Do I add my granddaughter to the house title or have the house retitled to my Living Trust to minimize the gift tax liability?
Get Legal Help Today
Compare Quotes From Top Companies and Save
Secured with SHA-256 Encryption
Do I add my granddaughter to the house title or have the house retitled to my Living Trust to minimize the gift tax liability?
I am 71years old and just recently bought a very modest $70,000 home for my granddaughter and her baby. The house has less than $1,000 equity. The 30 year mortgage payment is $560 per month which is about $100 less than what we would pay for a 2 bedroom apartment here. Along with my 2 sons, she is in my Will and Living Trust. The value of my estate is less than $1,000,000. I want to pay off the mortgage in 10 years by paying an additional $6,000 each year. How can she avoid paying gift tax on the equity (approximately $12,768 times the number of years I live beyond today)?
Asked on November 27, 2011 under Real Estate Law, Indiana
Answers:
FreeAdvice Contributing Attorney / FreeAdvice Contributing Attorney
Answered 13 years ago | Contributor
Your granddaughter would not have to pay a gift tax if you gave her more than $13,000 per year, you would. The best way to gift the property that you bought to your granddaughter tax free is to gift her a percentage of the property via a gift deed which is recorded and submit a gift tax return of $13,000 per year, each year until the percentage that you retain is reduced to zero.
The problem is that you do not have $13,000 in equity in the home presently but will have some equity by paying $6,000 in principal each year beyond your monthly payments. I suggest that you consult with a Wills and trust attorney to implement the process I suggested above. From what you have written, you would be able to gift $6,500 or so a year percentage wise in the property to your granddaughter.
IMPORTANT NOTICE: The Answer(s) provided above are for general information only. The attorney providing the answer was not serving as the attorney for the person submitting the question or in any attorney-client relationship with such person. Laws may vary from state to state, and sometimes change. Tiny variations in the facts, or a fact not set forth in a question, often can change a legal outcome or an attorney's conclusion. Although AttorneyPages.com has verified the attorney was admitted to practice law in at least one jurisdiction, he or she may not be authorized to practice law in the jurisdiction referred to in the question, nor is he or she necessarily experienced in the area of the law involved. Unlike the information in the Answer(s) above, upon which you should NOT rely, for personal advice you can rely upon we suggest you retain an attorney to represent you.