Adding Joint-Tenants (Full Version)

All Forums >> [Casual Banter] >> Off the Grid



Message

subfever -> Adding Joint-Tenants (4/16/2008 2:16:34 PM)

I've just spent an annoying amount of time googling and searching for answers, and came up empty. Perhaps someone here knows:

Does merely adding a joint tenant to already-owned real estate constitute a gift, in the eyes of the IRS?

FYI... under current law, gifts that exceed $12,000 from one person to another within a calendar tax year will subject the donor to either:

A) Pay gift taxes on the excess
B) Subtract the excess from his/her ultimate federal estate tax exemption



CalifChick -> RE: Adding Joint-Tenants (4/16/2008 3:14:46 PM)

Is the couple married?

Cali



CalifChick -> RE: Adding Joint-Tenants (4/16/2008 3:21:53 PM)

Husband and Wife Co-Tenants. No taxable gift results from the creation of joint tenancies by husbands and wives, as a general rule, since the unlimited marital deduction of Sec. 2523 will entirely offset the amount of any gift. No reporting is necessary.

Non-married persons Co-Tenants.  In general, the purchase of property jointly, or the transfer of separate property into joint names, is a gift by one of the co-tenants to the extent that one of the new co-tenants does not provide consideration equal to his or her property interest as defined under local law. Exceptions to that rule covering such property as joint bank accounts are separately covered later.

Example. Assume that Norton Jones and Bedford Smith acquired land for $100,000 to be held under joint tenancy with the right of survivorship. Each will have a one-half interest under local law. If Norton contributed $80,000 of the original consideration, he has made a gift of $30,000 to Bedford ($50,000 or one-half of the value of the property minus the $20,000 consideration furnished by Bedford).

So "no" if married; "yes" if not married.  These rules apply to real estate; there are different rules for bank accounts.

Cali
(not a tax accountant by any stretch of the imagination)



subfever -> RE: Adding Joint-Tenants (4/16/2008 9:28:36 PM)

No, this would not be a spousal gift. It would be from parent to adult child. 



subfever -> RE: Adding Joint-Tenants (4/16/2008 9:35:04 PM)

quote:

So "no" if married; "yes" if not married. These rules apply to real estate; there are different rules for bank accounts.


The parent seeks to avoid probate upon death by way of joint-tenancy, and would prefer to avoid the time and expense of establishing a trust, and the subsequent upkeep needed.



CalifChick -> RE: Adding Joint-Tenants (4/16/2008 9:37:40 PM)

Then half the value is a gift to the child.  You really need an accountant that specializes in this sort of thing.

Cali



CalifChick -> RE: Adding Joint-Tenants (4/16/2008 9:42:31 PM)

The reason I say you need a specialist is that some states are EXTREMELY picky about the documents for joint-tenancy.  If you don't have the exact wording for that state, then even if the intent was clear, a judge could/would throw it out, voiding the document, and making you go thru probate.  Once you consult an accountant, they may or may not have an attorney draw up the paperwork, it just depends on how things are done in your area.

Cali



subfever -> RE: Adding Joint-Tenants (4/16/2008 9:45:27 PM)

Many thanks... [sm=smile.gif]



Termyn8or -> RE: Adding Joint-Tenants (4/16/2008 10:42:08 PM)

There is no inheritance tax until probate. And you never have to probate. I dunno about everywhere, but here you have to initiate it. However it is the only way to get things out of a dead Man's name, so it must be done sometimes.

To the op I go though, if the contract is indeed worded that way it is probably not taxable. If he is a joint tenent, it should not be. If the owner ceded part of his interest in the real value of the property that might be different.

But when you use the term "Joint tenant" that leads me to believe otherwise. I believe this is more likely a part of the contract with the association. When you own a house you don't need paperwork to move someone in. Therefore I assume this is condo-land.

This may be nothing but a liability agreement, with the new "tenant" being responsible for ½ of the value of the place in case of damage. If the transfree has no control over it, like to sell their stake at will, it is worthless and therefore taxable at that rate. Zero times whatever percentage they say.

One would really have to look at the whole agreement. I have read enough court documents in my life and I am full up for now. Therefore I do not volunteer, sorry. Best I can do is take a look at the contract with your friend, if there are by-laws or covenents on the property to the transferor, the transfree becomes subjugated. The real issue here would be if there is value.

The legal test of that would be just exactly does the transfree get in the way of control ? The ability to buy and sell at will ? Even without the right to live there, it is an interest if it can be sold. If the tranferee has no control, they will not even bother you. It is too easy to fight, a TV tax lawyer could do it, or should be able to.

But if it can be sold, we are going into the other gray area. There is alot of gray area for me.To get any deeper into the subject you need an expert. Use your own judgement, and when in doubt, don't go on a spending spree, well I mean tell them this.

Hmmmm, just noticed that the Ides of April has passed.

T




Hippiekinkster -> RE: Adding Joint-Tenants (4/17/2008 12:23:01 AM)

quote:

ORIGINAL: subfever

quote:

So "no" if married; "yes" if not married. These rules apply to real estate; there are different rules for bank accounts.


The parent seeks to avoid probate upon death by way of joint-tenancy, and would prefer to avoid the time and expense of establishing a trust, and the subsequent upkeep needed.
Trusts are easy to set up. My first was only $500, subsequent ones were $100.



CalifChick -> RE: Adding Joint-Tenants (4/17/2008 9:26:18 AM)

quote:

ORIGINAL: Termyn8or

To the op I go though, if the contract is indeed worded that way it is probably not taxable. If he is a joint tenent, it should not be. If the owner ceded part of his interest in the real value of the property that might be different.


