Tag Archives: Gifts of Real Estate

Is an Inheritance a Gift or an Entitlement?

26 Sep

MetroBoston publication date September 25, 2013
By Attorney George Warshaw

The answer depends not only on your personal philosophy but whether you are the one inheriting or giving.

More people these days are considering whether it is better to leave all or a sizeable portion of one’s money and property to a charity rather than one’s children.

A frequently asked question is whether an inheritance will help one’s children in some important way or provide an incentive to do little or nothing with their lives, personal growth, or career development.

Frankly, too many children of wealthy or financially well-off families seem to do far less with their lives while waiting for an inheritance and become hostile later on when they don’t believe they received enough.

In my view, the number one purpose of earning money and acquiring assets over a lifetime is to take care of oneself first and foremost. What you leave to your children afterwards is something you earned. That point should be emphasized to one’s children.

Many believe today that the best estate plans remove the cost burden of education and medical expenses for one’s children or grandchildren, provide support where needed and incentives to do more with their lives.

More next week.

© 2013 George Warshaw.  George Warshaw is a well-known attorney and author. He represents buyers and sellers of homes and condos in Massachusetts, litigates real estate matters, and prepares wills, trusts, and estate plans. George welcomes new clients and questions.

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Mom Strikes Back!

7 Mar

Metro®Boston, Publication Date: March 7, 2012
By: George Warshaw

Last week I wrote about the loving son who filed to evict his 98 year old mother from the home she previously deeded to him. The son gave up!

How can a parent protect one’s home while deeding it, with good intentions, to a child to manage or oversee?

The first caution I must mention is that planning to accomplish one thing for older parents often makes a mess of something else.

For example, you may wish to transfer the deed of a property into a trust for ease of inheritance; the transfer, however, may create an unintended Medicaid planning problem.

To safeguard a parent’s home, one should think twice (or three or four times) before deeding it to one’s children. The loss of control for the elderly Mrs. K almost cost her dearly.

There are several safeguarding techniques I like to use.

A parent can grant the home to a child or relative and reserve a “life estate”; i.e. a right to live in and use the house for one’s life; or place the property into a trust.

If using a trust, it is often valuable to require the consent of a trusted advisor (lawyer, financial planner, etc.) before a trustee can sell or mortgage the house.

More on this Next Week. © 2012 George Warshaw.

George Warshaw is a real estate attorney and author. He represents buyers and sellers of homes and condos in Massachusetts, and prepares wills, trusts, and estate plans. George welcomes new clients and questions at metro@warshawlaw.com.

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Legal Advice: Laws, and court decisions interpreting them, change frequently and this article is not updated as laws change. The content and information contained in this article is neither intended as legal advice nor shall establish an attorney-client relationship.

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Where is Grandma’s Will?

11 Jan

Metro®Boston, Publication Date: January 4, 2012
By Attorney George Warshaw

Over family gatherings during the holidays, the topic often turns to one’s parent’s or grandparent’s will.

“It’s in the safe deposit  box, I think.”

“It’s in her sock drawer with her old letters from Dad.”

“It’s not where I saw it last. OMG! Maybe the lawyer has it?”

While a safe deposit box seems like a good idea to put the will, if your name isn’t on the box you will need authority from a court to open the box.

There’s another place you can store a will that is cheap and easy.

Try the Registry of Probate. The fee varies with the county but it’s not a lot.

In our office, we hold the original will for 12 months in case someone wants to make any changes or updates. We then file the will with the Probate Court.

Since most changes or corrections are made in the first year, it’s not likely to change for several years and the will can be easily retrieved for updating.

If the person later dies, the Probate Court checks its storage records when an estate is later filed.

So if you want to find it when you need it, consider using the Probate Court instead of a safe deposit box or Grandma’s sock drawer!

© 2011 George Warshaw.

