Background: My mom helped both my younger brothers buy their first houses, and she is leaving me her house (not the house we grew up in) in her will. My brothers are fine with that. Recently, my aunt died, and my uncle was able to seamlessly take over their house because he was on the deed along with my aunt, even though they weren't married any more. My mom wants to know if it would make things easier for me after she passes if she somehow puts my name on her house deed, or gives me the house before she dies. We're very close, she's cognitively great, and there's no conflict in the family over this. Can anyone think of any reason not to do this? And if you think it's a decent idea, do you have advice on the best way to handle it? If it makes a difference, the house is not paid off; she owes about 1/3 of what it's worth.
If so, a big hurdle will be how you can acquire ownership of a property that is not actually owned by your mother. Your mom has an equity interest in house. There’s a mortgage on it. When & Only when mortgage is paid off and they issue a Release of the Deed of a Trust and it’s filed and recorded at the courthouse, only then will mom truly own the house as Deed is now in her name.
My suggestion to you is to find mom’s mortgage paperwork. Within it will be the specifics as to how property can be transferred.
- main way is she pays off the mortgage then about 30-60 days later the Release of DOT gets sent to her; she files at CH and she can then transfer it to you via a Deed to you. It’s then yours. Personally I’d get it done via a Warranty Deed as it guarantees ownership with title insurance.
- if mom cannot pay off mortgage, then you need to carefully look at the existing mortgage agreement as to how to possibly do assumption of the mortgage. Some allow for another person to be placed if credit worthy.
- But usually the old mortgage needs to be cancelled or “struck” with a new mortgage done for the balance with fees & mip. The “new” mortgage will have lending requirements but likely be flexible as there’s huge equity in the house as mom has paid 2/3 already. Not a lot of risk for them. If your credit is good, this could work.
- Trying to get around this without a release from mortgage holder like via an Quit Claim Deed can cause mortgage holder to do a 30 day to maybe 60 day call in on the balance the loan once they find out as it’s not allowed.
If all of this are things you’ve never dealt with before, your best working with a real estate attorney to review mortgage, negotiatiate with mortgage co. and draw up paperwork.
Remember if things should change and mom needs care and applies to Medicaid before 2023, there will be a gifting transfer penalty to deal with.
Also, if Mom gives you the house now via a Quit Claim Deed, then when it comes time to sell the house you may need to pay Capital Gains Tax, and the bases used to figure out the tax will be the value of the house when your Mom had purchased said house.
If Mom gives you the house via her Will, then the Capital Gains Tax bases would be the value of the house on the day Mom passes.
Now if you reside in the house for a certain number of years, there use to be a Capital Gains deduction of $250k for a single owner, I don't know if that is still alive or well, or went away with the new U.S. Tax Reform.
Such a deduction helped my Dad when he sold his house, he had a cash gain on the house. He was able to use my late Mom's deduction of $250k, thus $500k total, if the house sold within one year after Mom's passing.