<p>Hayden you can give your home to your kids without triggering a gift tax.</p>
<p>Very few people pay gift or estate taxes .</p>
<p><a href=“Tax Implications of Giving Your House to Your Child”>Home and Garden;
<p>So, if you give your kid (or make a quit claim deed) a house that has fair market value of $5.4 million or less, you don’t have to pay gift tax. Is my understanding correct?</p>
<p>You may end up paying an estate tax though. What you give above the annual gift threshold counts as part of your estate. </p>
<p>So, if the estate tax starts at 5.5 million, and your estate is 7 million… And you gave away a house worth 5.5, your estate will pay estate taxes on 1.5 million. </p>
<p>Talk to your cpa or tax attorney. Married couples have higher thresholds. Details make a difference.</p>
<p>There are cap gains tax issues too.</p>
<p>And you have to fill out and file gift tax forms.</p>
<p>With a quit claim deed, the donor still has to pay capital gain tax?</p>
<p>if the amount is above the estate tax which is 5.4 million something.</p>
<p>You need a cpa or a tax attorney. You shouldn’t be doing the things you are talking about without talking to an attorney or and a cpa. </p>
<p>I would say no cap gains tax on a quit claim deed, but the basis from the giver may carryover to the new owners.</p>
<p>I am not 100 percent sure and we are talking too much money to be unsure. </p>
<p>I always wonder when people talk about the gift tax, as if they think someone is going to actually have to pay the IRS a tax if they give away a little bit of money. From what I have read, in a nutshell, “The first thing to know about the federal gift tax is that gift givers—not gift recipients—have to pay it. Thankfully, you won’t owe the tax until you’ve given away more than $1 million in cash or other assets during your lifetime. The lifetime exclusion will be raised to $5.25 million starting in 2013. If you’re married, your spouse is entitled to a separate $5.25 million in 2013. So actually owing the gift tax is not a concern for most folks. But you may still have to file gift tax returns even though you don’t owe any tax.”</p>
<p>So if you aren’t giving away more than 5.25 million in your lifetime (after 2013), it’s not an issue. And even after that point, it’s not like the giver pays taxes, it’s that his or her estate will have to pay taxes on the amount greater than that after death. Did I get that right?</p>
<p>When you are gifted an asset, you get the basis of the giver. You will owe capital gains tax if you sell it at a profit, even a house, unless in the case of a house it becomes your primary residence. There are scenarios where gifting triggers capital gains tax for the giver.</p>
<p>When you inherit, you get the fair market value as a basis.</p>
<p>In both cases (assuming the gift is significant) there are gift/estate tax implications.</p>
<p>Whether it is smarter to gift a house or let it go through your estate is not always straightforward. There can be other factors involved like trying to avoid Medicaid clawbacks.</p>
<p>The devil is in the details, and there is a lot of variation from state to state.</p>
<p>This is one area where you need professional advice, do not try to figure it out by reading something on the internet.</p>
<p>Is this why it’s better to give the house when you are dead because you don’t have to pay tax on capital gain?</p>
<p>I have read that it is not a good idea to put children on the deed of a home. If one of the children gets a divorce, then their spouse would likely have a claim to the house. The other reason is that if one of the children is sued for any reason, then the house becomes an asset which could be attached by a judgment against one of the children. I think that professional advice is the only way to go in this kind of situation.</p>
<p>
Your estate won’t have to pay capital gains tax, but the entire value of the house could be subject to estate taxes if the estate’s value is high enough. So it may be better to transfer it and pay capital gains than pay estate tax on the increase in value.</p>
<p>Currently the Federal amount is $5.35 million each if you structure things right, so very few people will be subject to Federal estate tax (that amount could change at any time, though). However many states that have estate taxes have much smaller amounts that could be easily reached by your average upper-middle class person. And some states have inheritance taxes as well.</p>
<p>“While in this thread we worry whether our money will last till retirement, I’m worried whether my brain will last 30 years for retirement. The longer your brain the less money you will need in retirement”</p>
<p>That is also one of my major worries. I keep hoping they come up a new medical miracle that will keep our brains intact. I need to find some interesting brain games that will help.</p>
<p>I agree with post #3110, it’s not a good idea. People don’t stay married anymore.</p>
<p>I still go round and round with “how much is enough”. The basic premise of this thread. There are unknown variables like where we might end up in a few years (we are happy where we are but many of our friends are moving away and our s’s both live across the country in a very expensive COL area), and I fear we will find ourselves in a position of having to help our nephews when BIL/SIL are gone. Thats another story, but suffice it to say my DH will want to help them even though its not our fault they have not learned the meaning of work and money. </p>
<p>So, I obsess over “how much is enough”. We need to factor in healthcare, and I’d love it if DH stays employed until he is eligible for medicare, but thats many years off (not as many for me) and I worry about the potential devastating effects if one of us had a major medical issue and not great healthcare. Being in the field, I want the best healthcare and access to the best Drs if I need them.</p>
<p>DH has run plenty of financial calculators, but is amazed to see what our monthly expenses run. Its not any one monthly issue, but we travel, have done house remodeling (and there is more to do), threw an engagement party for DS#1, etc and it adds up. There will always be something. Next will probably be a car, as mine is 9 yrs old. Its fine, but its beginning to creep up on the list of things… along with a new fridge which we’ve postponed for a year. So there is always some expense. I don’t want to worry about how/on what we spend our $, and I don’t want to worry about outliving it either. So every time DH sets a target number and reaches it (though the market dive the other day didnt help) I reset the bar. Wish there was a way toi just feel comfortable with what we have That, or win the lottery.</p>
<p>Re our brains in retirement, I’ve begun simplifying our portfolio. </p>
<p>One concrete example: I like HSAs as “super IRAs.” In discussing it with my wife, who is smarter than me and perfectly capable, it became clear that she wasn’t interested in maintaining medical receipts or doing any of the paperwork involved if, as can be expected, I predecease her. I think I’ll just get the pre-Federal tax benefits of the HSA, but spend it as we use it, thus leaving some money on the table. </p>
<p>That’s an unspoken part also of the annuity vs. portfolio discussion. There’s a benefit to having enough money deposited in your account monthly to live, especially as you get older. </p>
<p>Jym626, I am amazed by how much health care costs. Way tooooooo much. </p>
<p>I am amazed by how much we spend a year.</p>
<p>I adjusted up how much our expenses are, put new numbers into the financial calculators and the expenses better not go higher. :)</p>
<p>Well, this aging brain is not aging at all. I remember all the number of my work ID years ago when I filled out my spousal consent. There had been a little bit of doubt a few minutes ago. Take that CC. Slower access but still working. I just need to improve the speed of access. </p>
<p>Bob, I realized that hence I took the pension. One less thing to worry. </p>
<p>“Well, this aging brain is not aging at all. I remember all the number of my work ID years ago when I filled out my spousal consent. There had been a little bit of doubt a few minutes ago. Take that CC. Slower access but still working. I just need to improve the speed of access”</p>
<p>Yeah, sure, that’s it. Unfortunately for some things, I’m still waiting years to access those memories. But they’ll come back, no need to rush it.</p>
<p>I agree with making your finances less complicated.</p>
<p>I tried to figure out what our expenses are now, in order to plug the númbers into a retirement calculator. Then I remembered that the electronic banking statement was including all my payments for my expense account. Argh. It’s tough to figure out the expenses. </p>