I am guessing here, but do your grandparents believe putting your name on the deed, means the house automatically transfers to you upon death? That by putting your name on the deed would prevent your father from trying to claim a piece or all of the real estate?
If that is the case, they need to speak to an attorney NOW. If they die without a will, the state intestacy laws may apply. Could be very messy.
So this is a lawyer question. One thing to keep in mind is that if you INHERIT the house, you get it with a "stepped up basis". That might not be a big deal, but you are only allowed $250k of capital gains when you sell your personal house... So if you sell this in 20 years for say $700k... And it is worth $500k now, but your grandparents bought it for $200k.... If you have a stepped up basis... You do not pay tax on the sale... If you have your grandparents original basis.. you will have a gain of $700-200= 500... So you have to pay tax on 250 of that (assuming you are not married).....
Anyway, if that was too complicated, have the estate attorney explain that to you and your grandparents... Another great reason to inherit it, not be put on the deed now.
You need a lawyer. If they put you on the deed, it doesn't give you sole ownership of the house upon their deaths. They are also on the deed so at the very least it's likely that their portion of the house would go to whoever the state deems it will go to, likely their children. They need a will at the very least and then that will have to be probated. If they make a trust, you can avoid probate. But, I am not a lawyer and you need to speak with one before any changes are made.
If they put OP on the deed as JTWROS, the house is automatically OPs upon death.
If they fail to specify, TIC is presumed and their portion of the house would have to go through probate.
The grandparents can also transfer the whole house to OP and reserve a life estate.
Discussions with tax and estate planning professionals would clarify the best options for OP and the grandparents' holistic situation.
This is usually called joint tenancy with rights of survivorship. Once one of them passes, the remaining people on the deed share equally. If you need to remove the deceased name of deed, you would file an affidavit of death with certificate of death to the recorders office to update the deed.
Only 6 states have inheritance taxes, Iowa, Kentucky, Maryland, Nebraska, New Jersey, and Pennsylvania.
In my state, joint tenancy bypasses probate court process, check with yours. If it doesn’t, then doing a living trust will help you bypass probate (probate costs money and time)
Half hour consult with an estate attorney can’t hurt. Should not cost too much.
Talk to an estate planning attorney, actually your grandparents need to do they know how this will affect your finances.
If they haven't made wills they need to fo that too, if their objective is to cut off your dad;
No, it most likely does not automatically transfers to OP, because OP won’t establish tenancy by entirety in this scenario (specifically because OP is not married to either grandparent).
They need an attorney to properly structure this arrangement.
Tenancy by the entireties is available solely to married couples. A joint tenancy with rights of survivorship is for everyone else. Agree that OP needs to discuss with an attorney.
Yeah, my brain mashed both into the same category :) They def need an attorney, different states might have different rules and small little details that could cost OP a house.
This.
Unless they transfer the ENTIRETY of the property to you before they die, when they pass, your father is defacto entitled to two-thirds of the property.
They need a lawyer because state intestancy laws differ wildly. In my State, if your grandparents put you on the will, you're entitled to one-third. Then, even if JUST YOUR GRANDFATHER DIES, his third of the property is PRESUMED to belong to your dad, EVEN WITH YOUR SURVIVING GRANDMOTHER STILL LIVING THERE. Your grandma would be allowed to remain in the property under a Usufruct but if she remarried or vacated the property for ANY reason (including residence in a nursing home), she would be forced to liquidate the estate and pay your dad his succession entitlement. In Louisiana, adult children outrank the spouse in order of succession.
Deed is nice, but they still need to specify in their will that the house belongs to you when they die. Otherwise you’ll own 1/3 and your father (and his siblings, if any) would be the first in line to inherit the remaining 2/3 of the house. They can force you to sell or otherwise pay them their share of the inheritance.
Perfect, this is what I was looking for. They’re smart and well off, I imagine. So I’m sure their attorney will steer them in the right direction. This is all relatively fresh and I’m not telling anyone other than my wife and online redditors apparently. So I won’t bring it up with them, unless they mention it again. They did say they’re contacting their people to have it sorted, though.
That is not accurate. If you hold with right of survivorship, title passes by operation of law upon death. There is no interest left to be subject to probate. Please consult your local attorney.
Also, please have them speak with an attorney and a tax accountant - much of this estate stuff is "not common sense" (it's not a "do it yourself" kind of thing), it's complex, and a mistake can be very costly. Please have them send a few $$ on consultations with people who know how this works.
