How do I gift or sell my second home to my daughter?

Your question asks for two separate answers: 1. If you give your house to your daughter you need to determine its fair market value to determine if you owe federal gift tax. The gift tax exemption is currently $5 million until Dec. 31, 2012 and I have heard the pundits discuss a decrease to $1 million to $3 million. So, if the house is worth less than $1 million you can gift it to your daughter without incurring a gift tax - as long as you file a gift tax return claiming the exemption. You should also file a claim for exemption with the county assessor's office to avoid transfer taxes and, possibly, reassessment. 2. If you sell the house to your daughter, you must sell it at or near the fair market price to avoid the IRS claiming it is a sham transaction and really a gift. Your daughter must make payments to you to pay off the sales price that are similar to a commercially obtainable mortgage. 3. Choice three is to put the house in a trust with your daughter as the beneficiary. If your and your daughter's intent is that she live in the house, your daughter can pay you fair market rents to cover the expenses of the house. Upon your death the house passes to your daughter. A trust makes provisions for what happens if your daughter predeceases you. 4. Choice four is to sell the house and put the money in a trust to care for you while you are alive and the remainder to your daughter at your death. My advice is that you consult an estate planning attorney who will discuss your desires regarding the house and your circumstances to allow for proper planning of the current or future transfer of the house. I have only given you possible answers to your two questions (buy or gift) since I do not know the details of your situation. Just in case your question only asked for the mechanical procedure to give or sell the house to your daughter - you would have to have a deed recorded and recorded with the county recorder to convey the house to your daughter.

Well, like many things, the doing part is fairly straightforward -- if you want to give the property away, have a lawyer prepare a deed (and, if it hasn't been done already, an affidavit that no federal or Massachusetts estate tax was due if the decedent died owning less than $1M in assets), which will be signed and recorded. I would suggest having the lawyer run a title search to be sure that there are no liens on record as a result of the decedent's death or the subsequent probate prior to making the transfer. It's the potential implications of the gift that may be more troublesome in the long run if you don't take them into consideration. I strongly suggest that you speak with an elder law attorney about the potential tax and Medicaid (MassHealth) implications of any gift which you may make. Depending on the facts of your case, you may find that it may make more sense to sell the property and give your daughter a smaller gift of cash, or simply not make a gift at all and invest it for future needs.

You will want to talk to an elder law attorney. (Yes, if your daughter is old enough to own real estate, you probably "qualify.") The "how" is relatively simple. Real property in Massachusetts is always transferred by means of a "Quitclaim Deed." This is a statement, in proper legal form, signed before a notary, that identifies the property to be transferred, the price (If it is a gift, the usual language is "consideration paid of less than $100) and the person that the property is being transferred to. Only the original owner signs the deed. The deed must then be placed on record at the registry of deeds for the county where the house is located. There is a filing fee for this - usually $125. But the real question you should be asking is, not how you do it, but, what do you want to do - give or sell? If you sell, should you sell to your daughter, or should you put it on the market? Or should you keep the property and have your daughter (or someone else) pay you rent? If you decide to keep it, should you hold it in a trust? If so, what kind? This is where a counseling elder law attorney comes in. You would tell him or her the whole story - not only about the house, but who you inherited it from, all about your daughter, your whole family, what the house costs to keep up, why you want to keep it in the family ...everything. Only when the attorney knows the whole story can he or she help you to decide what you should do. There may be consequences to a gift you may not have thought of. Gift taxes are one. So is possible disqualification from Medicaid. But there may be other issues as well. A good elder law attorney will help you to understand what can happen, and will help you to arrange things so that you do what you want to do, and don't do anything you will later regret.

I agree that this situation raises complicated estate planning and tax implications. You should speak with an estate planning attorney right away. Best of luck.