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Hello, folks, I have a possible opportunity to buy a modest house if I buy it this summer. It will likely be sold to a family member of the original owner (this is an estate situation) if no outside buyer bids on it this year. I've been watching it a while. It's been on the market but is overpriced and hasn't sold. I know and like the area and know some downsides to the house, which is very old (early 19th c.) and needs new roof and electrical. My bid would be much lower than the asking price to compensate for needed repairs. It's just the right size, has character, and in other ways would be a good choice. I'd be a temporary snowbird as I am still working, probably for two 1/2 more years.
The only way I could buy a house now would be for me to take the money out of my retirement funds, which would cause a tax situation for 2016. The tax bite would be v. high, as I am still working full time.
The hit might be worth it if I drew the smallest poss. down payment and mortgaged the rest, though I had been assuming I would pay cash when/if I moved back to New England.
I'm just seeking strategies to do it if I decide to do it. I'm not sure. If I wait til full retirement, is there a transition tax benefit for moving that would make it worthwhile to wait?
Here's the question in case I decide I'd like to buy:
Is there any way I could convey a down payment (or the full amount, perhaps) as a gift to a family member up there? He wouldn't have to pay taxes on a gift, would he?
I would be giving the house in my Will to him anyway and he could be on the title. (Trust isn't an issue here--when a group of siblings share the care of a parent with Alzheimer's for 20 years, you get to know them.)
This transition into retirement is the darndest life-stage: like playing 3-D chess. If I don't do it, it will be because it closes down the option of other possible choices and locations--but I am getting tired of swimming around in this retirement "infinity" pool.
While on the surface it might seem to be an easy way to do it, I caution against it. However not knowing all of your resources we can only go on what you presented and assumptions. You will more likely get answers here to not do it. This crowd in the forum is pretty knowledgeable and is experienced. If you want to share more information than it might work if ......
While on the surface it might seem to be an easy way to do it, I caution against it. However not knowing all of your resources we can only go on what you presented and assumptions. You will more likely get answers here to not do it. This crowd in the forum is pretty knowledgeable and is experienced. If you want to share more information than it might work if ......
Hello, folks, I have a possible opportunity to buy a modest house if I buy it this summer. It will likely be sold to a family member of the original owner (this is an estate situation) if no outside buyer bids on it this year. I've been watching it a while. It's been on the market but is overpriced and hasn't sold. I know and like the area and know some downsides to the house, which is very old (early 19th c.) and needs new roof and electrical. My bid would be much lower than the asking price to compensate for needed repairs. It's just the right size, has character, and in other ways would be a good choice. I'd be a temporary snowbird as I am still working, probably for two 1/2 more years.
The only way I could buy a house now would be for me to take the money out of my retirement funds, which would cause a tax situation for 2016. The tax bite would be v. high, as I am still working full time.
The hit might be worth it if I drew the smallest poss. down payment and mortgaged the rest, though I had been assuming I would pay cash when/if I moved back to New England.
I'm just seeking strategies to do it if I decide to do it. I'm not sure. If I wait til full retirement, is there a transition tax benefit for moving that would make it worthwhile to wait?
Here's the question in case I decide I'd like to buy:
Is there any way I could convey a down payment (or the full amount, perhaps) as a gift to a family member up there? He wouldn't have to pay taxes on a gift, would he?
I would be giving the house in my Will to him anyway and he could be on the title. (Trust isn't an issue here--when a group of siblings share the care of a parent with Alzheimer's for 20 years, you get to know them.)
This transition into retirement is the darndest life-stage: like playing 3-D chess. If I don't do it, it will be because it closes down the option of other possible choices and locations--but I am getting tired of swimming around in this retirement "infinity" pool.
Assuming you're talking about something like a regular (not Roth) IRA - you're going to have to pay the taxes on the distribution. And a penalty too if you're < 59 1/2. The family member wouldn't have to pay taxes. Although you might have to file a gift tax return if the "gift" was > $14,000 (in a single year). Without knowing more about your financial situation - I can't say whether buying a house with some of your retirement funds makes/doesn't make sense.
Unless you're a very talented DIYer - or have a lot of excess money - I would stay away from old houses. Old houses = money pits. Note that - at least here in Florida - once you start substantial renovations on an old house - building codes may require you to bring *everything* in the house up to current codes. It's often cheaper to tear a place down and start from scratch. It is also very hard/impossible to get homeowners' insurance on old houses here.
Finally - I wouldn't put your family member's name on your title. Even if you trust him - he could get into a situation like a divorce - an accident - a business dispute - etc. - where someone else could get a judgment against him and force a sale of the house to collect his half interest.
Oh, my--I value the advice, which is so fervent that it produced special effects!
My own main negative is that I can't be sure the sale of my house here in FL will bring in as much as the purchase of the one up in New England will cost.
The offer I would be making is very low. But the selling price of my house 2 years down the road is of course a question mark. My FL house is in a very desirable location and surrounded by 400,000-500,000+ houses; but it has structural problems that would prevent a quick flip. Any buyer will be shown the engineer's report I got last summer.
I am thinking the land value of my FL house is more than what I would bid on this New England house. New England house is waterfront and is in a beautiful place near family members. That's the draw.
But is it the case that I could give purchase money as a gift and avoid a tax consequence if the gift were used to buy co-owned property and the giftee's name were on the title? I suppose it's a question for a tax expert, but people are so knowledgeable here, I thought I would run it by this forum.
I'm not foolish enough to hide money from the tax folks, but thought that an open gift (not something under the table) might be tax exempt under those circumstances.
I guess I may have to swim around a bit more in this nebulous state of in-between, though.
Is this a sibling?? Would the family hold a short term mortgage for you (low or no down payment so you wouldn't have to touch your retirement funds) until you retire and sell your Florida house?? Unsold property can become expensive for an estate and older properties tend to degrade while empty. They might come out ahead not having to carry the costs of the property for much longer.
Hi, funisart,
That is the situation; I hadn't thought about that type of mortgage arrangement. Hmm. The family are in the outer family circle--I don't really know them the way I know my sibs. That's something to think about, though.
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