Transferring property ownership to next generation and gift taxes (sales, lawyer, value)
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A lawyer has recommended transferring property ownership to the next generation by adding the children' names to the title. Lawyer cited the $5 mil life time allowance.
But I also understand gifts over ~$13000 per year must report and pay tax.
get a new attorney . you will take assets that can be inherited at a stepped up basis with no taxes possibly, and turn them in to taxable assets by adding names to a title who end up getting your cost basis instead of an updated basis at current value.
i have my doubts about this attorney . he definitely sounds like a general practitioner or real estate attorney and not an estate attorney
A lawyer has recommended transferring property ownership to the next generation by adding the children' names to the title. Lawyer cited the $5 mil life time allowance.
But I also understand gifts over ~$13000 per year must report and pay tax.
Do these two things conflict with each other?
Like others in this thread, I disagree with your attorney's attempted estate planning technique. But I just wanted to point out- you don't have to pay gift tax on gifts over $13k if you are applying the gift towards your lifetime exemption; that's probably what your attorney meant.
Doesn't make it a great plan though. The one upside is that they get the property in today's dollars, so if you have another 20-50 years of life left in you (don't know your age), then the exemption will likely be higher due to inflation if not totally eliminated, and their gift will ultimately only be a small portion of your exemption at that point. They will have a monster gain if they sell it though, as pointed out by another poster, since they will get today's cost as basis instead of the future FMV step-up.
Also, having them on the title now makes the house partially theirs today, which can have drawbacks and strange outcomes if there is a weird occurrence in the future such as a big medical debt, an argument between kids, or other unforeseen problems.
A lawyer has recommended transferring property ownership to the next generation by adding the children' names to the title. Lawyer cited the $5 mil life time allowance.
But I also understand gifts over ~$13000 per year must report and pay tax.
Do these two things conflict with each other?
Up to $14K is tax free, not sure when it changed, but that's what it was for 2016 & is for 2017.
Who you need to talk to, is a good CPA, who can tell you the advantages and disadvantages of doing what this attorney suggests. An attorney, is not the one that can tell you from a tax and from an inheritance point of discussion what is the best path for you to follow.
Here in Montana we have a special revocable deed that you deed the property to your heirs, and it does not get put into use until the death of the owner or couple that are deeding the property to heirs. They own the property and stay in full control of it till they are dead. When the death certificate is available the deed is filed with the death certificate and the new owners take over. If one of the heirs should die before the death of the property owners, they can change the names on the deed. This takes it clear out of probate and transfer is immediate. With your name and the heirs names on the deed, it can still have to go to probate to clear your ownership portion and tie the ownership up for a year or so.
Instead of looking for advice from people on a forum most of us know nothing about the laws in your state, etc., go see a good CPA who knows the answers and take his advice.
Up to $14K is tax free, not sure when it changed, but that's what it was for 2016 & is for 2017.
any amount of a gift is tax free . it is just over the 14k or so you have fill out a form and it goes towards your life time exclusion which for a couple today can approach 10 million since unused portions can carry over to a spouse with the recent changes .
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