George Warshaw is a real estate attorney and author. He represents buyers and sellers of homes and condos in Massachusetts, and prepares wills, trusts, and estate plans. George welcomes new clients and questions at metro@warshawlaw.com.

Legal Advice: Laws, and court decisions interpreting them, change frequently and this article is not updated as laws change. The content and information contained in this article is neither intended as legal advice nor shall establish an attorney-client relationship.

Before making any legal decision, consult an attorney to see how the foregoing may apply to your circumstances.

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Is it Better to Inherit Real Estate?

20 Dec

Metro®Boston, Publication Date: December 14, 2011
By Attorney George Warshaw

Many people often want to give their home to their children before they die. It’s certainly simpler but it sometimes has unintended tax consequences. (See GeorgeintheMetro.com for last week’s story).

There is an important tax rule regarding inheriting real estate that could save you a bundle of taxes.

When a person dies, the fair market value of any real estate owned must be determined. If you inherit property, you inherit it at its fair market value.

Inherit a house worth $500,000, sell it a month later for $500,000, and there is no taxable gain. But what if your parents only paid $100,000 for it 20 years ago?

It matters not what your parents paid if you inherit it, but it may matter if you receive it as a gift during their lifetimes.

The basic tax rule is this: you inherit property at fair market value; but when you receive it as a gift, you acquire it at the same cost+ tax basis as the giver had in the property. Sell it later for more than cost+ and you could pay a tax that could have been avoided.

So before gifting real estate: always consult your tax advisor or attorney. The foregoing is not intended as legal advice.

© 2011 George Warshaw. All Right Reserved.

George Warshaw is a real estate attorney and author. He represents buyers and sellers of homes and condos in Massachusetts, and prepares wills, trusts, and estate plans. George welcomes new clients and questions at george.warshaw@warshawlaw.com.  

Legal Advice: Laws, and court decisionsinterpreting them, change frequently and this article is not updated as laws change. The content and information contained in this article is neitherintended as legal advice nor shall establish an attorney-client relationship.

Before making any legal decision, consult an attorney to see how the foregoing may apply to your circumstances.

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Real Estate for Christmas

30 Nov

By Attorney George Warshaw

It’s Christmas and Hanukkah time. Naturally one’s thoughts turn to gifts.

As families get together, oftentimes the discussion shifts to a parent’s home. Is it better to gift it now or inherit it later?

While the answer requires a careful discussion with a tax advisor, it’s helpful to review a key gifting rule.

When a person receives a gift of real estate, the gift is valued for tax purposes at the same cost+ value (or “tax basis” in accountant-speak) as the giver has in it.

Bought a home years ago for $200,000, put $50,000 in improvements into it, and your tax basis is likely $250,000.

Give it to your kids today and the IRS will likely value the gift as worth $250,000. It doesn’t matter if the house is worth $1,000,000, the gifting value is still $250,000.

If your kids later sell it for a million, the IRS deems they made a profit of $750,000 (sale price minus tax basis) – and they may have to pay a tax on the $750,000 gain at the time of sale. That’s painful!

Next week: Is it better to Inherit Real Estate?

Always consult your tax advisor or attorney before gifting real estate. The foregoing is not intended as legal advice. Only an in person consultation with an attorney can establish an attorney-client relationship. © 2011 George Warshaw.

George Warshaw is a real estate attorney and author. He represents buyers and sellers of homes and condos in Massachusetts, and prepares wills, trusts, and estate plans. George welcomes new clients and questions at george.warshaw@warshawlaw.com.

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Cash Now or Inherit Later?

30 Apr

Metro® Boston, Publication Date: March 9, 2011

By Attorney George Warshaw 

What would you do? 

An elderly parent owns several rental properties. He offers to sell these investments and give you your inheritance now. You could, of course, decline and simply inherit it several years from now. 

Most people, I suspect, would take the cash now – but they might be short changing themselves. Here’s why. 

Let’s say your parent sells an investment property and has to pay a capital gains tax of $100,000 on the profits realized. If you were to inherit the property instead, you might have saved the $100,000. 

