I'm looking to give the properties to the adult kids in a few years. Can I just add them to the deed? Will there be capital gains? What's the easiest and least expensive way to do this? I thought trusts involve early fees. Thanks in advance.

I’m not a CPA, but adding kids to the deed, I believe, causes a tax consequence. Our kids will inherit our properties and get a stepped up basis so they could sell them with no gain.

When my grandfather put my dad on the deed of some property back in day, it caused a huge tax bill - my grandfather had purchased 7 house lots for $700 in a little-known town in Massachusetts back in the day. By the time he died and my dad sold the land it had risen in value exponentially. It was on Cape Cod! So dad had to pay taxes on the gain from $100...left him with very little compared to what my grandfather had intended.

Had he left it to him in trust or even in a will, it would have been much much better.

Don't go the easiest or even the cheapest route now - go for the best route for your kids.

Sorry didn't mean to use the word Trustee, I meant executor. I was both the sole benefactor and the person in charge of running the Irrevocable Trust.

It's not that expensive either. I think we spent $3500 or so to set up the Family trust, pour-over wills, POAs and Medical Directions, etc. We used an Estate firm, not our RE attorney...

JM,

I'm not a CPA but I handled properties after the deaths of each of my parents.

Ideally hold the property and let them inherit is at it's stepped up basis (current value). They can sell it at that price and not pay taxes on it.

If you add them to the deed they will have to pay taxes on the price increase from when you bought it AND and the depreciation going back to when you bought it.

Also, you are liable along with them for what THEY do. Example: they kill someone with their car. The bloodhound attys will take the property.

And for their debts and bankruptcy.

Being given real estate is like a monetary gift - increased income. Higher income can change their status for tax credits, health insurance, assistance, programs, etc.

Side note: we have advised our adult children to not expect any money from us. We straightened their teeth, paid for college, and pointed them in the right direction. It's up to THEM to build their fortunes.

I see lots of LLs wanting to FEEL GOOD by gifting property but it is not always good for the receiver.

I have bought many houses from heirs who could not care less and sold super cheap because they had not skin in the game.

BRAD

There's an order to life AND death. Plan you order now.

Our biggest fear (other than dying of course) was a mess left for others to clean up. I know you all know what I mean. Time is now to plan-- cause it's coming.

We set up our trust acct back in 2001. Cost was 6500.00. 2 years ago we updated, with a new Estate Atty for 2600.00. As WMH says do the whole plan.

Instead of the irrevocable trust, I would recommend placing the property into a revocable land trust. Then you can assign the beneficial interest to whom ever you would like.

The only irrevocable trust I have created has been my living trust. This outlines what happens when you die. I don't ever plan on becoming undead after I die. The draw back in Pa with using them to transfer real estate, is the state inheritance tax. Maryland might have a different tax structure but in Pa it is 0 % for spouse, 7% for kids (and/or parents), and 15% for everyone else. That lifing trust does allow you manage your affairs from beyond the grave so they are a good idea though.

Lots of great advice above. The best advice is to hire a professional, experienced estate attorney to help deal with this. You may also need a CPA who specialized in inheritances.

This is not the time to be a typical landlords and go for a cheap, DIY solution. If it costs $5,000, so what if that saves you $50,000 in taxes and costs?

The rich hire professional help. The lower classes think they can be a jack-of-all-trades and "get 'er done." Can't tell you how many folks I've heard make the mistake of not seeking professional guidance. This is why the old statement is true: "The rich get richer and the poor get poorer". The difference is often in having proper knowledge and execution of the proper actions.

P.S. I am not a professional, but everything I've ever read and heard says just adding them to the deed while you are still alive is not a good strategy. Whatever you do--even if you choose to DIY this--don't do that. The simplest DIY method would be to file a Beneficiary Deed. Draw up the document now or hire a title agency or lawyer to draw it up for you, record it with the local Recorder of Deeds office. It only goes into effect when you die and will automatically transfer ownership interest to whichever party(ies) you name... AFTER death. This will keep it out of probate. Very similar to a TOD (Title on Death) for a motor vehicle or POD (Paid on Death) for a bank account or investment account.

Are you trying to get rid of your property or are you simply trying to get real estate into the hands of your kids so that they have income?

You can gift them $17,000 a year for several years, so if your goal is for them to have investment property, then buy something with new money, put it into the kid's name and start paying off (or forgiving) $17,000 a year of the mortgage for them while they run the rental and collect the rent money. That will start them with a higher basis.

Pennsylvania has inheritance tax, in addition to capital gains on the stepped up value if/when the kids sell my properties. So I figured I'd get a life insurance policy like mentioned above to cover those taxes. I

I have something in my medical records that is very rare and misunderstood. I was denied coverage. My doctor wrote an appeal letter for me explaining how my medical condition did not affect my life expectancy, at all. It actually is a good thing because I get monitored and it is very thorough so anything else going wrong would be caught relatively early. Didn't matter.

Just in case I wasn't clear. On my previous advice, I was not advocating placing the property in an irrevocable trust. If you do that, you don't own it anymore. No, the only thing that goes in the trust is a life insurance policy which will be tax free and inheritance tax free. It can be used to fund the inheritance taxes. No property should be placed in that trust.

The Tax Laws have changed a lot over the last few years. One friend would not listen to my advice. I am a builder, contractor, accountant, CPA and took business law in college.

