Inheritance Land/Home

Fire-Man · #1 12/21/14, 06:41 AM

A friend is going to get a farm and home when his mother passes---I have already told him to talk with a Lawyer but I figured some of you would know what will happen----and I will tell him.

His Grandmother passed 25 years ago and she willed the land to Him---with his Mother a Life time right. His Mother has been renting the land, home, etc. His Mother told him yesterday to check into what is going to happen at her death(she is 78)------When the land is turned over to him after her death----will he have to pay inheritance tax?

She has never payed any, but she only has a life-time-right!
She wants to turn it over to him Now while she is alive?

What say Yea?

Thanks

brosil · #2 12/21/14, 07:08 AM

My folks sold me the farm for $1 long ago and kept lifetime rights to live here and farm. In Ohio at that time if they lived 8 years, it fell to me without any taxes or probate. Laws vary by state by a transfer now might save him. He's got to get a lawyer.

DAVID In Wisconsin · #3 12/21/14, 08:03 AM

Laws vary by state. Each case is different but some do better by inheriting as they inherit at the current stepped up value. Lawyer up.

TxMex · #4 12/21/14, 08:17 AM

I agree. Laws vary by state.

He may save a lot of money in the long run by consulting a good attorney. Unfortunately I seem to keep getting the incompetent variety of attorney.

greg_n_ga · #5 12/21/14, 08:38 AM

I think it is clear that laws vary state to state. Here in county I live in, the magistrate judge also a practicing attorney. It made the property transfer much easier. Check the local probate/magistrate. Being from a small town community here, it helped us.

billinwv · #6 12/21/14, 09:24 AM

If he was willed it 25 years ago shouldn't it be in his name already? If so, done deal.

MO_cows · #7 12/21/14, 09:35 AM

Get some tax advice and legal advice. He doesn't want to end up liable for capital gains tax for all the appreciation since Grandma bought the place.

Pony · #8 12/21/14, 10:10 AM

My concern would be capital gains. If property is signed over, and he chooses to sell, he could be responsible for taxes on the difference between what granny paid for the land and the selling price.

Fire-Man · #9 12/21/14, 12:00 PM

Quote:

Originally Posted by Pony

My concern would be capital gains. If property is signed over, and he chooses to sell, he could be responsible for taxes on the difference between what granny paid for the land and the selling price.

He has been living on the farm before his Grandmother died and He Would Not Sell It---or--It would take a "MAJOR" diaster before he would sell it. Even though his Mother has a Life-time right(she lives in another town)----and thats the way it was deeded from the Will----To Him with his mother a life-time-right. His Mother does not rent it anymore----he keeps it from growing up/takes care of it---so his mother wants out of it so nothing could come up if she had to be put in a nursing home as well as she is thinking it would be better to take care of it now instead of after she is gone.

Jennifer L. · #10 12/21/14, 12:02 PM

I would think the inheritance tax has already been paid when the grandmother died and her will was probated. Son already has ownership. But this is what attorneys are for.

Explorer · #11 12/21/14, 12:21 PM

I agree with Jennifer. Lawyer up.

Nimrod · #12 12/21/14, 12:55 PM

Get a lawyer because laws vary.

Below is my experience here in MN. Your mileage may vary. I may be wrong.

(1) Did he inherit the land when his grandmother died? Was her will probated? The owners name should be on the title. They should also be the ones the county is sending the property tax bills to.

If he owns the property then any inheritance tax should have been paid 25 years ago when granny died so he won't owe any when his mom dies. If the land is in his name then the nursing home can't claw back the land to pay his mom's bills because she doesn't own it.

Capital gains tax is based on the amount you sold the land for, minus your cost basis. He won't owe any capital gains tax until he sells the land. His cost basis is what the land was worth when he inherited it plus any the cost of any improvements he made to the land and buildings that he has documentation (receipts) for. If he took title to the land 25 years ago then his cost basis is what it was worth then plus documented improvements. He could owe a bunch if he sells. A neat twist to this is that, if he wills it to someone when he dies, his estate doesn't owe any capital gains tax and the cost basis for the new owner is the value of the land upon his death.

(2)If she wants to turn it over to him right now, and he owns it, then she is giving up her right to use the land. No taxes ensue but get it in writing.

(3) Inheritance taxes are based on the size of the estate. Small estates, under a half million, don't pay any inheritance tax. Larger ones do. If his mom's estate is big enough it will owe inheritance taxes.

fordy · #13 12/21/14, 06:42 PM

[QUOTE=Fire-Man;7322424]A friend is going to get a farm and home when his mother passes---I have already told him to talk with a Lawyer but I figured some of you would know what will happen----and I will tell him.

His Grandmother passed 25 years ago and she willed the land to Him---with his Mother a Life time right. His Mother has been renting the land, home, etc. His Mother told him yesterday to check into what is going to happen at her death(she is 78)------When the land is turned over to him after her death----will he have to pay inheritance tax?

She has never payed any, but she only has a life-time-right!
She wants to turn it over to him Now while she is alive?

What say Yea?

...............Normally , inherited property receives a stepped up basis(evaluation) for federal estate tax purposes , IF the gross estate is of sufficient value to be taxed at the appropriate tax rate . IF , no federal estate tax is due , there still maybe state inheritance tax .
............... A stepped UP valuation is of great value to the person receiving the property , when that person decides to sell the property because the net taxable gain on the sale will be much lower due to the stepped up basis assigned to it . , fordy

rambler · #14 12/23/14, 01:18 AM

If done properly when granny passed, the son already owns it and has name on it.

Mom is renting the property.... You mean mom rented it out and collected the rent? She should not be paying to rent the land for herself......

Mom controls the property while she is alive, but does not own it.

But I would look into if things were done right back when grandma passed away, it is surprising how often it is not done right......

Paul

topofmountain · #15 12/23/14, 01:37 AM

If she wants him to have it now she can quick claim it to him & call it a gift. As a gift that avoids Fed Taxes. As for State taxes that varies from State to State as stated.

bigjon · #16 12/23/14, 05:23 AM

bought mom's farm,she has the right to LIVE there until her death.i own it-get a lawyer&see if grandma's farm was done right.

Fire-Man · #17 12/23/14, 05:54 AM

Quote:

Originally Posted by rambler

.... You mean mom rented it out and collected the rent? Paul

Right!

doozie · #18 12/23/14, 06:45 AM

I agree,get a real estate lawyer, it probably won't cost as much as they may think, and the peace of mind for having everything in writing,and set up properly would be worth it, mom and son go in together with any paperwork, etc.
I believe mom can decline her rights to live there, and son will be sole owner with no restrictions then.
I don't think he has to worry about capital gains unless he sells, if he has lived there for years,and even then, no tax unless it is sold for over a certain amount.

Use Less · #19 12/23/14, 06:56 AM

Lawyer. Cheap in comparison to a lifetime of regret for not consulting one.

Nimrod · #20 12/23/14, 08:51 AM

Again check with a lawyer.

You have two exemptions per lifetime to capital gains taxes. If you sell a house, and have lived there for 2 out of the last 5 years, the first $500,000? of gain is exempt from capital gains taxes.