Now I'm confused, although that's nothing new.  I was reading the OP as using the legal term "joint tenancy" which has nothing to do with being a tenant, joint or otherwise. 

If this is about being a tenant, then skip everything I said.

Cali



Termyn8or -> RE: Adding Joint-Tenants (4/17/2008 11:15:53 AM)

Yes, Calif, it is not the OP's words that matter, it is the words that appear on the document.

So we really can't say, but to know that you do not know something can be a good thing.

T



subfever -> RE: Adding Joint-Tenants (4/17/2008 11:27:19 AM)

The property owned by the parent, without lien, is a single family residence that is currently being rented out for income. In terms of joint tenancy, I meant in terms of ownership only.

Though in this particular case, it's hard for me to imagine that it would make any difference if the property in question was a condo or townhouse. But I could be wrong.



subfever -> RE: Adding Joint-Tenants (4/17/2008 11:33:05 AM)

quote:

ORIGINAL: Hippiekinkster

quote:

ORIGINAL: subfever

quote:

So "no" if married; "yes" if not married. These rules apply to real estate; there are different rules for bank accounts.


The parent seeks to avoid probate upon death by way of joint-tenancy, and would prefer to avoid the time and expense of establishing a trust, and the subsequent upkeep needed.
Trusts are easy to set up. My first was only $500, subsequent ones were $100.


They're a bit higher in this area, but the key in this situation is that all current and future assets would need to be transferred into the name of the trust. This creates additional hassle, and fees for other real estate. 

But I'm curious, what is the need for subsequent trusts, if the primary purpose of the initial trust is to avoid probate?



xxblushesxx -> RE: Adding Joint-Tenants (4/17/2008 11:46:12 AM)

I *think* if I remember right, in KY, the person(s) who have owned it first actually have to 'sell' it to a 'straw man' (usually their lawyer), and then the straw man sells it back to the original owner(s) and whoever they want to add.
That gives everyone all four elements they need in order to actually have joint tenancy.
So, as you can see from just this one state, it's not always as easy as writing something up.
You really should speak to a lawyer regarding this. It's too important, and not getting it right could be a very expensive mistake.



CalifChick -> RE: Adding Joint-Tenants (4/17/2008 11:47:25 AM)

That's the kind of thing I was talking about Christina; sometimes the documents have to say "A gives unto B as B gives unto A"... almost sounds like they're getting married.

Cali



subfever -> RE: Adding Joint-Tenants (4/17/2008 11:51:07 AM)

quote:

ORIGINAL: xxblushesxx

I *think* if I remember right, in KY, the person(s) who have owned it first actually have to 'sell' it to a 'straw man' (usually their lawyer), and then the straw man sells it back to the original owner(s) and whoever they want to add.
That gives everyone all four elements they need in order to actually have joint tenancy.
So, as you can see from just this one state, it's not always as easy as writing something up.
You really should speak to a lawyer regarding this. It's too important, and not getting it right could be a very expensive mistake.


Yes, you're right. I read something earlier today which explained that some states need up to 4 elements satisfied to qualify as a bonafide joint-tenancy!



xxblushesxx -> RE: Adding Joint-Tenants (4/17/2008 11:54:42 AM)

Yes, and here in KY, we have to have the 'four unities' here is an explanation of them:

"When two or more persons are equally owners of some property. The unique aspect of joint tenancy is that as the joint tenancy owners die, their shares accrue to the surviving owner(s) so that, eventually, the entire share is held by one person. A valid joint tenancy is said to require the "four unities": unity of interest (each joint tenant must have an equal interest including equality of duration and extent), unity of title (the interests must arise from the same document), unity of possession (each joint tenant must have an equal right to occupy the entire property) and unity of time: the interests of the joint tenants must arise at the same time"  this is from http://resources.lawinfo.com/en/Dictionary/J.html

I just studied this stuff last quarter. There has to be a way to have the four unities or it's not 'joint tenancy'. (everything must be equal)



Hippiekinkster -> RE: Adding Joint-Tenants (4/17/2008 1:19:20 PM)

quote:

ORIGINAL: subfever

quote:

ORIGINAL: Hippiekinkster

quote:

ORIGINAL: subfever

quote:

So "no" if married; "yes" if not married. These rules apply to real estate; there are different rules for bank accounts.


The parent seeks to avoid probate upon death by way of joint-tenancy, and would prefer to avoid the time and expense of establishing a trust, and the subsequent upkeep needed.
Trusts are easy to set up. My first was only $500, subsequent ones were $100.


They're a bit higher in this area, but the key in this situation is that all current and future assets would need to be transferred into the name of the trust. This creates additional hassle, and fees for other real estate. 

But I'm curious, what is the need for subsequent trusts, if the primary purpose of the initial trust is to avoid probate?

Because I have multiple properties, and I want to minimize my exposure to litigation.

I think you should check with a trust attorney. Atlanta isn't exactly a low-cost area for lawyers, and that's what I paid. Also, I think you have an erroneous notion of how much paperwork is involved. I just looked at one of my trust agreements, and it is only 5 pages, including the signature page. The management agreement is only 4 pages. My leases are longer than that.

It might also be possible to accomplish what you need to with an LLC or S corp. I don't really know much about that. There are any number of wannabe lawyers/real estate gurus here on CM that can tell you definitively what you need to do, however. One or two might even have bought a house at some point.



subfever -> RE: Adding Joint-Tenants (4/17/2008 4:30:49 PM)

Yes, in the end, I will speak to an attorney. But thanks to you all, when I do so, I will not be speaking from a totally blind position. 



Page: [1] 2   next >   >>

Valid CSS!




Collarchat.com © 2025
Terms of Service Privacy Policy Spam Policy
0.03125