I told him to consult with a Probate, Trust, Will and Real Estate Attorney. He was too cheap to spend $5,000 for professional advice.

I know this is more for a tax professional but I have a question.

We have the properties in an LLC. As of right now the kids are not associated with the LLC at all.

Can the kids be made voting members of the LLC in the case of my death and then they just run the business (into the ground)?

Set up a Trust as others have noted - About 3 to 4K is the going price in our area. Use an Attorney who specializes in estate planning. As others have noted this NOT a DIY.

I would like to add one thing that is very important in estate planning. What happens if you have long term medical needs that require caregiver services by the children.

What will you do if one child helps and the other children do NOT? I can tell you from personal experience some siblings help and some don't.

We have two LLCs and some privately owned property, and some SDIRA owned properties too. As well as stocks and such.

That's where the estate attorney came in - she talked with us about where we wanted each property to go (which kid) and how to do it - and then set up the deeds to reflect that. One kid gets THIS LLC and another kid gets THAT LLC and the third gets the SDIRA stuff (he's much older and will benefit from that sooner than the other kids, plus with the new 10 year rules it MIGHT work out for him.)

The attorney who did our planning handled my mother's probate and did it included in the 6 or 7k we paid him. He made us wills, Power of Attorney, etc..also created Trusts. Unfortunately he did help us transfer the properties to the trust and we were too naïve to know it needed done. So we need to see another (this time an Elder law attorney) to get things right. We also were caring for my sister with anticipation of her ending up in a nursing home. She did and it went through her $$ very quickly at 8k a month..so consider that.

We did find an interesting podcast on the subject by an attorney here in Indiana called LegalTeapodcast dot com

Thanks all for the info.

My older brother had a stroke in November. As his only close family member I had to start handling his affairs. After that nightmare we made many changes to our trust.

We found both names should be on all utility bills or you can’t make and changes. On credit cards have one for each family member. On CC’s there is a primary name and a secondary name. The secondary name has no authority.

A power of attorney is not sufficient because many

The attorney Jerry refers to above, Mary Hart, did such an excellent job of instruction on various aspects of estate planning, that I have asked her to be a featured instructor at the upcoming Landlord Convention in Columbus. She will also be doing a special question and answer session on estate planning as well.

On the advice of our r.e. attorney, we created Lady Bird deeds for all of our properties. He explained that some of the

Researched and created revocable family trusts: One for my NY stat mother in law and her three children, one each for two houses my wife and I owned in SW Fl, and one each for three properties in VT.

When my mother in-law passed, my wife called NY state to ask about fees/taxes, etc. the reply was "you're all set".

We sold both of the florida houses in their trusts with no additional consequence (capital gains didn't change, but titling was without issue)

Agree with my friends Brad and Ray. The "Stepped Up Basis" is one of the most advantageous aspects of the IRS Federal Code,for real estate investors. If you give real estate to your children or anybody else during your lifetime BEFORE your death, you blow away the "Stepped Up Basis" advantage. What this advantage tax code provides is that the party inheriting real estate gets the basis of the property on the Date of Death of the departed. If the property is given to the child before the date of death, even the day before death, the child's basis becomes the basis that the parent paid when they bought the property maybe years, or decades earlier. For example you buy a house for $100,000 in 1995 that is now worth $385,000. You give it to your child before your death their basis is $100,000 and if they sell today they have a capital gain of $285,000. If they inherit it their basis is now $385,000 and if they immediately sell then there is NO capital gain. Today the capital gains rates are 0%, 15% and 20%. However, in the current Federal Budget proposal, it says that Capital Gains should be raised to as high as 39.6% and the Affordable Health tax is proposed to be raised to 5%. If that passes, that $285,000 gain could be taxed at 44.5% You could be giving almost HALF your estate away in taxes, especially if your state has estate or inheritance taxes. If you want to do that just write a check to the government now. Personally, I would not give real estate to my relatives before my departing.

What I have not seen mentioned is if the child is living in the house as their primary residence. He and a roommate are currently renting from us. He would like to get rid of the roommate but cannot afford the full rental. We have been discussing reducing the rent so he could afford it and placing him on the deed. In essence, he would cover the mortgage payment and other expenses but would have the house through survivorship. The stepped up basis would have no bearing since the capital gains would be exempt as primary residence. I know the response will (and should) be see a lawyer. I'm just wondering if anyone has thoughts or experience.

We are thrilled to be able to leave properties to our kids - split three ways, it gives them basic income but not a fortune, or if they sell, ditto. ALL of them see the benefits of rental real estate - they see what it has done for us - but maybe they just won't want to be landlords. Up to them. And no fighting with each other over it either, they each get some but none get all :)

Hopefully by the time I kick there will be a half decent management company in my area. That's about the only way I see my kids wanting to hold any properties.

I have identified a few "decent" property management companies. If I die first my husband can hire them while he figures out what i did all of these years and what he may want to do! If we both are gone we will have instructions for hiring property managers until they decide what they want to do! Mary Hart is a gem giving us great legal advice so when we finally get this all set up with a local attorney we will do it correctly! At the January retreat we signed up with consultations with Mary. We are talking to our kids now and making our plans some based on their differing desires! It's cruel not to take care of this before you go. Taxes, rip off attorneys are waiting! As a realtor i sell many estates it sadden' s me on what happens to those who don't plan properly!