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Other responses have already touched on the important legal things your need to think about such as:
> capital gains tax if the children sell the house, > whether you want to launch a Probate Court "Petition to Partition" that could force the children to sell their interest to one of them, or to another buyer, > the ownership status of the children if one of them dies (Is it "Tenants in Common", meaning the deceased child's interest survives them and passes to the decedent's heirs or is it "Joint Tenants", meaning the deceased child's interest evaporates and is absorbed by the surviving children.)
Also, your question doesn't say whether Parents are still alive, and if they are, where they are living and what is their health status?
If Mom and Dad are still living, protecting them is most important, correct? The decision on how to handle the house they gifted depends on what's best for them.
If they're still living, a previous response pointed out how it matters to Medicaid eligibility whether the house transfer was within the past 5 years.
Another response pointed to the Principal Residence Exclusion, which wouldn't shelter the profits if the house is sold during the Parent's lifetime, since the children don't live in the residence.
But if the Parent's are deceased, and the deed they had signed reserved a Life Estate for the Parents, the children do get a step up in tax basis that covers the capital gain. Holding onto the house becomes a business decision if both Parents have passed.
With all these insights, you now have what you need for an intelligent conversation with a Real Estate / Elder Law attorney in your state who can consider all the facts and advise you on the costs and benefits of all your options.
Others reading this may reckon that simply signing a Deed that transfers immediate ownership of a house to several children is a step that often oversimplifies a significant decision. Using a Trust to hold ownership of a house can accomplish the goals you have in mind, keep more options open, and save the family from misunderstandings and expense in the future.
If this home is now the property of the children, one or more of them can "force a sale" of the property and divide the property. That is almost always what is certain to happen; agreement is a rare bird.
As to how this sale will affect the parents and their ability to apply to help with their care or governmental financial assistance, that is something that an attorney should have discussed BEFORE the quit claim was done, and for certain the parents should have sought advice on in terms of "look back" because quit claiming can look like gifting of assets.
This really is something that you should have expert advice on. See an attorney. Best of luck.
I’m going to expand on what Alva posted….. it sounds like that QCD placed the homes ownership as “undivided interest” so the tenancy is all equal shares aka “Tenancy In Common”. Everyone has a right to the property. Everyone has a right to the whole and not a set %. HOWEVER… any of the owners can file for a “forced partition”. Fairly straightforward Real Estate Attorney work. It imho absolutely has to have an atty do this as there are required sequential timelines & Notices that have to be done according to your States laws. The property will have to be sold due to the forced partition.
Property could also be done as “Joint Tenancy”. The difference would be that joint is equal shares.
Look at the last property tax bill done after the QCD. How does this bill read as to who owes taxes? You’ll need this bill to take to the attorney. Let the atty suss out this mess and do the partition filing.
******** on another related tangent….. how was this QCD done? Was this a DIY document that the folks did and then got it notarized and it is actually recorded at the courthouse? QCDs get touted as quick n easy but this type of deed has inherent flaws. QCDs do not - DO NOT - guarantee ownership. It transfers what the old owner thinks is their ownership. It can let property that has clouds on the title, judgments placed, easements issued, mortgage owed, etc. all still be there even though the property has the new owner’s as per the QCD.
It is a Warranty Deed that guarantees ownership. And almost always the WD has gone through a title company for clearance and title insurance issued.
Because of the no guarantee inherent in QCDs, most banks are wary of doing lending that uses it as collateral, so no mortgage lending on home with a QCD title. LSS trying to sell the house to a buyer who needs a mortgage can be challenging. It tend to be QCD property gets sold to someone who is willing to take the risk but fully expects it to be a deal.
You want to ask your Real Estate attorney what they can suggest for the family to do to have a sale be done to get it best price. The attorney may suggest that a Quiet Title Action be done. Quiet done often on Tax Sale deeded and Quit Claim deeded to enable it to get guaranteed to have clear, clean title. Really a Real Estate attorney familiar with your area will be needed to shepherd getting this property done.
************* Regarding LTC Medicaid, Alva is spot on that if the folks should apply for LTC Medicaid in under 5 years from the date of the QCD, they will get a gifting of assets transfer penalty. The penalty is usually based on the tax assessor placed value and whatever your State pays a facility as the daily room&board reimbursement. Say home is 425K & State pays $225 day rate. Basically 1,889 days of ineligiblity that starts the date the elder filed for LTC Medicaid. 1,889 days = 5+ yrs ineligible!
The butt rash in this is that the elder is actually residing in a NH as a custodial care resident when they file that LTC Medicaid application. When transfer surfaces a gifting penalty will be placed so ineligible. They will have to become private pay at the NH in order to stay and their past due bill settled in some way. If they move out, their past due bill still exists and facilities will turn it over to collections and do whatever they can to find a family member to be financially responsible.
The ones who want to keep it can buy out the ones who want to sell it, at full market value. If they refuse, the one(s) who want to sell can file a partition lawsuit. The judge will order the house to be sold and the money divided.
