Question about adding a kid to the house

[PandaBear]

So due to prop 19 passage, my parents are thinking about add me to their investment properties as joint tenancy with the right of survivorship, so the tax base of those properties will remain at the purchase price + inflation (prop 13) instead of the time of inheritance.

I don't think I need a real estate agent for that, but do I need a lawyer? or do I need a title company? There is no mortgage or loan on any of these properties so we do not need an appraisal.

Do I get a volume discount or can I negotiate for a lower fee because I am doing a few on the same day? Or are all places pretty booked up so I really can't ask for much now?

 

[ragtoplvr]

The gold standard is use a lawyer. If you think you need a lawyer, then you do. You really want a trust I think.

A finance company might render an opinion for less, hopefully it is worth more than you pay for it.

 

[paulri]

Another way of saying this, Panda, is that given the amount of money you would probably be saving in real estate taxes in California, I would think that paying a lawyer a few grand to get this right, would save you a lot more cash over the years.

I absolutely would do that if I were in your shoes.

The gold standard is use a lawyer. If you think you need a lawyer, then you do. You really want a trust I think.

A finance company might render an opinion for less, hopefully it is worth more than you pay for it.

 

[UncleDave]

Hire a lawyer sleep well knowing its covered.
Stakes are too high otherwise.

 

[Donald]

You will be liable if there was an accident and the property owner sued. Umbrella policy.

 

[paulri]

Unless they just bought it a few years ago, the differences between what your parents are/were paying on Prop13 property tax schedules, and what you would be paying if you inherited it, have got to be huge. It should be well worth an attorney's fees.

 

[JimPghPA]

Just as all cars are not created equal, also all lawyers are not equal. There are bad, mediocre, good, and great, and along with that what you pay for what you get varies a lot also. I found that word of mouth recommendations from intelligent people is extremely valuable in choosing an attorney for a specific area of law.

When we were in a hurry regarding a land title and just chose a local attorney with a local office we paid too much and the service was poor. When we asked intelligent honest friends for recommendations regarding a land title, and a patent, we got good attorneys at a fair price.

Spend a little time and contact your intelligent honest friends asking for a recommendation for an attorney in the specific area of law you require.

 

[Al]

I also recommend a certified TAX Attorney
One thing..you only should purchase a vehicle under one name. Then joint property can not be attacked.

 

[ragtoplvr]

Just as all cars are not created equal, also all lawyers are not equal. There are bad, mediocre, good, and great, and along with that what you pay for what you get varies a lot also. I found that word of mouth recommendations from intelligent people is extremely valuable in choosing an attorney for a specific area of law.

When we were in a hurry regarding a land title and just chose a local attorney with a local office we paid too much and the service was poor. When we asked intelligent honest friends for recommendations regarding a land title, and a patent, we got good attorneys at a fair price.

Spend a little time and contact your intelligent honest friends asking for a recommendation for an attorney in the specific area of law you require.

I would a for recommendations from the title company, and if someone does your taxes, your stock broker etc.

 

[Dave Hess]

Yep, get a lawyer to clarify everything.

JTWROS is extremely powerful if there is no will.

 

[ArrestMeRedZ]

I can comment on this because I have done the exact same thing you are contemplating, in California. There are pros and cons to this. I can tell you one thing - it's a simple process to do it yourself and you don't need a lawyer. On the other hand, when my parents did our transfer, they got the property description wrong, and it had to be unwound. At that time, I paid a nominal fee for help from a guy who did title work for a living, at about 1/10th the price of a lawyer. You could also go with a title company or a paralegal, but you would likely have to pay more.

