Showing posts with label gift tax. Show all posts
Showing posts with label gift tax. Show all posts

Monday, December 31, 2012

Using gifts for real estate purchase downpayment

The New York Times discusses the impact on your loan application when you receive a gift towards your cash needs for closing.
HOME buyers trying to scrape together enough money to cover the typical 20 percent down payment frequently look to relatives for help.
The number of first-time homebuyers who resort to the Bank of Mom and Dad is about 25%.  No surprise here as prices in the metro-New York area are high and first time home buyers are young couples who are, literally, just starting out.

There are some pitfalls to avoid when you receive a gift.
But mortgage lenders closely scrutinize cash gifts. That critical check from the parents may not count toward your home purchase if you can’t thoroughly document its source and intention.
Be certain that the money is transferred by check or wire as the paper trail is essential and must be able to be followed by the loan processor.  If possible, get the money into the buyer's account several months before the closing.  It might result in less questioning by the bank.  Also, donors should check on their gift tax liability.

Nothing is simple, is it?

Read the full article here.


For your next title order or
if you have questions about what you see here, contact
Stephen M. Flatow, Esq.
Vested Land Services LLC
165 Passaic Avenue, Suite 101
Fairfield, NJ 07004
Tel 973-808-6130 - Fax 973-227-0645
E-mail sflatow AT vested.com
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Tuesday, October 12, 2010

A little planning can save Mom's home

Bankrate.com’s Steve McLinden fields questions about real estate. Here’s a column with a question that will resonate with more folks as time goes by.


Dear Real Estate Adviser,

My elderly mother needs assisted living. She owns a home in which she has lived for 50 years. If she sells the home, valued at about $150,000, she wouldn't be eligible for Veterans Affairs benefits for assisted living.

Is there any way she might be able to place the home in some kind of trust and not realize any monetary benefit from the sale?   -- Steve F.

Dear Steve,

Yes. A family trust might be the solution to the asset-retention challenge your mother -- and ultimately the rest of the family -- will face.

Also known as a living trust or revocable living trust, this type of trust protects a home and other assets such as stock from remaining on the books as part of her net worth. In addition, it covers how those individual assets will be handled prior to and after your mother's passing.

The trust would also leave control of the home in the hands of your mother while she is alive, provided she remains mentally competent.

Once your mother -- who is considered the grantor in this case -- passes away, the appointed family trustee would take over and be required by law to distribute the property precisely as the grantor desired.

In the case of a house, the children typically would receive equal shares after the parent's passing. At that point, the house could be sold, or one or more of the heirs could elect to buy the others out and take ownership. There may be some overhead to maintaining a trust, by the way.

Gifting the house outright to the children, who could then sell it, is another option, particularly if you need to raise money soon for your mother's assisted-living expenses.

The negatives to this are the tax consequences, since federal law only permits an annual exclusion of up to $13,000 per family member without payment of federal gift tax. It would be prudent to have the home appraised by a professional appraiser before doing this to avoid any questions of value by the Internal Revenue Service.

As your family plans out a strategy, take into consideration any Medicaid benefit planning in addition to the VA assisted-living planning as part of a comprehensive long-term elder-planning approach. Realize the gift of a house can result in a period of ineligibility for Medicaid benefits.

For these and many other reasons, you should first consult with an estate-planning attorney or other asset-protection professional who is steeped in knowledge of VA pensions and assisted-living benefits.

You also might take another look at the U.S. Department of Veterans Affairs "Survivors and Dependents Benefits -- Death After Active Service" section. The VA's toll-free line for income verification and means-testing questions is (800)929-8387.

Good luck in sorting this out and best wishes to your mother, whose needs should remain paramount to others in this matter.

Note- Always seek competent legal advice on issues such as estate planning. Your local bar association is a good source to locate specialists in the field of estate planning. This column should not be construed as legal advice!

See the column on line - Family trust could save mom's benefits


For your next title order or
if you have questions about what you see here, contact
Stephen M. Flatow, Esq.
Vested Title Inc.
165 Passaic Avenue, Suite 101
Fairfield, NJ 07004
Tel 973-808-6130 - Fax 201-656-4506
E-mail vti@vested.com - www.vested.com
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