A most generous gift....need help

[bladerunner]

Hello everyone, still a newbie here. I lost my job two years ago. I defaulted on 3 credit cards last year 10/09 owed 15,000$. I'm a 99er, no unemployment, still no job and no bank account. Well for the last twenty years I have been assisting my elderly neighbor, helping out when her husband had Alzheimer's and just recently looking after her(92 yrs) taking her shopping, driving, cleaning, and so forth. Well...the neighbor has moved to NYC with her adult daughters and as a wonderful gift... the elderly neighbor wants to give me her paid off home. What do I do? Can the credit cards, unsecured debt, put a lien on secured debt if its homesteaded? Any information would be nothing but appreciated.
Thank you...all of the members on this forum have been nothing but helpful and sincere....

[AngelinaCatHub]

HHHMMMM a problem anew. First of all, you cannot homestead it for about six months (My state as reference) but you can and should file a homestead affidavit. Then, perhaps as a gift, you may have some tax liabilities. Best be careful here. Also, as a paid item you could lose it in your name for her. Wouldn't that be bad. The Sheriff depending on your timing could look at this as a great asset. Not homesteaded (where are you living now?) and the tax liability, and the look back can be long if worth it. It is an asset you just cannot (and never should try) to hide. It is lawyer time for you I am afraid and if you are going to bk, get one now. 'Hub

[ccsjoe]

Well, talk about a double edged sword.

Let's talk tax implications first. If she really wants to do you a favor, she should sell you the home or deed you the home for $1. That way you avoid the gift tax that the IRS will undoubtedly assess.

As far as bk implications, well, it definitely will become a bk estate asset once you file and you will need to exempt it in full since there's no debt against it.

As far as unsecured debt getting a judgement against you an ultimately getting a lien, I believe they can...but, the lien would only come into play once you sell the property.

[bladerunner]

thank you everybody for your comments. I was looking for an easy answer...but it's not gonna happen. Yes, the neighbor will sell me the house for 1 dollar and I will put the title in my son's name. As some of you had already read in some of my other posts, our home is in foreclosure and if we cannot short sale it, we will have to file chap 7.(will have a huge deficiency balance) So it's best right now, that both of us have no large asset like a clear title to a home in our names. Talk about prayers being answered though. We had no idea where we were going to live with our two dogs once our home is sold at auction or whatever and then this miracle falls on our laps...I am going to pay the 45 bucks to meet with a BK or real estate att. next week for 30 minutes...
I'm discombobulated right now....
thank you....

[tobee43]

Hello everyone, still a newbie here. I lost my job two years ago. I defaulted on 3 credit cards last year 10/09 owed 15,000$. I'm a 99er, no unemployment, still no job and no bank account. Well for the last twenty years I have been assisting my elderly neighbor, helping out when her husband had Alzheimer's and just recently looking after her(92 yrs) taking her shopping, driving, cleaning, and so forth. Well...the neighbor has moved to NYC with her adult daughters and as a wonderful gift... the elderly neighbor wants to give me her paid off home. What do I do? Can the credit cards, unsecured debt, put a lien on secured debt if its homesteaded? Any information would be nothing but appreciated.
Thank you...all of the members on this forum have been nothing but helpful and sincere....

indeed, an double edge sword as joe puts it....

there will be tax ramification for both of you, provide this situation is not handled properly. this is more a question for an accountant than an atty...unless he's/she's an estate and tax atty.

you can have you neighbor begin to "gift" you over 10k annually beginning ASAP...because it's nov. she can do it now and then again in jan....that way it's considered a tax free gift...on her end and on yours.

then she can begin by adding your name to the deed in approx 6 months down the road...it's just a "safer" way to approach both the tax issues and once she begins to deed over the property to you, you should be able to homestead it at some point.

wish you the best of luck! let us know how you make out on the situation! it's a treaty one... but i'm certain can be worked around with the correct guidance.

[LadyInTheRed]

About the Tax Issues

Federal gift tax is the responsibility of the giver. The neighbor will only pay gift tax after she has made taxable gifts worth $1,000,000 during her lifetime. The first $13,000 in gifts to each person in any one year is excluded from tax (i.e., a non taxable gift) ($10,000 was the exclusion from 1998 through 2001). The neighbor must file a federal gift tax return if she makes gifts worth $13,000 to any person within a year, even if she doesn't owe tax. So, if the house is worth $100k, she has made a taxable gift of $87k and she must file a tax return showing that gift but will not owe any tax unless she has made more than $1M of taxable gifts in her life.

Paying $1 does not change the fact that a gift was made. It only reduces the value of the gift by $1.

For more info on Federal Gift Tax, go to http://www.irs.gov/publications/p950/index.html

The above applies to federal gift tax only. It is possible that there are states that have a gift tax.

Another tax issue is capital gains tax. The recipient of the gift retains the giver's basis in the property for purposes of calculating capital gains tax when the recipient later sells the property.

Depending on the state, there could be real estate tax implications as well.

[LadyInTheRed]

I am going to pay the 45 bucks to meet with a BK or real estate att. next week for 30 minutes...
I'm discombobulated right now....
thank you....

Unlike attorneys in most other areas of the law, most BK attorneys will give you a free initial consultation.

