Can my father give me and my husband a gift of equity letter yearly for a home we all three are listed on the title?

[Garlesky]

He is looking to purchase a 400k home in Florida for us to live in with all three of our names on the title and then yearly write a gift of equity letter to transfer 17k each of equity to me and my husband so that in 12 years he will have transferred 34k a year = 408,000.00 on paper at which point we would personally hold all the equity free and clear….  This would keep him under the tax limit for gifts and form 709.  This would also shield us from paying taxes on this since it’s provided over time.. are we understanding that correctly?

[MaryK4]

This is a perfectly acceptable strategy- the annual exclusion is not considered for the unified credit so there will be no tax consequence to your father or you as the recipient.  You are wise to do the annual letter and be sure to keep them with your tax records. 

[Mike9241]

if he buys the house using his money and immediately puts you and your spouse on the title he at that time has made a gift to you of 1/3 of the house or 133,333 for you and your spouse for which a gift tax return would be required, then in subsequent years he could making additional gifts to your of parts of his interest. to avoid any initial gift he would have to keep your names off the title.  now the potentially expensive downside.  see a real estate lawyer because of state/local laws regarding transfers of interest.  it is possible that every year he made the gift, to make it official, it would need to be recorded. this could result in the imposition of transfer taxes each year. Unless his estate is over like  $12million there would be no federal estate taxes when he passed. so an immediate gift of $400,000 would cost nothing.  Florida laws could be different so the absolute need to consult a real estate lawyer. 

[Garlesky]

a few follow up questions...

1) would there be an disadvantage to him if he does not live in that home with us?

2) if/when he passes, would the yearly letters of equity be enough to show that we own X % of the 400k. at which point if he has not transferred enough equity would we only have to pay taxes on the remainder

3) what about Mikes comment that if all three of our names are on the Title then technically each of us own 1/3 of the house and he would be gifting the whole amount on the front end?   from what I read that technically would not be an issue since if would be no were near 12 M lifetime max and would be tax free to him.

[KrisD15]

To clarify, what are you and your father trying to accomplish? 

We answer tax questions, but financial planning can involve more than taxes. 

If your father owned one third of a jointly owned house, and you inherited his third, you would get a step-up basis. That might or might not matter. 

The suggestion to speak to a real estate Attorney might be good advice. 

Real Estate Law is governed by the state.