although possibly 10-20k in home equity line of credit).
What's the best way to handle this transaction to be favorable to both
parties?
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On Apr 4, 7:39 am, kevincw01 <ke...@netkev.com> wrote:
My mom lives in large house and is having trouble taking care of it.
My wife and I are thinking of buying her a smaller house and moving
into her house. We hope to take over ownership of her old house and
have her take ownership of the new house.
<details snipped>
What's the best way to handle this transaction to be favorable to both
parties?
This is not a do-it-yourself transaction unless you are willing to
shoot in the dark at a moving target and don't care about the possible
consequences re: property tax, inheritance tax, estate tax, income tax
(capital gain), medicare reimbursement, and on and on. For heaven's
sake, take your ideas and goals (and your Mom's, which she, presumably
is on the same page with you about) to a lawyer in your area
specializing in elder law, trusts & estates, and complex real estate
transactions, and let him or her handle it for you. The cost is
minimal compared to what you could lose if you screw up big time and
once you take certain actions you cannot "undo" the damage tax-wise
after adverse consequences finally become apparent to you if you did
not think far enough ahead or know enough about the applicable laws.
--
This posting is for discussion purposes, not professional advice.
Anything you post on this Newsgroup is public information.
I am not your lawyer, and you are not my client in any specific legal
matter.
For confidential professional advice, consult your own lawyer in a
private communication.
Mike Jacobs
LAW OFFICE OF W. MICHAEL JACOBS
10440 Little Patuxent Pkwy #300
Columbia, MD 21044
(tel) 410-740-5685 (fax) 410-740-4300
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My mom lives in large house and is having trouble taking care of it.
My wife and I are thinking of buying her a smaller house and moving
into her house. We hope to take over ownership of her old house and
have her take ownership of the new house.
Some things to consider: This will all take place in California. My
wife and I do not currently own a home and have qualified for a loan
large enough to buy a house my mom is interested. My mom is concerned
about losing her low property tax rate. My mom's house is paid off
(although possibly 10-20k in home equity line of credit).
What's the best way to handle this transaction to be favorable to both
parties?
Your mother is right about the tax implications.
I would purchase the smaller house and have her live in it but keep
ownership of the larger house. That way, new taxes aren't triggered.
Essentially, you would be tenants of your mother in the large house and
she would be tenants of you in the smaller house.
Lighthope
Pearls of Wisdom - The secret of success is honesty and fair dealing. If
you can fake those, you've got it made. - Groucho Marx
--== TIGERS' QUEST - http://www.tigersquest.com
--== THE DOCTOR WHO AUDIO DRAMAS - http://www.dwad.net
--== A CHRISTMAS SPECIAL - http://christmas.dwad.net
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kevincw01 <kevin@netkev.com> wrote:
My mom lives in large house and is having trouble taking care of
it. My wife and I are thinking of buying her a smaller house and
moving into her house. We hope to take over ownership of her old
house and have her take ownership of the new house.
Some things to consider: This will all take place in California.
My mom is concerned about losing her low property tax rate.
What's the best way to handle this transaction to be favorable to
both parties?
If the new house will be in the same county, your mom may be able to
keep her low property tax rate, if she is old enough. I don't remember
at the moment what the age requirement is, or if counties are required
or only authorized to allow the tax rate to follow the resident. But
check with a local real estate lawyer who will check it for you.
Stu
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In article <io4cv3d5pqlc9djuf4c5igqc8i1r6ofqkv@4ax.com>,
kevincw01 <kevin@netkev.com> wrote:
My mom lives in large house and is having trouble taking care of it.
My wife and I are thinking of buying her a smaller house and moving
into her house. We hope to take over ownership of her old house and
have her take ownership of the new house.
Some things to consider: This will all take place in California. My
wife and I do not currently own a home and have qualified for a loan
large enough to buy a house my mom is interested. My mom is concerned
about losing her low property tax rate. My mom's house is paid off
(although possibly 10-20k in home equity line of credit).
You also have to worry about creating taxable events here.
The best thing is that you buy the new house, then least it to
your mom for $1 per year. Your mom then leases her house to you
for $1 per year. She keeps title on the old house, and keeps
those low taxes. You pay for the house, and pay the taxes.
The mom's house has not changed title, so no taxable event
happens. When she dies, you inherit her house, the one that
you are living in (assuming that there are no other heirs).
If something bad happens and you cannot afford to make the
payments on mom's house, she still owns her house, and she
can move back in, with or without kicking you out. It is
win-win all around.
-john-
--
======================================================================
John A. Weeks III 612-720-2854 john@johnweeks.com
Newave Communications http://www.johnweeks.com
======================================================================
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Sat, 05 Apr 2008 07:41:18 -0400 from John A. Weeks III
<john@johnweeks.com>:
The best thing is that you buy the new house, then least it to
your mom for $1 per year. Your mom then leases her house to you
for $1 per year.
With respect, the BEST thing is to consult a professional who knows
both real estate law and tax law.
I could be wrong, but I believe that when a house is rented out at a
rate for below market, the IRS imputes income to the owner in the
amount of the difference between market rate and actual rental.
Related persons leasing houses to each other at a buck a year could
end up increasing taxable income to both of them by thousands.
--
If you e-mail me from a fake address, your fingers will drop off.
I am not a lawyer; this is not legal advice. When you read anything
legal on the net, always verify it on your own, in light of your
particular circumstances. You may also need to consult a lawyer.