A possible pro is you keep the property at the purchase price value (plus 2% a year) for property tax purposes. I say possible because I am not totally sure this will work. I know the El Dorado County tax assessor keeps an eagle eye on the obituaries. My parents home was in their trust. When my step-father passed, my mother soon got a letter demanding she re-title the house, removing him as beneficiary. When she passed, I got a letter demanding the same. The house remained in the trust, but the beneficiaries were changed to me and my sisters. If I ended up with the property, as provided for in the trust, property taxes on 2/3rds of it would have been excluded from the Prop 13 exemption since transfers between siblings aren't exempt. If I were you I would see a tax expert, or an estate attorney to make sure under the new Prop 19 you don't get hit anyway with part or most of the property tax increase.
One huge, and I mean huge con is the income tax disadvantage you will face if your parents transfer ownership before passing. If your parents "gift" you the property (not considering gift tax here), your tax basis becomes their depreciated tax basis. So, if they bought an 8 unit apartment building in 1980 for $400k (current value $4M), and subsequently depreciated it down to the land value of $100k (plus undeducted capital expenses), your tax basis would be $100k. Instead, if you inherited it when they passed, your tax basis would be the value at their passing, $4M. So, you would not only lose the ability to depreciate the property on your annual income taxes, you would pick up a major federal capital gains tax liability. Add to that another 13% for Gavin Newsome (as I understand it, Cali taxes capital gains at ordinary rates) and it gets costly.

 

[PandaBear]

I can comment on this because I have done the exact same thing you are contemplating, in California. There are pros and cons to this. I can tell you one thing - it's a simple process to do it yourself and you don't need a lawyer. On the other hand, when my parents did our transfer, they got the property description wrong, and it had to be unwound. At that time, I paid a nominal fee for help from a guy who did title work for a living, at about 1/10th the price of a lawyer. You could also go with a title company or a paralegal, but you would likely have to pay more.

A possible pro is you keep the property at the purchase price value (plus 2% a year) for property tax purposes. I say possible because I am not totally sure this will work. I know the El Dorado County tax assessor keeps an eagle eye on the obituaries. My parents home was in their trust. When my step-father passed, my mother soon got a letter demanding she re-title the house, removing him as beneficiary. When she passed, I got a letter demanding the same. The house remained in the trust, but the beneficiaries were changed to me and my sisters. If I ended up with the property, as provided for in the trust, property taxes on 2/3rds of it would have been excluded from the Prop 13 exemption since transfers between siblings aren't exempt. If I were you I would see a tax expert, or an estate attorney to make sure under the new Prop 19 you don't get hit anyway with part or most of the property tax increase.
One huge, and I mean huge con is the income tax disadvantage you will face if your parents transfer ownership before passing. If your parents "gift" you the property (not considering gift tax here), your tax basis becomes their depreciated tax basis. So, if they bought an 8 unit apartment building in 1980 for $400k (current value $4M), and subsequently depreciated it down to the land value of $100k (plus undeducted capital expenses), your tax basis would be $100k. Instead, if you inherited it when they passed, your tax basis would be the value at their passing, $4M. So, you would not only lose the ability to depreciate the property on your annual income taxes, you would pick up a major federal capital gains tax liability. Add to that another 13% for Gavin Newsome (as I understand it, Cali taxes capital gains at ordinary rates) and it gets costly.

Thanks, I was thinking the same line. I am not sure if lawyers will help but I will definitely check with an accountant for sure.

One thing to simplify things: I am an only child. My parents and I are all financially secure, so there is no incentive to scam each other, just trying to find optimal tax solutions.

One thing to complicate things: like you my parents depreciate the building annually.

Between capital gain on the appreciation (2 house and 1 quadplex bought in 2010), let's say their valuation nearly double. If I were to hold it for just a short period of time then it doesn't make sense to add me to the title. If I were to keep them till I die and pass them to my kids, then the depreciation is a wash vs the savings in property tax.

 

[PandaBear]

You will be liable if there was an accident and the property owner sued. Umbrella policy.

Transferring between my parents to me (or adding me to the title), who would sue for what?

 

[Donald]

Transferring between my parents to me (or adding me to the title), who would sue for what?

UPS man slips on front steps and sues the property owners. You are now one of the property owners.

 

[BISCUT]

Transferring between my parents to me (or adding me to the title), who would sue for what?

You are a joint owner and will have your name on a registered deed. That means any suite related to the property you will be named in.

A thought....definitely have a reputable attorney look into what you want to do. I would chart options on paper and critically think on each one for a while. I have no idea about your situation or CA laws. I am in NY and if it were me in NY I would strongly look into a corp for each property LLP, LLC, etc. Review and determine if appropriate for you. Structure each property independently to keep assets disassociated from each other. Something to think about.