Q: What are the pros and cons of my parents adding me to their deed?
Their house is worth $70,000. They have agreed to sell it to me for $35,000 which I would give them now so they can have money for an emergency or any medical bills they might have. They are going to continue living there until their death and will leave the house to me. They don’t feel comfortable just signing the deed over to me and instead just want to add my name to it. If we do that, what are the tax implications for them (gift tax?) or for me when I sell it ( capital gains?).
A:
You may want to consider a Transfer on Death Deed. On the death of your parents, you will receive a "step-up" in basis to the "fair market value" as of their date of death. This stepped-up amount will then be used in the calculation for capital gains.
One of the problems in selling a $70,000 house for $35,000 is that it is for less than fair market value. This could cause problems if they try to qualify for Medicaid within the next 5 years.
I would recommend that you contact a lawyer to help you further.
A:
The situation you are looking at is a deed with the reservation of life estate. You would be on the deed but have no right to occupancy or income therefrom until your parents pass away. The capital gains question is best asked of an accountant.
The problem with a transfer on death deed is that your parents could sell the property without you permission or knowledge.
Probably should consult an attorney for title opinion and options.
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