Legal Question in Tax Law in Indiana

Selling house to children

What steps must be taken, and how would taxes be involved, if I sold my house, valued at approximately $60-70,000.00 (no appraisal has been made) to my son and daughter for $1.00 each?


Asked on 1/03/02, 3:10 pm

2 Answers from Attorneys

Mary Ann Wunder Wunder & Wunder

Re: Selling house to children

The gift tax law allows you to gift the sum of $11,000 per year to each person to whom you are making a gift without the necessity of filing a tax return. When you make a gift in excess of $11,000 to a person (whether it is a child or someone else), you must file a gift tax return. There is a credit against the gift tax so that your gifts would have to all total more than $650,000 before a tax would actually have to be paid. This will have an effect for you only if your estate when you die is worth more than the $650,000 credit equivalent.

It is possible if you die very soon after the gift that Indiana would impose its inheritance tax, however, currently each child inherits $100,000 from a parent before the tax must be paid.

If you have to qualify for medicaid before 36 months elapse, then, the house will be treated as a countable resource and you will be ineligible for a number of months calculated by the value of the house divided by the customary average cost of nursing home care in your locality (there are three different figures in use in Indiana depending upon the section of the state in which ou reside - all just slightly more than $3,000). If the result is not a whole number (4.564 rather than just 4), the number of months is rounded down to the whole number.

The way this exclusion applies is that the months count from the time you made the gift forward, so that if a gift makes you ineligible for 5 months and you apply in the 6th month, there is no exclusion to apply after your application is approved.

Be sure when preparing the deed that you consult an attorney to make sure you have correctly stated the legal description and complied with all the statutory requirements for the recording of a deed in the state in which you reside.

In Indiana if you would continue to reside in the home without keeping a life estate, you will loose your homestead exemption and the real estate taxes on the property will be increased.

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Answered on 1/04/02, 6:16 pm
Gregg A. Garofalo Deutsch, Levy & Engel, Chtd.

Re: Selling house to children

There may be some gift tax issues, however, these may be avoided if you plan it properly. I suggest you consult a tax attorney. If I can be of assistance, please contact me at 312/346-1460 or garofalo@dlec.com.

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Answered on 1/03/02, 4:13 pm


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