Posted by Bill H on March 15, 2005 at 16:22:17:
Hi Kristine:
You are absolutely correct. Trusts are not necessarily the panacea that lots of guys and gals think they are. They provide a certain amount of anonimity but if you search long enough and hard enough now-a-days you can find just about anybody.
That is part of the reason I read the First Amercian Ttile Company legal website often…thery are some very interesting things on it.
You can …but…you can’t hide…Ronald Regan
Good Luck,
Bill H
To deed or not to deed that is the ? - Posted by Tom Kirby (p.a)
Posted by Tom Kirby (p.a) on March 15, 2005 at 05:23:27:
My mother in-laws house is fully paid off and my wife will inherit the prop when she dies.
Question would it be better putting my wife on the deed or in a land trust to avoid inheritance tax?
Tom
STEP AWAY FROM THE DEED… - Posted by David Krulac
Posted by David Krulac on March 15, 2005 at 06:33:03:
NEVER put your wife’s name on deed. Forget putting wife’s name on deed or Land Trust. Dealmakers absolutely right about stepped up basis.
The Federal estate threshold, I believe is $1,000,000 this year, so any estate for this year owes NO Federal estate tax on the first million. Pa. State Inheritance tax is 4.5% and is on dollar one.
Re: To deed or not to deed that is the ? - Posted by dealmaker
Posted by dealmaker on March 15, 2005 at 06:27:06:
Do NOT put your wife’s name on the deed while Mom is alive. When Mom dies your wife receives STEPPED UP basis. Let’s say Mom paid $25K in 1960 and it’s worth $400K today and Mom dies today. Your wife (plus other descedents) would inherit at the “stepped up” valuem, $400K. If you sell it next week for $400K there is NO GAIN on the sale.
But, sith your wife on the deed she would already own 1/2, at HER MOM’S BASIS, and would receive “stepped up” basis only on the other 1/2. If she sells the place next week there is NO GAIN on the inherited tax, but there is a TAXABLE GAIN on the 1/2 she already owned.
Your wife doesn’t pay “inheritance” tax. That’s paid by the ESTATE. IIRC non-taxable estate is about $650,000 for this year and increases to $1MM by 2010. How much is the total estate worth. Also I don’t think you avoid TAX in a land trust, just avoid the probate process. But I’m not an attorney.
Also everyone ooohs and ahhhs about PROBATE. In most states it’s neither a big deal nor an expensive deal.
Depending on the size of the estate there are probably some estate planning things to do, but a HUGE percentage of US estates are well beneath the threshold for inheritance taxes.
Good luck
dealmaker
Dang - My Dad Deeded his Place to Me - Posted by rehabber
Posted by rehabber on March 15, 2005 at 09:11:42:
My father is battling some on again, off again, health
issues. Thinking ahead, he deeded his home to me and
my brother a year ago. He did this because he heard
that if he were to have some catastrophic medical bills
or (God forbid) have to go into a home in the future,
they (health creditors) can go back up to 2 years
and claim any sale/deeding of his property in that
2 year time period could be construed as just having
been done to avoid creditors and be reversed - ie
courts could favor creditors if he deeded the place to
me right before he went into a costly old-folks home
then claimed he had no money.
So, he deeded it to me and my brother last year so
our family would not loose the home before any of his
health issues become costly.
First off - Is there such a ‘rule’ that they can go
back 2 years to undo any last minute deeding if done
so to avoid creditors?
and
If such a ‘rule’ exists…
What should I do at this point? Should I create a
land trust between brother and me and put the property
in that or should we deed it back to my Dad then have
him redeed it into a land trust. The good thing
is since the deeding is between father/sons, there is
no PA realty transfer tax.