Stan Brown, Oak Road Systems, Tompkins County, New York, USA
http://OakRoadSystems.com
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Lighthope <lighthope@onepost.net> wrote:
My mom lives in large house and is having trouble taking care of
it. My wife and I are thinking of buying her a smaller house and
moving into her house. We hope to take over ownership of her old
house and have her take ownership of the new house.
Some things to consider: This will all take place in California.
What's the best way to handle this transaction to be favorable to
both parties?
Your mother is right about the tax implications.
I would purchase the smaller house and have her live in it
but keep ownership of the larger house. That way, new taxes aren't
triggered.
Essentially, you would be tenants of your mother in the large
house and she would be tenants of you in the smaller house.
Property taxes are slightly higher if you do not live in your home, so
this scheme would end up costing the parties about $150 a year. Though
that might be a small price to pay if the mother doesn't qualify to
carry her tax base with her to a new property.
Stu
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Lighthope,
I would purchase the smaller house and have her live in it but keep
ownership of the larger house.
Since the OP will not reside in his house that may affect his mortgage.
He's borrowing on a rental property not his primary residence. It may also
affect his tax situation since he can't write off his rent as he could his
mortgage payments.
Good luck,
Dave M.
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Terms of use of this message: It may not be stored or read in North
Dakota. (see http://www.circleid.com/posts/811611_david_ritz_court_spam/
for the reason.)
In article <98pev3dkbi2nf218aei9auorg6kesv9l5p@4ax.com>,
Lighthope <lighthope@onepost.net> wrote:
Some things to consider: This will all take place in California.
.. . .
My mom is concerned
about losing her low property tax rate. My mom's house is paid off
(although possibly 10-20k in home equity line of credit).
What's the best way to handle this transaction to be favorable to both
parties?
Your mother is right about the tax implications.
I would purchase the smaller house and have her live in it but keep
ownership of the larger house. That way, new taxes aren't triggered.
Transfers might not trigger revaluation. That's why OP needs to see a
qualified .ca.us real estate attorney.
Seth
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On Apr 5, 4:41=EF=BF=BDam, Stuart Bronstein <spamt...@lexregia.com> wrote:
If the new house will be in the same county, your mom may be able to
keep her low property tax rate, if she is old enough. =EF=BF=BDI don't rem=
ember =EF=BF=BD
at the moment what the age requirement is, or if counties are required
or only authorized to allow the tax rate to follow the resident. =EF=BF=BD=
But
check with a local real estate lawyer who will check it for =EF=BF=BDyou.
Stu
Also trasnfers between family can retain the same assessed valuation
if your county is participating. Not all Counties play. Check with
your County assessor.
Larry
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Larry <LRLake@aol.com> wrote:
Stuart Bronstein <spamt...@lexregia.com> wrote:
If the new house will be in the same county, your mom may be able
to keep her low property tax rate, if she is old enough.
I don't remember at the moment what the age requirement is, or if
counties are required or only authorized to allow the tax rate to
follow the resident. But check with a local real estate lawyer who
will check it for you.
Also trasnfers between family can retain the same assessed
valuation if your county is participating. Not all Counties play.
Check with your County assessor.
Transfers between parents and children always carry over the lower
assessed value for property tax purposes, subject to some fairly
generous limits on value, as long as the child claims the exemption
within three years of the date of transfer.
The question I don't know the answer to deals with a parent with a
low assessed value, who buys a new home in the same county and is
allowed to retain that value for her new residence. If she transfers
her old home to a child, will the child also get the same, old
assessed value?
My guess is that one only of them will get to keep the former
assessed value for the old home, not both. But I've never had this
issue come up before and have not had occasion to research it.
Sty
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Stan Brown <the_stan_brown@fastmail.fm> wrote:
John A. Weeks III <john@johnweeks.com>:
The best thing is that you buy the new house, then least it to
your mom for $1 per year. Your mom then leases her house to you
for $1 per year.
With respect, the BEST thing is to consult a professional who knows
both real estate law and tax law.
I could be wrong, but I believe that when a house is rented out at a
rate for below market, the IRS imputes income to the owner in the
amount of the difference between market rate and actual rental.
Remember that gifts per se are not generally subject to income tax.
More likely what will happen is that if the property is not rented at
market value, the owner will not be allowed to take deductions (e.g.
interest, depreciation, etc.) in excess of the income received.
Stu
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On Apr 7, 4:39=EF=BF=BDam, "Stuart A. Bronstein" <spamt...@lexregia.com>
wrote:
Transfers between parents and children always carry over the lower
assessed value for property tax purposes, subject to some fairly
generous limits on value, as long as the child claims the exemption
within three years of the date of transfer.
The question I don't know the answer to deals with a parent with a
low assessed value, who buys a new home in the same county and is
allowed to retain that value for her new residence. =EF=BF=BDIf she transf=
ers
her old home to a child, will the child also get the same, old
assessed value?
My guess is that one only of them will get to keep the former
assessed value for the old home, not both. =EF=BF=BDBut I've never had thi=
s
issue come up before and have not had occasion to research it.
Sty
Stu,
Looks as though you are correct. I remember that, according to
proposition 60, Counties were allowed to permit the assessed valuation
to transfer to a new property in the same County, equal or less in
value, for owners 55 or older. Apparently, Counties could choose to
play or not as they saw fit. So OP should chek...
See: http://www.co.shasta.ca.us/Departments/AssessorRecorder/Forms/Prop60Han=
dout.pdf
for Shasta County rules.
For the transfer of assessed value to occure, the sale must be
increased to market value, for the buyer, to qualify (# 11).
So, as you expected, either the kids or mom can get the benefit; not
both...
Larry
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