Q: Paying off my parent's mortgage and putting the title under my name
My parents, who are in their 80's still paying mortgage on house. What is involved for me to pay off the mortgage and putting the title under my name so my parents do not have to worry about this anymore?
If you move the house into your name while they are alive then you will give up a HUGE tax advantage. Right now if the house is sold, your parents have a big tax liability for all the profit they make on the sale (probably). If they GIVE the property to you then you carry the same tax burden (you will have the same taxable profit on sale). If you inherit the property, then the tax basis for you steps up to the current value. The math: parents bought the house for $100,000 and now it is worth $1 million. That is a $900,000 taxable gain if they sell (yes they can take $250,000 each of that tax free if it is their home). If they give you the house, your tax basis is $100,000 (you get their tax basis). If you inherit, then your tax basis is $1 million (current value) and nobody pays tax on that $900,000 of gain.
Next problem: if mom or dad or both go into a nursing home and they have given away a valuable asset in the previous 30 months (like, say, a house) then Medi-Cal will tell them "No Way" until that 30 months is up, and they will have to pay for their own nursing home care at $10,000 per month or more.
Solution is to put the house in a Trust of some sort. That will make sure the house goes where they want it and not to the government to pay back for nursing home care. See an estate planning or elder law attorney.
A: Dear Daughter/Son inquiring about assisting parents: To achieve your objectives (title transfer and lump sum mortgage payment) IRRESPECTIVE OF TAX RAMIFICATIONS, you'll need to: (a) determine the name and payment address of Lender and send lump sum final payment, (b) have attorney draft Quitclaim Deed and get title owners to sign before notary, (c) record Quitclaim Deed, then (d) follow-up with Lender to make sure they record a cancellation of the secured mortgage (i.e. usually a cancellation of a First Trust Deed). After that, YOU are the title owner. JIM GREER is an attorney licensed to practice in CA and CO and has specialized in real estate matters for the past 30 years; nothing herein shall be construed as the offering of legal advice insofar as Mr. Greer is not in an attorney-client capacity with the inquiring party. 858.481.9006
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