My father recently passed and my mother is moving to a smaller home. She in-turn wants me to have her current house which has a clear title. I plan to do the same for my daughter when once we move. It is my intention to remain in my parent's old home for the foreseeable future. Can the conveyance be done without any monetary exchange and what if any type of taxes would I have to pay after the deed is done. Since there is no problem with her finanically, if she at some point had to move into a nursing home, she would not require Medicade support.
Assuming that your mother lives in Georgia and she is the only owner listed on the deed, and that there are no liens, mortgages, or other debts on the house, then all she would need to do to transfer the house to you would be to sign a deed which transfers the house from herself to you. I would, however, VERY strongly advise her to seek the advice of a competent estate planning attorney before she did any such thing. As to whether taxes would be payable: I can't answer that because I don't have enough information. If it is a Georgia house and the transfer is purely a gift (meaning that you did not pay your mother anything for the house and she simply gave it to you), then there would not normally be any Georgia transfer taxes due at the time of the transfer. There would be filing fees associated with the deed - these depend on the exact length of the deed. However, whether there would be other taxes payable depends on a number of factors. If your mother has made prior taxable gifts and used up her gift tax lifetime exemption, for example, then a federal gift tax could be due and payable on the value of the house (possibly less some small amount for the gift tax annual exclusion, depending on other factors). If, as is statistically more likely, your mother has not fully used up her lifetime federal gift tax exemption (which is actually the result of a tax credit), then she would probably be legally required to file a gift tax return and report the gift, but it would use up part of her gift tax exemption amount rather than causing any amount to actually have to be paid at the time. If she's not in Georgia, there could also be state gift tax issues. From an income tax perspective, she should not have any issues. However, you would need to make very sure that you had good documentation of HER current income tax basis in the house (usually the purchase price she initially paid, with certain adjustments made over time of ownership for improvements, and possibly with a full or partial step-up in basis at your father's death if he owned an interest in the house). This is because your income tax basis if you sell the house during your lifetime will be her current income tax basis in the house (or the fair market value of the house, if that's lower than her basis and you eventually sell the house at a loss). You need to be able to show what that basis was if you sell, because if you can't provide evidence of the basis the IRS may assume it was zero dollars. Your mother also needs to be completely certain that she has properly dealt with any interest your father may have had in the house, and his estate, to ensure that she really does have clear title to the house. This should all be confirmed before she makes any gift to you. And she should have a competent attorney prepare any deed and any gift tax return, because the title to real estate is not a good thing to mess up, but it's also an easy thing to mess up.
If you are planning to do the same type of transaction with your own daughter, then YOU also need to get a competent estate planning attorney to review your own situation and help you decide if you really want to make the transfer, as well as paying attention to providing your own daughter with evidence of your basis in your home. This is not an easy transaction you are considering, and you really need to take the time and spend the money needed to ensure that, if you do carry out your proposed gifts, they are done right and don't create other problems. Medicaid is one consideration, but not the only one. Good luck to you.
Ms. DiSalvo gave you a very thorough answer. I would like to reiterate that while the documents to accomplish this are relatively simple to assemble and file, there are alot of issues as suggested by Ms. DiSalvo, some are related to income taxes, some to gift and estate tax, and still others relate to a wide array of non-tax legal issues. Please consult a lawer before you undertake this. There is also the potential for a conflict of interest, so your mother should consult her attorney and you should consult your own.
Attorneys DiSalvo and Shaffner have provided very thorough advise. If you want to calculate the gift tax amount then the formula is as follows: Please note that "--" is a arithmetic minus sign.
(FMV of Taxable Gifts for Current Year) -- (Annual exclusion $13,000)
+ Prior Years Taxable Gifts (to 1976)
= Aggregate Taxable Gifts (Cumulative Gifts)
X Tax Rates §1001(c)
= Tax on Aggregate Gifts (Total lifetime gifts)
-- Tax on prior years gifts (Gift Tax Calculated on Prior Year Gifts)
= Current Year Tax
-- Unified Credit Remaining [$1,730,800 in 2011; $1,772,800 in 2012]
= Gift Tax Due in Current Year
The gist of all this is that if your unified credit is more than the aggregate gift tax due then there should not be any federal gift tax due.
