In August 2009, my wife and I — both now 75 years old — purchased a foreclosure condominium in Port Hueneme, Calif., for $120,000 in cash. Since that time, our son has lived rent-free in the home. We have paid both the homeowners association fees and property taxes amounting to $2,000 per year because he works minimum-wage jobs.
We told our son years ago that someday the property would be placed in his name. Recently, we have both agreed to transfer the property from our family trust into his name.
So here is my question: Today, the condo’s value is approximately $250,000. If we do a quitclaim deed over to our son, what, if any, tax consequences would there be? And whose responsibility to pay those consequences, us or him?
Note: We are currently discussing whether he might sell the house and move, or stay and refinance.
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It’s wonderful to see how generous your wife and you have been to your son for the past decade-plus. I am sure he’s immensely grateful for your assistance. That gift — because, yes, it was a gift — surely helped him make ends meet on a limited budget, and especially amid the worst years of the Great Recession.
I’m also glad that this exchange between the two of you and him is clearly being discussed openly among everyone involved. Too often, my colleagues and I hear from readers who are struggling to sort out tough financial issues among family, and inevitably secrets and biases get in the way of clear-headed judgment.
Before I delve into the potential financial ramifications of the transfer, I want you and your wife to consider what your goal in transferring the property is. Are you trying to give your son more financial freedom? Are you trying to take a financial load off your own backs?
I ask these questions because this isn’t a decision to make lightly. As Matthew Saneholtz, senior wealth adviser and co-owner of Tobias Financial Advisors in Plantation, Fla., suggested when I described your situation, transferring the condo to your son could take away valuable financial options for you and your husband.
“They would no longer be able to deduct the taxes paid if [the property was] owned by the son,” Saneholtz …….