California  |  Real Estate Law

Legal Question

Asked on: 7/14/13, 12:39 pm

My parents have a VA loan on their home. My dad wants to add me(daughter) to title because they are in their 80"s. Is this possible and how does the process work?

1 Answer

Answered on: 7/15/13, 9:41 am by Timothy McCormick

Making a gift of real property from parents to a child while the parents are alive is one of the biggest financial mistakes most people can make. It will immediately subject your parents to gift tax if there is more than about $39,000 in equity in the property. On top of that, it will almost certainly be a violation of their loan. Then, later on when they pass you will lose the tax benefit of the stepped up basis. What this means is that whenever you sell the house you will have a taxable gain on everything between what they paid for it and what it sells for. If it passes to you by way of will or a living trust, you will only pay tax on the gain from the value on the date the second of them passes away and the price you get. That difference in a 94xxx zip code can easily mean tens of thousands of dollars in extra taxes, and even hundreds of thousands depending on how little they may have paid and how much it appreciates. They need to talk to an estate planning attorney.

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