Quick 'Quit' Question
My elderly father-in-law wants to quit claim his house to my husband and his brother.
My brother-in-law says that if he does this, it might count as income and we may have to pay taxes on the value of the house?
Is that true? If so, does anyone know a good way for him to give the house to his sons and avoid anyone paying any taxes?
Thanks. 
Quit claim is not always the best way to pass title. If the parties are willing to work out a specific deal a deed that offers stronger protections for the transfer is best. Title companies sometimes have issues when there is a quit claim rather then a deed that shows a more complete transfer of rights and interests.
As to the tax angle it is hard to say exactly what makes the best sense.
It might be smartest for tax planning reasons that the home go into a trust and upon the person's death the home be sold or transferred to the designated beneficiaries. The value used at that point is the stepped-up value (value at time of death). The rest of the estate and how that is handled should be considered.
If the property remains in the name of the elderly person and they end up in a nursing home provided for by the state the transfer might be investigated as the state might have a claim on the assets to off-set the cost of care. Another reason for making sure you get competent advice before decided to quit claim the property.
John
[addsig]
John, thanks for the feedback.
Foggy
John has given some good advice here. There are many directions that you can go and many times you can go down one path and find that it potentially complicates another aspect of your overall financial plan. I would highly recommend sitting down with an estate planning attorney and take a long-term look or big picture look at your options. Quite often the best way to not deed the property to your husband and brother at this point because you would lose the "step up" in basis.
_________________
Bill Exeter
[ Edited by JohnLocke on Date 06/19/2004 ]
Don't avoid the bigger issue of where is your father-in-law going to live.
from a common sense reading of your post I mith interprete that "dad" stays untill he passs or can't live by him self wny more.
Is that what's intended? The trust seems cleaner.
Quote:... does anyone know a good way for him to give the house to his sons and avoid anyone paying any taxes?Yes. Have your father-in-law leave the house to his sons in his will. As an alternate, he could put the house into a revocable trust with the sons as the beneficiaries. At least between now and 2009, if your father-in-law passes on, the sons inherit the property at its appraised value.
If they then decide to sell the house at its appraised value, there will not be any profits to tax.