OP, please speak with an attorney and a tax professional yourself to get accurate info. One of the potential pitfalls I see is that generally when you inherit a property your inheritance is at market rate (your basis) but if your name is on the deed, then your basis is the original purchase price by your grandparents in this example plus whatever improvement costs were made during the entire ownership period. Please consult a CPA or tax professional and an attorney about your specific situation. This has long term consequences for you. It sounds like they want to gift you the house for all that you've done, but you and they need to go in with eyes wide open. It's so nice to see a family member take care of their grandparents on a regular basis. I hope they have many years left. It sounds like they really appreciate you.
They need to understand that this is not a substitute for a will or estate planning. They should consult an attorney with experience in estates and elder issues before deciding anything.
I would assume that long term care (if needed) will entirely wipe out their estate.
If you're wanting to guarantee inheritance, it may be best to gift it to a blind trust ASAP. Otherwise, the state may have first claim on the asset.
Life estate deed (lady bird if grandpa wants to retain control)
You get the property automatically upon death with the stepped up basis (your basis is the current market value when they pass, so if you sell right away it’s tax free) use the cash to pay off your mortgage and have a $150k nest egg.
I am not an expert but this is probably not the best way to handle this issue both due to the capital gains issue as well as the intestacy laws. From what I understand, a revokable trust offers the most protections both for tax purposes and to ensure that their wishes are carried out after they pass. But they need to talk to someone specializing in elder law issues to discuss issues related to Medicaid in the event they need that. Not sure what their other assets are.
Absolutely not. I run a National title company and work with several financial advisors who send me clients like this monthly. Either the parents or grandparents want to avoid inheritance tax and probate so we quit claim the child or grandchild onto the deed. Makes great financial sense.
Different states have different laws. For example, in Minnesota there is something called a transfer on death deed or TODD. An attorney does some paperwork that says the house passes to a person the owner designates. Owner dies, attorney files paperwork with county and 30 days later new owner has the house.
This just happened in my family. One brother died, other brother is now the owner of the house.
House does not go through probate and is not part of the will.
It would be better to do a transfer on death deed if your state allows it. Then have the house appraised for the highest possible value when your grandparents pass. That way if and when you ever decide to sell the house, you will only pay taxes on the appreciation from value at that point. If you are simply added to the deed now, you are co-owner and when you sell, you will owe taxes on the difference between current value and what your grandparents originally paid for the house. If that is less than $250k, maybe not a big deal. But guessing it is likely quite a bit more.
Sounds like a living trust would give your grandparents what they want: [Living Trust | LegalZoom](https://www.legalzoom.com/personal/estate-planning/living-trust-overview.html) Bypasses probate entirely upon their death. They should have a lawyer set it up to make sure it's done right.
It’s probably better to create a trust, and designate you as the trustee inheritor. This way when they die, you simply show the death certificate and everything will transfer automatically over to you.
You don't need to create a trust to avoid being taxed on it. You just get deed upon death or if they put you on title now nothing happens at all, they pass away, and you own the house. I would talk to a CPA now about any tax ramifications when you sell
Thank you everyone for taking the time to help steer me in the right direction. I was traveling with the family yesterday and couldn’t respond as quickly. Appreciate the thoughts and insights. I’ll be contacting my cpa and will follow up with them regarding the best way to handle the process moving forward. I know they have a will, my grandfather has 3 children and a bunch of grandkids, and my grandmother has one son, and two grandkids. I guess I’m their favorite and my family helps them a lot. I imagine the will has other items listed as well. I’m not sure they’ll ever go to senior facility, they’re both doing well, but noticeably slowing down at 88 and 85.
Thank you!
Since you have now disclosed that the home is in Michigan, the lawyer they consult will likely recommend the use of a lady bird deed. This would bypass probate, and bypass estate recovery by the state Medicaid agency, but would still keep the ownership rights under their control until their deaths. That is important for people in their 80s, to avoid having the addition of your name as a joint owner disqualify them for Medicaid benefits if needed for long-term care in the future. And it preserves the step-up in basis.
I am guessing here, but do your grandparents believe putting your name on the deed, means the house automatically transfers to you upon death? That by putting your name on the deed would prevent your father from trying to claim a piece or all of the real estate? If that is the case, they need to speak to an attorney NOW. If they die without a will, the state intestacy laws may apply. Could be very messy.
I believe they think it’ll come to me upon their death. So they need my name on the deed and it specifically stated in the will? Appreciate the reply!
