quick claim deed
My parents want my sister and I to do a
quick claim deed on their home. My dad
is ill and we are not sure how long he will
live. If the house is put under our name,
will we have to pay taxes? Can we take
a second mortgage on their home if its
under our name?
I need your help.
Thanks,
Betty
I think you are asking about the possible tax consequences if your parents give you and your sister a quit claim deed to their home.
If the house is put in your names, you will likely become responsible for the property taxes. You will not have an immediate income tax consequence until you decide to sell the home.
Since the property is really a gift, your parents will be giving you and your sister a property with a cost basis equal to their adjusted cost basis. If the property has appreciated a lot while they owned the house, the difference between your cost basis and the sale price becomes a taxable capital gain when you sell the property. If you and your sister own the property equally, then each of you reports half of the taxable capital gain on your tax return for the year the property is sold.
While there is no immediate tax consequence for yourselves, your parents, however, may have to file a gift tax return along with their normal 1040.
If your father is ill and not expected to live very long, what will happen to your mother? If your mother is going to leave you the house anyway, then consider putting the house into a living trust with you and your sister as beneficiaries. Your mother can have a life interest in the house, but at her death the property becomes yours at its "stepped up" basis -- and a lot smaller capital gains consequence (if any) should you sell the property at some time in the future. Putting the house in a trust avoids probate fees, but not federal estate taxes. You could accomplish the same thing by having your parents leave the house to you and your sister in their wills, but then the property has to go through probate.
Not sure why you want to take out a second mortgage on the property. Is there a first mortgage? If you need money out of the property, why not consider a cash out refinance instead of a second mortgage? If your names are the only names on the title, then a lender should have no problem accepting a loan application from the both of you.
In otherwords, we will be responsible for taxes only when the house is sold. The
house is paid off. Could my sister use the house as collateral for some type of loan, without my consent? I am trying to avoid future problems. Your information is greatly appreciated.
Betty