Wylie, TX asked in Estate Planning and Tax Law for Michigan

Q: My mom wants to buy a house with us and live in it with us. I want to make sure this will not be considered a "gift"?

She is offering to pay our downpayment on the house. She will live in the house with us and share living expenses. We are ok with her being listed on the mortgage and/or title to the house. Since basically this arrangement is just us going in together on a house that we will all be living in, this would not be considered a gift, correct?

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2 Lawyer Answers
Nina Whitehurst
Nina Whitehurst
  • Estate Planning Lawyer
  • Crossville, TN

A: You are wise to avoid letting your mother’s investment be characterized as a gift. There is more than one way to do this is this and they each have pros and cons and they each require some rather precise math to make sure there is no gift component. One method is the purchase of a life estate and the other is the purchase of a percentage interest. A prepaid rental contract is another possibility but not as common. You should obtain the advise of an experienced elder law attorney who also is good with real estate law to help you sort this out and then implement the strategy that you all choose.

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Kenneth V Zichi
Kenneth V Zichi
  • Estate Planning Lawyer
  • Fowlerville, MI
  • Licensed in Michigan

A: As noted, whenever there is an exchange of value for less than 'fair market' price, there is a gift. WHY are you concerned about not having this considered a gift though? Because you think there will be tax consequences to you? Because your mother needs to qualify for federal benefits? Because you don't want to feel 'beholden'? Because you're afraid someone might 'take away' a gift? Some of these concerns are valid, others are not. And all require professional advice and structuring the transaction BEFORE you buy anything.

Seek a local attorney familiar with estate planning and real estate (that is a common 'cross specialization') to walk you and your mother through the process. A complete estate plan implies more than just this, and doing a complete plan at this time would be wise if it is not already done too!

Bottom line. A 'gift' may or may not create an issue. The specifics of YOUR situation need to be examined in detail. Seek local licensed legal advice.

-- This answer is offered for informational purposes only and does not constitute legal advice or create an attorney/client relationship.

I am licensed to practice in Michigan only. Please seek competent local legal help if you feel you need legal advice

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