Legal Question in Wills and Trusts in Wisconsin

Re: Quick Claim Deed & Life Estate

You are asking a lot of difficult questions regarding a very complicated situation that you should really see an attorney to be sure all the facts are considered and sorted out. Depending on parents' ages, they retained a residual value in the property. The difference between that and fair market value is potentially reportable and taxable as gifts. It doesn't appear that was done. The kids are the fee owners of the property, but subject to parents' life estates. As for capital gains, the property transfers over the basis of parents upon the gift. That basis is probably low, so if the kids sell, there will likely be a bigger capital gain to contend with. The gift itself doesn't cause capital gains. There is no one time capital gains exemption. There is a limited exemption on the sale of one's primary residence. It doesn't appear any of the parties could take advantage of that exclusion the way things presently exist. A judgment lien against one of the kids would put a lien on the property, and since it is joint ownership, would complicate things for everyone. The route your parents considered was only one of many ways they could have gone, and without knowing the compelling reasons, it is hard to tell if this was the best way. In any event, you should see a qualified estate planning attorney to sort this out and advise you.