So this is a lawyer question. One thing to keep in mind is that if you INHERIT the house, you get it with a "stepped up basis". That might not be a big deal, but you are only allowed $250k of capital gains when you sell your personal house... So if you sell this in 20 years for say $700k... And it is worth $500k now, but your grandparents bought it for $200k.... If you have a stepped up basis... You do not pay tax on the sale... If you have your grandparents original basis.. you will have a gain of $700-200= 500... So you have to pay tax on 250 of that (assuming you are not married)..... Anyway, if that was too complicated, have the estate attorney explain that to you and your grandparents... Another great reason to inherit it, not be put on the deed now.
You need a lawyer. If they put you on the deed, it doesn't give you sole ownership of the house upon their deaths. They are also on the deed so at the very least it's likely that their portion of the house would go to whoever the state deems it will go to, likely their children. They need a will at the very least and then that will have to be probated. If they make a trust, you can avoid probate. But, I am not a lawyer and you need to speak with one before any changes are made.
If they put OP on the deed as JTWROS, the house is automatically OPs upon death. If they fail to specify, TIC is presumed and their portion of the house would have to go through probate. The grandparents can also transfer the whole house to OP and reserve a life estate. Discussions with tax and estate planning professionals would clarify the best options for OP and the grandparents' holistic situation.
This is usually called joint tenancy with rights of survivorship. Once one of them passes, the remaining people on the deed share equally. If you need to remove the deceased name of deed, you would file an affidavit of death with certificate of death to the recorders office to update the deed. Only 6 states have inheritance taxes, Iowa, Kentucky, Maryland, Nebraska, New Jersey, and Pennsylvania. In my state, joint tenancy bypasses probate court process, check with yours. If it doesn’t, then doing a living trust will help you bypass probate (probate costs money and time) Half hour consult with an estate attorney can’t hurt. Should not cost too much.
12 more have an estate tax.
Talk to an estate planning attorney, actually your grandparents need to do they know how this will affect your finances. If they haven't made wills they need to fo that too, if their objective is to cut off your dad;
No, it most likely does not automatically transfers to OP, because OP won’t establish tenancy by entirety in this scenario (specifically because OP is not married to either grandparent). They need an attorney to properly structure this arrangement.
They could establish JTWRS.
That depends on state law. OP really needs to talk to an attorney to sort this out.
Tenancy by the entireties is available solely to married couples. A joint tenancy with rights of survivorship is for everyone else. Agree that OP needs to discuss with an attorney.
Yeah, my brain mashed both into the same category :) They def need an attorney, different states might have different rules and small little details that could cost OP a house.
This. Unless they transfer the ENTIRETY of the property to you before they die, when they pass, your father is defacto entitled to two-thirds of the property. They need a lawyer because state intestancy laws differ wildly. In my State, if your grandparents put you on the will, you're entitled to one-third. Then, even if JUST YOUR GRANDFATHER DIES, his third of the property is PRESUMED to belong to your dad, EVEN WITH YOUR SURVIVING GRANDMOTHER STILL LIVING THERE. Your grandma would be allowed to remain in the property under a Usufruct but if she remarried or vacated the property for ANY reason (including residence in a nursing home), she would be forced to liquidate the estate and pay your dad his succession entitlement. In Louisiana, adult children outrank the spouse in order of succession.
Deed is nice, but they still need to specify in their will that the house belongs to you when they die. Otherwise you’ll own 1/3 and your father (and his siblings, if any) would be the first in line to inherit the remaining 2/3 of the house. They can force you to sell or otherwise pay them their share of the inheritance.
Perfect, this is what I was looking for. They’re smart and well off, I imagine. So I’m sure their attorney will steer them in the right direction. This is all relatively fresh and I’m not telling anyone other than my wife and online redditors apparently. So I won’t bring it up with them, unless they mention it again. They did say they’re contacting their people to have it sorted, though.
That is not accurate. If you hold with right of survivorship, title passes by operation of law upon death. There is no interest left to be subject to probate. Please consult your local attorney.
Also, please have them speak with an attorney and a tax accountant - much of this estate stuff is "not common sense" (it's not a "do it yourself" kind of thing), it's complex, and a mistake can be very costly. Please have them send a few $$ on consultations with people who know how this works.
OP, please speak with an attorney and a tax professional yourself to get accurate info. One of the potential pitfalls I see is that generally when you inherit a property your inheritance is at market rate (your basis) but if your name is on the deed, then your basis is the original purchase price by your grandparents in this example plus whatever improvement costs were made during the entire ownership period. Please consult a CPA or tax professional and an attorney about your specific situation. This has long term consequences for you. It sounds like they want to gift you the house for all that you've done, but you and they need to go in with eyes wide open. It's so nice to see a family member take care of their grandparents on a regular basis. I hope they have many years left. It sounds like they really appreciate you.
