Q: In 1999, my father-in-law filed a warranty deed adding his four adult children to the title on his home.

He has now found himself with inadequate income to meet his expenses and wants to obtain a reverse mortgage on the home. He is mailing my husband a document that will remove his name from the deed. My husband is to sign it in the presence of a notary public.

My question is whether there are any tax implications for my husband (and his siblings) arising from this transaction. Thanks for your reply.

A: There might be. It depends on a number of factors.

First, how much did your father-in-law pay for the property? If he paid $50,000 thirty years ago, your husband might have received one-fourth of that amount as the cost basis of the property as a gift when he was placed on the title to the home.

If he now returns it, he will be giving it back at the same amount. That’s below the annual federal gift level of $13,000. You can give anyone a gift of $13,000 in a year without it causing a taxable event and filing forms with the IRS.

Second, was the initial quit claim deed actually recorded correctly? Did the title transfer to your husband and his siblings? You may want to hire a real estate attorney to consult with you on that to see if the gift actually transferred and discuss what options are available now.

If the reverse lender has requested you to sign these documents, it’s possible that the lender obtained a title search on your father-in-law’s property and knows that the title is not only in his name but in the name of your husband and his siblings.

Finally, if there are tax consequences to the transfer, perhaps your husband should call a family meeting to discuss how he and his siblings might be able to help out his dad.

It might be a lot less expensive for each sibling to simply give their dad $100 per month (if that meets the dad’s needs) than give away so much equity with a reverse mortgage. (You need to know that the costs of a reverse mortgage can be substantial. Usually they are much higher than the costs of an ordinary mortgage, and the reverse mortgage will likely eat up most, if not all, of the equity in the property.)

Is your father-in-law still paying the mortgage, taxes and insurance on the property? If your husband and his siblings now own the property, perhaps they could take over the expenses of the property, providing financial relief for your father-in-law.

Your husband and his siblings need some professional guidance and should open up a conversation about all of the options that are available with their dad.

At one point, your father-in-law wanted the home to end up with his kids. That might still happen, but it’s more important to solve your father-in-law’s cash flow problems now than worry about what he will leave to his heirs.

Stay in touch and let me know what your husband and his siblings decide to do. Readers, if you’ve already walked a mile in these shoes, please write and let me know how you wound up solving this problem. I receive a significant amount of mail on this topic and I would be happy to publish your solutions in a future column.

For more on reverse mortgages, read the following articles:

Choices With Reverse Mortgage Payments

How Does A Reverse Mortgage Work And What Are The Pitfalls?

Reverse Mortgage Threatening Home Equity For Seniors

Reverse Mortgages Explained