Tom Ashworth

Gift or Inheritance

gift or inheritanceThe question of a gift or inheritance comes up often.  If you want to transfer the deed or title of your home to another person, such as a family member, this could have huge tax implications.

If someone inherits property, it is known as “stepped-in” or “stepped-up” to the fair market value (FMV) at the time of the decedent’s death.

If you gift the property, the gift has a carry-over basis which means that the person receiving the property has an unrealized gain.

As an example, my wife’s elderly parent, in an attempt to get their affairs in order, gives their home to their adult child.   The thinking is that “my kids are going to get it anyway” so let’s do it now.  By doing this early you may be facing unnecessary income gift taxes.

If you purchased for $50,000 and worth $150,000 at the time of transfer, there is a possible gain of $100,000.  However, if your children inherited the property at the time of your death, their new basis would be $150,000 or the fair market value (FMV) at the time of death and the possible gain would be zero.

This is only an example of what can happen with Texas Hill Country Real Estate.  If you are concerned you should talk to a Tax Professional or Tax Attorney.

You can also rest assured that as your Texas Hill Country Real Estate professional, I am here to answer any questions you may have about this and other real estate problems.

Give me a call at (208)830-7992 and we can discuss this.

 



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