On the “Full Market Value” that can be a sticky. What most places use is the value the most current tax assessor/collector bill has for the property. The rationale for this is that if you pay the taxes you basically agree the taxes & value are correct as you had an opportunity to protest the value set.
For elders as so often their taxes are frozen, they really do not pay attention to the value as per the current bill. And as nearby houses have been repaired, renovated or fully flipped and sold for higher value, the value of MeMaws house - with its years if not decades of delayed maintenance- reflects all those other properties for its taxes but is actually not at all comparable to them. The value is inflated and will pose problems to get sold and pose problems for the siblings do get the partition done.
Ideally the heirs would get a licensed residential property appraiser to do their own independent report. And that is the $ amount used for the new FMV.
I’ll add to my comment below, sometimes getting served with the notice of a partition lawsuit prompts those who want to keep the house to come up with the money.
My former parents-in-law put their property into a trust. The trust beneficiaries are my former husband and his three siblings. My ex lived with his parents in their house for several years before their deaths (in 2019). He's still living there now. Nothing has been done to dissolve the trust and dole out the property, meaning, in effect, that my ex has possession of the house, can continue living there, and is responsible for paying taxes and such. I don't know what will happen if my ex decides to move or if he dies while still living in the house.
If there are other siblings who are beneficiaries of this Trust the sibling who is Trustee, your ex I assume, has to follow the rules of the trust. Other siblings should hire an attorney to be certain trustee is acting as directed on a trust IF they are beneficiaries. Now, Trust may well dictate that hubby can live in and occupy the home, until his death, and etc. It is all now a matter of what the TRUST, which now owns the home, dictates. And if any sibs are bennies, they better know and read the trust if parent is deceased.
It's unfortunate most times when a parent (or parents) quit claim their house to the kids, as the kid(s) now have a stepped up tax basis, and if the house has appreciated a bunch, the taxes could be a bunch when they sell.
If a parent just does a transfer on death, the family member they transferred the house to now has the same tax basis (with the house) that the parent had, and when they finally sell the house, the taxes will be much less. Check out Dave Ramsey's comments on the subject.
By proceeding, I agree that I understand the following disclosures:
I. How We Work in Washington.
Based on your preferences, we provide you with information about one or more of our contracted senior living providers ("Participating Communities") and provide your Senior Living Care Information to Participating Communities. The Participating Communities may contact you directly regarding their services.
APFM does not endorse or recommend any provider. It is your sole responsibility to select the appropriate care for yourself or your loved one. We work with both you and the Participating Communities in your search. We do not permit our Advisors to have an ownership interest in Participating Communities.
II. How We Are Paid.
We do not charge you any fee – we are paid by the Participating Communities. Some Participating Communities pay us a percentage of the first month's standard rate for the rent and care services you select. We invoice these fees after the senior moves in.
III. When We Tour.
APFM tours certain Participating Communities in Washington (typically more in metropolitan areas than in rural areas.) During the 12 month period prior to December 31, 2017, we toured 86.2% of Participating Communities with capacity for 20 or more residents.
IV. No Obligation or Commitment.
You have no obligation to use or to continue to use our services. Because you pay no fee to us, you will never need to ask for a refund.
V. Complaints.
Please contact our Family Feedback Line at (866) 584-7340 or ConsumerFeedback@aplaceformom.com to report any complaint. Consumers have many avenues to address a dispute with any referral service company, including the right to file a complaint with the Attorney General's office at: Consumer Protection Division, 800 5th Avenue, Ste. 2000, Seattle, 98104 or 800-551-4636.
VI. No Waiver of Your Rights.
APFM does not (and may not) require or even ask consumers seeking senior housing or care services in Washington State to sign waivers of liability for losses of personal property or injury or to sign waivers of any rights established under law.
I agree that:
A.
I authorize A Place For Mom ("APFM") to collect certain personal and contact detail information, as well as relevant health care information about me or from me about the senior family member or relative I am assisting ("Senior Living Care Information").
B.
APFM may provide information to me electronically. My electronic signature on agreements and documents has the same effect as if I signed them in ink.
C.
APFM may send all communications to me electronically via e-mail or by access to an APFM web site.
D.
If I want a paper copy, I can print a copy of the Disclosures or download the Disclosures for my records.
E.
This E-Sign Acknowledgement and Authorization applies to these Disclosures and all future Disclosures related to APFM's services, unless I revoke my authorization. You may revoke this authorization in writing at any time (except where we have already disclosed information before receiving your revocation.) This authorization will expire after one year.
F.
You consent to APFM's reaching out to you using a phone system than can auto-dial numbers (we miss rotary phones, too!), but this consent is not required to use our service.
> capital gains tax if the children sell the house,
> whether you want to launch a Probate Court "Petition to Partition" that could force the children to sell their interest to one of them, or to another buyer,
> the ownership status of the children if one of them dies (Is it "Tenants in Common", meaning the deceased child's interest survives them and passes to the decedent's heirs or is it "Joint Tenants", meaning the deceased child's interest evaporates and is absorbed by the surviving children.)
