Joint Tenancy with ROS tax implications/basis

Forum|Forum|1 year ago
November 26, 2024
5 replies
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If there is a father with three daughters who currently wants to include the daughters on the deed of his home in an effort to avoid Probate down the line (Trusts are not an option), what would the tax implications of a Joint Tenancy with ROS be? More specifically, the daughters would not be paying any consideration for their interest in the home, so would there be a gift tax implication? Also, down the line, after the father passes (because the intent is purely for dad to live in the home for the remainder of his life), would the daughters receive a step-up basis for the home? In the tax world, would a JTROS or Life Estate make more sense for this transaction? Any advice is appreciated!

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pk_

Level 15

@Amd813 recognizing that there is a lot of unknowns in the post and if the main goal are to

1. avoid probate ( time , expenses, privacy etc. ) ;

2. pass the asset to the daughters ( or their progeny );

3. achieve a step-up to FMV so as to avoid / mitigate Capital Gain at disposition by daughters/inheritors;

and

4. full use rights by the father till his last breath

then a life-estate with or without trust is the way to go. To put them as co-owners probably is not the best vehicle to achieve all your goals.

Additionally I am not sure I understand why a trust is not desirable here. Also is there a mother involved in this ? Which state is the property in, and is the father a resident of that state ?

If there is privacy concerns on any of the questions/ answers, you can always PM me -- just NO PII ( Personally Identifiable Information )

That is my two cents.

Amd813Author

Level 2

Hi @pk12_2,

You are correct on the main goals. The cost of the trust is the issue, as well as the client just seems to be put off by the concept. Mother is deceased. Property is RI and father is a resident.

My only addendum to this is also a goal of Medicaid consideration. RI is a probate only state for Medicaid Estate Recovery, so both a L/E and JTROS would protect the house from Probate, therefore shield the home from Medicaid Estate Recovery. However, with JTROS, and the father living in the home as a primary residence, it would be an excludable resource from Medicaid, SHOULD he need Long Term Care (not an issue as of now). Life Estate is a bit a of a question mark in that area, so it depends.

As a 'tie-breaker' of sorts- is either better in terms of gift tax implications?

I appreciate your input!

Anonymous_

Level 15

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VolvoGirl

Level 15

It’s usually not good to put them on the deed. Then it’s a gift and they won’t get the step up in value instead of inheriting it. Your cost becomes their cost.