Legal Question in Wills and Trusts in Minnesota
Parents Gifting House to Child
My parents want to gift their house to one of their four children to get it out of their name since one is dying and the other one does not want it to go to teh government in case of future assisted living or nursing hoome bills. I have heard conflicting opinions from CPA's and Lawyers as to what is the best way to do this considering that the child they want to have it will continue to live there and I understand the 3 year look back rule. The parent who is expected to live will continue to live there as well, but the son they want to give it to will also live there and is planning on staying there for many years. What are the best ways to do this to avoid tax problems such as the step up cost basis and other taxes? If it was passed on vbia a will after a parent dies, how would this affect taxes if it was resold? Basically looking for the best way to get the house out of the name of the parent allowing that parent to continue living there with the son they want to give it to. Again, we have heard conflicting reports from lawyers and CPA's.
Thanks!
2 Answers from Attorneys
Re: Parents Gifting House to Child
Thank you for your question regarding the gifting of your parents'
house. It sounds like you're doing some Medical Assistance planning.
Transferring the home is one part of the big picture. In addition to protecting your parents' assets, you also have to plan for their eligibility to receive benefits. I strongly advise you to contact an elder law attorney before proceeding to make any gifts. There is much more to Medical Assistance planning than the look-back period.
Additionally, there have been recent changes in Medical Assistance laws which may affect your plans.
As for your questions about tax issues; when a house is transferred through probate, the person who received the house also receives a stepped-up basis. However, there are ways to transfer the house and receive a stepped-up basis without going through probate.
Please feel free to give me a call if you have any questions.
Luke Robinson
Chesley, Kroon, Chambers
Harvey & Carpenter, P.L.L.P.
P.O. Box 327
75 Teton Lane
Mankato, MN 56002
(507) 625-3000
Re: Parents Gifting House to Child
You are in a bit of a pickle. If the house is deeded, you lose the stepped up basis. If you don't deed it, however, you might never get the lookback period running. There's a reason why you are getting conflicting advice.
I only know one person who really knows this stuff inside and out. It's not me. I suggest you call Attorney Laurie Hanson 952-929-0622. Be prepared to pay her a substantial sum for her advice. It's worth it because what she says will be right. Tell her Dave Kelly said to call her.
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