Re: Saving Estate Tax

It really depends on how large your mother's estate is. If you mother's estate is larger than $675,000 then maybe you want to transfer the house now, but there may be gift taxes payable on the transfer now. Let me explain.

If a person has assets over $675,000 and they died in 2001, then anything over $675,000 will be taxable for federale estate purposes at a rate of 37-55%. If you give a person a gift during your lifetime in which the value is over $10,000 then you have to pay gift tax on the gift or reduce your credit exemption for estate tax when you die. So if your mother gives you this house valued, lets say at 110k, now she will have to pay gift tax on it now or when she dies anything over $575,000 will be taxable for federal estate tax ($675,000 exemption minus 100k for gift over 10k = $575,000).

This is something you need to speak with an estate attorney over because they are a lot of other things which also must be considered such as valuing the asset, increasing the cost basis of the house, etc.

Re: Saving Estate Tax

If your mother is satisfied to give you the house, now, you should do it. If it requires a paymnet to your sister, you should work that out and do it now. We could assist you with all aspects of the transacation. You may need to have your mother's will redone. Call me at 610 565-3700 x242 Murray S. Eckell

Re: Saving Estate Tax

I think it's premature to be dividing your mom's property. Right now the property belongs to her and it is her desires that are crucial.

There are many reasons why a mother would not want to transfer a house to her children prior to her death:

1. If a child is sued, the house can be sold to satisfy judgements against them.

2. If a child goes into bankruptcy, the house becomes property of the bankruptcy estate and is subject to liquidation to satisfy the child’s debts.

3. If a child gets married, or is already married, their spouse can, in some situations, make a claim on the property in divorce proceedings.

4. If a child dies before the parent, the parent may inherit their own house, and will be forced to pay inheritance tax on what was their own property.

5. If your mom intends to continue to live in the house after it is transferred, and later has a falling out with you or your spouse she can be put out of the house (if you say, “You would never…”, think again. It happens all the time).

6. For tax purposes, if your mom transfers the house to you, you will take the property at her cost basis (price at which she purchased the property plus any capital improvements that were made). When you later sell the house, capital gains tax (approximately 20% ) will be due on the difference between the original basis and the net receipts from sale. If you inherit the house, you will pay 6% on the equity in the house at time of your mom's death death and no capital gains.

I think there are lots of reasons for your mom not to transfer the house prior to death. There may be compelling reasons why she would but you have to sit down with counsel to discuss them thoroughly.