[msm859]

How about she bequeath it to you in her will, probably no tax implications you get stepped up basis. In the interim she rents it to you with a lease option $1,000 / month which she gifts to you each month. 100% of rent payments go towards fmv purchase price.

[LadyInTheRed]

How about she bequeath it to you in her will, probably no tax implications you get stepped up basis. In the interim she rents it to you with a lease option $1,000 / month which she gifts to you each month. 100% of rent payments go towards fmv purchase price.

Excellent idea! If she leaves it to him in her will, what's the point of the lease option with payment towards purchase price?

[msm859]

Excellent idea! If she leaves it to him in her will, what's the point of the lease option with payment towards purchase price?

well just in case she lives another 10 + years depending on the value of the house it may get them ownership earlier. also depending on the fmv after bladerunner gets their financial affairs in order the owner may be able to accelerate the gifting (who knows what will happen with the gift/inheritance tax next year)

[LadyInTheRed]

well just in case she lives another 10 + years depending on the value of the house it may get them ownership earlier. also depending on the fmv after bladerunner gets their financial affairs in order the owner may be able to accelerate the gifting

Got it!

(who knows what will happen with the gift/inheritance tax next year)

Well, the further we get along in the year, the more I think Congress won't pass anything on estate tax and we'll go back to a $1,000,000 federal estate tax exemption for 2011. If that happens, I doubt Congress will be able to come to agreement very quickly to change that. That's good for me. The more taxable estates there are, the more secure my job is.

[msm859]

Got it!



Well, the further we get along in the year, the more I think Congress won't pass anything on estate tax and we'll go back to a $1,000,000 federal estate tax exemption for 2011. If that happens, I doubt Congress will be able to come to agreement very quickly to change that. That's good for me. The more taxable estates there are, the more secure my job is.

The Republicans will make sure that doesn't happen. All they have to do is get the Dems to blink. It amazes me now how many people are against the estate tax when most will never be affected. Although I do believe the exemption should be higher than $1million. The Dems could probably trade something big to agree to raise it to say $5million.

[tobee43]

Federal gift tax is the responsibility of the giver. The neighbor will only pay gift tax after she has made taxable gifts worth $1,000,000 during her lifetime. The first $13,000 in gifts to each person in any one year is excluded from tax (i.e., a non taxable gift) ($10,000 was the exclusion from 1998 through 2001). The neighbor must file a federal gift tax return if she makes gifts worth $13,000 to any person within a year, even if she doesn't owe tax. So, if the house is worth $100k, she has made a taxable gift of $87k and she must file a tax return showing that gift but will not owe any tax unless she has made more than $1M of taxable gifts in her life.

Paying $1 does not change the fact that a gift was made. It only reduces the value of the gift by $1.

For more info on Federal Gift Tax, go to http://www.irs.gov/publications/p950/index.html

The above applies to federal gift tax only. It is possible that there are states that have a gift tax.

Another tax issue is capital gains tax. The recipient of the gift retains the giver's basis in the property for purposes of calculating capital gains tax when the recipient later sells the property.

Depending on the state, there could be real estate tax implications as well.

yes...you are correct on the 13k as opposed to the 10k...it's our state that is the 10k limit and NOT the federal...also absolutely right on with the capital gains...however, if there is some way that all the value can be "gifted" within a few to five year period...the gains will not have to be claimed or realized by the recipient of that gift....but once again ONLY provided the entire property has been turned over and of course that can take a few years...also if there are other family members such as a spouse of the OP they also can be a beneficiary of the 13k annually.

[LadyInTheRed]

The Republicans will make sure that doesn't happen. All they have to do is get the Dems to blink. It amazes me now how many people are against the estate tax when most will never be affected. Although I do believe the exemption should be higher than $1million. The Dems could probably trade something big to agree to raise it to say $5million.

Yeah, if people actually knew the facts before forming an opinion, their opinion might be quite different. I agree with you that the exemption should be higher than $1M. I like the $3.5M from 2009, but $5M wouldn't upset me.

yes...you are correct on the 13k as opposed to the 10k...it's our state that is the 10k limit and NOT the federal...also absolutely right on with the capital gains...however, if there is some way that all the value can be "gifted" within a few to five year period...the gains will not have to be claimed or realized by the recipient of that gift....but once again ONLY provided the entire property has been turned over and of course that can take a few years...also if there are other family members such as a spouse of the OP they also can be a beneficiary of the 13k annually.

No capital gain is realized when a gift is made. The recipient only realizes a gain when they sell the property they received. So, gifting it in pieces does not change the capital gains tax.

Yes, if the OP is married, both the OP and spouse can receive a $13K gift. So could their children. If the neighbor is married (doesn't sound likely), she and her husband can each give $13k. Not that it's relevant here, but you an give an unlimited amount to your spouse tax free.

Again, I only know about how things work at the Federal level and in CA.

[debee]

There are only a handful of states with gift tax and NV isn't one of them.

In the UST Manual, Chapter 5-10.7.2, one of the listed red flags is when the debtor has no ownership interest in his principal residence. But I guess all kinds of people rent a house from their adult children. Still, I would talk to an attorney and proceed with caution.