Also the numbers aren’t huge, but-
He bought the place in 1969 for 15k
it’s now worth 150k
How about both… - Posted by David Alexander
Posted by David Alexander on March 15, 2005 at 13:00:15:
Put the property in a land trust with the mom as beneficiary… then you avoid probate also, and you won’t have to worry about how simple probate is or isn’t…
David Alexander
Re: To deed or not to deed that is the ? - Posted by ATM
Posted by ATM on March 15, 2005 at 12:13:02:
Tax Rates and Exemptions for Taxable Gifts and Estates
2005-- $1,500,000–47% tax rate in excess of $1.5 MM
2006-- $2,000,000–46% tax rate in excess of $2.0 MM
2007-2008-- $2,000,000 --45 % tax rate in excess of $2.0 MM
2009–$3,500,000–45% tax rate in excess of $3.5 MM
2010-- TAX ELIMINATED-- NO TAX
2011–back to $1,000,000–55% tax rate in excess of $1MM
Pres. Bush is trying to eliminate the Death Tax completely but Congress and the democrates are fitting this. It is expected that the exemption will be set at $2.5 MM to 3.0 MM before the sunset of 2011, maybe as soon as this year.
Re: To deed or not to deed that is the ? - Posted by ATM
Posted by ATM on March 15, 2005 at 11:52:47:
Tax Rates and Exemptions for Taxable Gifts and Estates is as follows:
2005–$1,500,000–47% tax rate in excess of 1.5 M
2006–$2,000,000–46% tax rate in excess of 1.5 M
2007-2008–$2,000,000-- 45% tax rate in excess of 2M
2009–$3,5000,000- 45% tax rate in excess of 3.5M
2010–TAX ELIMINATED-- NO TAX
2011–back to $1,000,000-- 55% tax rate in excess of 1M
Bush is trying to eliminate the Inheriteance tax completely but the Democrates are opposing this. It is expected that the exemption will be set at $2.5 to $3 Million before the sunset in 2011.
its 3 years lookback and there is a proposal to - Posted by David Krulac
Posted by David Krulac on March 15, 2005 at 10:23:07:
make it 5 years. It a difficult decision, I hope that your father’s health is restored.
At the 15% Federal capital gains rate and a 135,000 gain, the Federal tax would be over $20,000. That’s not an insignificant amount for most people. I’d sure Oprah doesn’t wink at $20,000, but to most people its a lot of money.
But the medial costs for elderly is terrific. One nursing home around here charges $90,000 per year and doesn’t accept medicare. A friend of mine had a relative die in CA and even though he left an estate of $300 to $400,000, nothing was left after paying the medicare, calcare liens. Many people are going to be faced with spending their entire assets to provide long term health care and there will be less inherited wealth.
Re: Dang - My Dad Deeded his Place to Me - Posted by DaveD (WI)
Posted by DaveD (WI) on March 15, 2005 at 09:55:34:
Let’s hope your dad’s health remains good, which will render all this moot! Contact an elder care attorney. This is an estate planning issue. Your dad’s instincts were correct. The “look-back” rule you are referring to deals with the definition of “indigency” as it relates to qualifying for Medicaid-paid long term nursing care.
You’re on the right track. Should have gone into a trust to begin with. But don’t do anything rash like trying to deed it back. Keep things quiet and put in whatever additional estate planning protections your elder care advisor suggests.
Re: How about both… - Posted by Redline
Posted by Redline on March 16, 2005 at 23:54:41:
If house is in trust with mom as beneficiary, and mom passes what happens then?
RL
Re: its 3 years lookback and there is a - Posted by Sean
Posted by Sean on March 15, 2005 at 10:39:39:
This is why if you are young and healthy you should seriously consider LONG TERM CARE INSURANCE! If you are healthy and sub 30 you are looking at peanuts a month for the rest of your life to prevent this sort of thing from happening.
Closer you get to retirement age, the more expensive a month it gets.
definitely time for an attorney - Posted by Kristine-CA
Posted by Kristine-CA on March 15, 2005 at 11:05:31:
I agree with Dave regarding consulting with an attorney who
specializes in elder law and estate planning. These are people who
have the most experience with the issues surrounding health care
costs and estates.
Just transferring to a trust won’t necessarily do it either. Here in CA,
Medi-CAL has gone after the deceased’s interest in a trust–and won.
The whole point of using trust in these circumstances was to prevent
this from happening (Medi-CAL claims against the estate). But the
state has successfully gotten paid out a decedent’s interest in a trust.
Elder law attorneys that I have met really know their stuff regarding
relevant case history and spending down techniques. Definitely worth
the money, IMO. Kristine
Re: How about both… - Posted by David Alexander
Posted by David Alexander on March 17, 2005 at 02:32:28:
trustee decides based on moms wishes…
David Alexander