Also, your question doesn't say whether Parents are still alive, and if they are, where they are living and what is their health status?
If Mom and Dad are still living, protecting them is most important, correct? The decision on how to handle the house they gifted depends on what's best for them.
If they're still living, a previous response pointed out how it matters to Medicaid eligibility whether the house transfer was within the past 5 years.
Another response pointed to the Principal Residence Exclusion, which wouldn't shelter the profits if the house is sold during the Parent's lifetime, since the children don't live in the residence.
But if the Parent's are deceased, and the deed they had signed reserved a Life Estate for the Parents, the children
do get a step up in tax basis that covers the capital gain. Holding onto the house becomes a business decision if both Parents have passed.
With all these insights, you now have what you need for an intelligent conversation with a Real Estate / Elder Law attorney in your state who can consider all the facts and advise you on the costs and benefits of all your options.
Others reading this may reckon that simply signing a Deed that transfers immediate ownership of a house to several children is a step that often oversimplifies a significant decision. Using a Trust to hold ownership of a house can accomplish the goals you have in mind, keep more options open, and save the family from misunderstandings and expense in the future.
Links to info on Principal Residence Exclusion:
https://estateplansplus.com/html/real_estate_income_tax.html
That is almost always what is certain to happen; agreement is a rare bird.
As to how this sale will affect the parents and their ability to apply to help with their care or governmental financial assistance, that is something that an attorney should have discussed BEFORE the quit claim was done, and for certain the parents should have sought advice on in terms of "look back" because quit claiming can look like gifting of assets.
This really is something that you should have expert advice on. See an attorney. Best of luck.
HOWEVER…
any of the owners can file for a “forced partition”. Fairly straightforward Real Estate Attorney work. It imho absolutely has to have an atty do this as there are required sequential timelines & Notices that have to be done according to your States laws. The property will have to be sold due to the forced partition.
Property could also be done as “Joint Tenancy”. The difference would be that joint is equal shares.
Look at the last property tax bill done after the QCD. How does this bill read as to who owes taxes? You’ll need this bill to take to the attorney. Let the atty suss out this mess and do the partition filing.
********
on another related tangent….. how was this QCD done? Was this a DIY document that the folks did and then got it notarized and it is actually recorded at the courthouse? QCDs get touted as quick n easy but this type of deed has inherent flaws. QCDs do not - DO NOT - guarantee ownership. It transfers what the old owner thinks is their ownership. It can let property that has clouds on the title, judgments placed, easements issued, mortgage owed, etc. all still be there even though the property has the new owner’s as per the QCD.
It is a Warranty Deed that guarantees ownership. And almost always the WD has gone through a title company for clearance and title insurance issued.
Because of the no guarantee inherent in QCDs, most banks are wary of doing lending that uses it as collateral, so no mortgage lending on home with a QCD title. LSS trying to sell the house to a buyer who needs a mortgage can be challenging. It tend to be QCD property gets sold to someone who is willing to take the risk but fully expects it to be a deal.
You want to ask your Real Estate attorney what they can suggest for the family to do to have a sale be done to get it best price. The attorney may suggest that a Quiet Title Action be done. Quiet done often on Tax Sale deeded and Quit Claim deeded to enable it to get guaranteed to have clear, clean title. Really a Real Estate attorney familiar with your area will be needed to shepherd getting this property done.
*************
Regarding LTC Medicaid, Alva is spot on that if the folks should apply for LTC Medicaid in under 5 years from the date of the QCD, they will get a gifting of assets transfer penalty. The penalty is usually based on the tax assessor placed value and whatever your State pays a facility as the daily room&board reimbursement. Say home is 425K & State pays $225 day rate. Basically 1,889 days of ineligiblity that starts the date the elder filed for LTC Medicaid. 1,889 days = 5+ yrs ineligible!
The butt rash in this is that the elder is actually residing in a NH as a custodial care resident when they file that LTC Medicaid application. When transfer surfaces a gifting penalty will be placed so ineligible. They will have to become private pay at the NH in order to stay and their past due bill settled in some way. If they move out, their past due bill still exists and facilities will turn it over to collections and do whatever they can to find a family member to be financially responsible.
For elders as so often their taxes are frozen, they really do not pay attention to the value as per the current bill. And as nearby houses have been repaired, renovated or fully flipped and sold for higher value, the value of MeMaws house - with its years if not decades of delayed maintenance- reflects all those other properties for its taxes but is actually not at all comparable to them. The value is inflated and will pose problems to get sold and pose problems for the siblings do get the partition done.
Ideally the heirs would get a licensed residential property appraiser to do their own independent report. And that is the $ amount used for the new FMV.
If a parent just does a transfer on death, the family member they transferred the house to now has the same tax basis (with the house) that the parent had, and when they finally sell the house, the taxes will be much less. Check out Dave Ramsey's comments on the subject.