When a person inherits real estate, he or she acquires it at its fair market value. Sell it at the same value and you haven’t made a profit in the eyes of the IRS. For example, if a property is worth a million when you inherit it and then you sell it at the same amount, you haven’t made a profit. You make a profit only if you sell it for more.

Be careful though: if your parent’s estate is large enough to be subject to a federal or state estate tax, it might be better to take the money today. Consult a tax accountant or attorney for your situation. © 2011 George Warshaw.

The foregoing is not intended as legal advice. Consult an attorney to see how or if the foregoing applies to you.

Attorney George Warshaw represents buyers and sellers of homes, condos and investment properties, prepares wills and trusts for inheriting real estate, and trusts that protect your children and pets. George welcomes new clients and questions at  george.warshaw@warshawlaw.com.

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Should You Gift Real Estate?

30 Apr

Metro® Boston, Publication Date: January 12, 2011 

 By Attorney George Warshaw 

Is it better to receive a gift of real estate or inherit it later? Tax wise, a gift isn’t always the best choice for the recipient. 

When a person dies one’s real estate has to be valued. Let’s say the present market value of the house is $500,000, but you, the homeowner, only paid $100,000.

Give it to your children while you are alive and they later sell it for $500,000: they may have to pay a capital gains tax on $400,000 of profit. But if they inherit and sell it for $500,000, no tax or a lesser tax may be due.

 Here’s why:

 A person who receives a gift steps into the shoes of the giver. The recipient acquires the property at the same cost or tax basis as the person who gave it, i.e. $100,000. Sell it for $500,000 and you’ve made a profit. If you inherit property, you instead acquire it at its fair market value, i.e., the same as if you paid $500,000 for it. Sell it for $500,000 and you’ve sold it for the same amount that you acquired it.

 The above information may not apply you. Always consult your tax advisor or attorney before gifting real estate. There are numerous opportunities available to owners of real estate. © 2011 George Warshaw.

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Caution. The foregoing is not intended as legal advice. Laws, and court decisions interpreting them, change frequently. This post is not updated. If you have a legal question, only an actual consultation with an attorney who has an opportunity to review all the facts can provide an answer that applies to your situation.

Attorney George Warshaw represents buyers and sellers of homes, condos and investment properties and prepares wills and trusts for inheriting real estate. George welcomes new clients and questions at  george.warshaw@warshawlaw.com.

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Gifting Your Home to Your Children

30 Apr

 Metro® Boston, Publication Date: January 5, 2011

 By Attorney George Warshaw

 It’s not unusual for parents to gift their home to their children and expect to live in it afterwards; but we’ve all heard stories – all too real – about how someone’s parents were later forced to move.

How can something so simple go so badly?

Suppose you (the parent) deed your home to your son as a gift. He gets a mortgage but can’t pay it; or, your son’s creditors place a lien against all real estate standing in his name; or, your son gets divorced and now your home is one of his assets before a probate judge.

How can you protect your home? A trust is perhaps the best method, but a life estate may work almost as well.

It works like this: In the deed to your son or daughter you, the parent, simply reserve the right to live in the house the rest of your life (i.e. called a “life estate”). While your son’s creditors may still acquire a lien, the lien is subject to your right to live in the house forever. If your son wants a mortgage, your permission is needed – and, if you take my advice – be smart, don’t give it! If you do give it, you will likely be evicted in the event of a foreclosure. © 2011 George Warshaw.

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Caution. The foregoing is not intended as legal advice. Laws, and court decisions interpreting them, change frequently. This post is not updated. If you have a legal question, only an actual consultation with an attorney who has an opportunity to review all the facts can provide an answer that applies to your situation.

Attorney George Warshaw represents buyers and sellers of homes, condos and investment properties and prepares wills and trusts for inheriting real estate. George welcomes new clients and questions at  george.warshaw@warshawlaw.com.

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