change joint tenancy of house to trust

fusili3

New Member
Jurisdiction
Delaware
MY jurisdiction is LA, CALIFORNIA, NOT DELAWARE!!!!!!!!!!!

I live in California. My mom bought a house in 1972 for $20,000. In 1992 she added me as joint owner and the assessment rate, which is quite low because Prop 13 protects us, did not change. The house was worth about $300,000 in 1992.

If 1 of us dies, the house automatically passes to the other, but now that the house is worth $950,000 (WITH NO improvements over the years), I am concerned/unhappy that the survivor will get only a 1/2 stepped-up value. In my crude calculation, the survivor will get 1/2 of $950,000, which is $475,000 + 1/2 of the original purchase price, which is $10,000, + a $250,000 exclusion, as both of us have lived in the house since 1972.

THE Federal capital gains tax would kick in if the house were sold at market value of, say, $950,000----the tax basis would be 475,000 + 10,000 + 250,000 = 735,000; therefore, tax would be owed on $215,000 because the sale price of 950,000 - tax basis of 735,000 = $215,000. Perhaps California also has a capital gains tax.

1. COULD I quitclaim my share of the house to my mom WITHOUT incurring a re-assessment?

2. COULD my mom then create a trust with me as beneficiary that would enable me to get a full stepped-up value if she predeceases me?

3. If those 2 steps above are not possible, does another option exist to get the full stepped-up value?

THANKS
 
1. COULD I quitclaim my share of the house to my mom WITHOUT incurring a re-assessment?

zddoodah has already given you an answer that you can do that, and my own research supports that. He practices in CA and I do not, so I'd defer to him anyway on that. Note that you will need to file a federal gift tax return, Form 709, for this gift (and all other gifts you make to her in the same year).

2. COULD my mom then create a trust with me as beneficiary that would enable me to get a full stepped-up value if she predeceases me?

Yes. And there are other ways to do that too. For example, she could simply transfer the home to you via her will, or by recording a beneficiary deed which automatically transfers the home to you upon her death.

I suggest you see a CA estate planning attorney for help to get everything right. The cost in fees will be well worth it to avoid a snafu that might cost you much, much more.
 
Note that these schemes means you are unprotected in your interest until she passes. Be it an outright deed to her or into a trust that will get you the step up, there's nothing that says she can't then sell it or change whatever estate planning tool there so that you don't get it.
 
Thanks for the replies. I now know that I can achieve the goal of getting a trust to avoid taxes. I also must file the FEDERAL TAX form 709 for the gift tax that I incur. DOES California have a gift tax and a concomitant form that have to be dealt with?







MY jurisdiction is LA, CALIFORNIA, NOT DELAWARE!!!!!!!!!!!

I live in California. My mom bought a house in 1972 for $20,000. In 1992 she added me as joint owner and the assessment rate, which is quite low because Prop 13 protects us, did not change. The house was worth about $300,000 in 1992.

If 1 of us dies, the house automatically passes to the other, but now that the house is worth $950,000 (WITH NO improvements over the years), I am concerned/unhappy that the survivor will get only a 1/2 stepped-up value. In my crude calculation, the survivor will get 1/2 of $950,000, which is $475,000 + 1/2 of the original purchase price, which is $10,000, + a $250,000 exclusion, as both of us have lived in the house since 1972.

THE Federal capital gains tax would kick in if the house were sold at market value of, say, $950,000----the tax basis would be 475,000 + 10,000 + 250,000 = 735,000; therefore, tax would be owed on $215,000 because the sale price of 950,000 - tax basis of 735,000 = $215,000. Perhaps California also has a capital gains tax.

1. COULD I quitclaim my share of the house to my mom WITHOUT incurring a re-assessment?

2. COULD my mom then create a trust with me as beneficiary that would enable me to get a full stepped-up value if she predeceases me?

3. If those 2 steps above are not possible, does another option exist to get the full stepped-up value?

THANKS
 
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