Q: My mother has had several strokes in the past year, but is now feeling much better.
I have asked her to put me on the deed to her property. I am the only living child. My brother died over 20 years ago. Her attorney told me to have my mother put the property into a trust, but that costs more money than we have.
Would a quit claim deed do the same thing? Thank you so very much.
A: Your mother’s attorney has the right idea and may be trying to save you money down the line. By creating a simple trust, you’ll inherit the property at the stepped-up basis — in other words, what the property is worth on the day of her death, rather than what she originally paid for it.
Let’s say she paid $50,000 for the property but on the day she dies it is worth $300,000. If you inherit the property at the stepped-up basis, and then turn around and sell it for $300,000, you would owe nothing in taxes. However, if you are given the property, you get it at the current basis, or $50,000. If you turn around and sell it for $300,000, you may owe taxes on roughly $250,000.
I generally would recommend a living trust over a quit claim deed. A quit claim deed will put your name on the house, but will but you at risk for paying a lot in taxes down the line. Some attorneys don’t charge too much to prepare a living trust. You may want to find the funds to get the attorney to do it for you. You need only the simplest kind of trust.
You may want to sit down with your attorney again and go over the fees involved but also get an understanding as to some of the tax consequences of taking title to the home now over taking title to the home later.
Aug. 7, 2007.