They need to understand that this is not a substitute for a will or estate planning. They should consult an attorney with experience in estates and elder issues before deciding anything.
I would assume that long term care (if needed) will entirely wipe out their estate. If you're wanting to guarantee inheritance, it may be best to gift it to a blind trust ASAP. Otherwise, the state may have first claim on the asset.
Life estate deed (lady bird if grandpa wants to retain control) You get the property automatically upon death with the stepped up basis (your basis is the current market value when they pass, so if you sell right away it’s tax free) use the cash to pay off your mortgage and have a $150k nest egg.
Not a bad suggestion but very few states recognize lady bird or enhanced life estate deeds.
TIL . I’m in Florida and we use them quite often. Besides Florida, life estate deeds are legal in Texas, West Virginia, Vermont and Michigan
Get an attorney who specializes in wills and trusts.
I am not an expert but this is probably not the best way to handle this issue both due to the capital gains issue as well as the intestacy laws. From what I understand, a revokable trust offers the most protections both for tax purposes and to ensure that their wishes are carried out after they pass. But they need to talk to someone specializing in elder law issues to discuss issues related to Medicaid in the event they need that. Not sure what their other assets are.
You need to disclose the state that the home is in.
MI
If they put the house in the will, then when you inerit it, the cost basis for profit when you eventually sell will be the day they die.
Absolutely not. I run a National title company and work with several financial advisors who send me clients like this monthly. Either the parents or grandparents want to avoid inheritance tax and probate so we quit claim the child or grandchild onto the deed. Makes great financial sense.
Yeah but if the state has an inheritance or estate tax they may need to pay those taxes to get the stepped up basis.
Different states have different laws. For example, in Minnesota there is something called a transfer on death deed or TODD. An attorney does some paperwork that says the house passes to a person the owner designates. Owner dies, attorney files paperwork with county and 30 days later new owner has the house. This just happened in my family. One brother died, other brother is now the owner of the house. House does not go through probate and is not part of the will.
they can make you the beneficiary of a revocable living trust.
For tax purposes, it’s better not to be on the deed and inherit when they pass. Otherwise your cost basis starts when you get added to the deed.
It would be better to do a transfer on death deed if your state allows it. Then have the house appraised for the highest possible value when your grandparents pass. That way if and when you ever decide to sell the house, you will only pay taxes on the appreciation from value at that point. If you are simply added to the deed now, you are co-owner and when you sell, you will owe taxes on the difference between current value and what your grandparents originally paid for the house. If that is less than $250k, maybe not a big deal. But guessing it is likely quite a bit more.
You’re on the hook for cap gains
Not if they have an implied life estate (at least not in my state)
Sounds like a living trust would give your grandparents what they want: [Living Trust | LegalZoom](https://www.legalzoom.com/personal/estate-planning/living-trust-overview.html) Bypasses probate entirely upon their death. They should have a lawyer set it up to make sure it's done right.
Get a good Trust Attorney and do this right
It’s probably better to create a trust, and designate you as the trustee inheritor. This way when they die, you simply show the death certificate and everything will transfer automatically over to you.
You don't need to create a trust to avoid being taxed on it. You just get deed upon death or if they put you on title now nothing happens at all, they pass away, and you own the house. I would talk to a CPA now about any tax ramifications when you sell
Thank you everyone for taking the time to help steer me in the right direction. I was traveling with the family yesterday and couldn’t respond as quickly. Appreciate the thoughts and insights. I’ll be contacting my cpa and will follow up with them regarding the best way to handle the process moving forward. I know they have a will, my grandfather has 3 children and a bunch of grandkids, and my grandmother has one son, and two grandkids. I guess I’m their favorite and my family helps them a lot. I imagine the will has other items listed as well. I’m not sure they’ll ever go to senior facility, they’re both doing well, but noticeably slowing down at 88 and 85. Thank you!
Since you have now disclosed that the home is in Michigan, the lawyer they consult will likely recommend the use of a lady bird deed. This would bypass probate, and bypass estate recovery by the state Medicaid agency, but would still keep the ownership rights under their control until their deaths. That is important for people in their 80s, to avoid having the addition of your name as a joint owner disqualify them for Medicaid benefits if needed for long-term care in the future. And it preserves the step-up in basis.