finance, taxes

Karen Asked About 'Ask the Dolans: Dolans.com'

We bought a small second home for our daughter to ...

We bought a small second home for our daughter to live in. We paid 54,000. for the home, paid cash with a home equity loan. We have $22,000. left on the loan. Our daughter pays us $300. a month which we put towards taxes. We have the house willed to her, free and clear when we pass. However, we want to turn the house over to her now. What is the best way for us to do that with out being hit with extra fees, for her or us, at tax time? Is there a way we can turn the house over to her as a gift? We live in New York State!! My husband and I are 62 and hoping to retire in the near future. Hope this is enough information for you to help us, Karen Swanson

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Answers

Eva Norris, enrolled agent Answered:

If you gift her the entire house at once, you will have to file a gift tax return and pay taxes on it. Her cost basis in the house is what you paid for it. if you wait and let it pass to her via the will, there will probably be no taxes due and her cost basis will be it's fair market value on the date of your death. If you are concerned about a possible Medicaid situation in the future, you need to speak to an attorney who is familiar with the rules. There is a five year lookback period on transfers of property or other gifts. It doesn't mean that you can't get Medicaid, just that there may be a longer waiting period.