Does gifting/quick deeding "count" if filing information was partly wrong? How can we fix?

Asked over 1 year ago - Millstadt, IL

In 2005 my in-laws filed a gift tax return form gifting their farm to their children. Attached to the tax return is:
1. An appraisal of the farm
2. The appraisal's description of the farm.
3. Pictures of the farm.
4. The quick claim deed.
5. The legal/surveyor's description of where the ground is located.
The parcel number on the deed and the legal description of where the ground is located are both wrong. They are for a neighboring farm that belonged to Dad's brother.
It was verified with mapping and platting that Mom and Dad's farm is still in their names. It was not quick deeded to the children, as was the intent.
If Dad ends up in the nursing home, can the nursing home come after the farm for $$? There are some aspects of the filing (1,2, 3 and the tax return) that were right.

Attorney answers (2)

  1. James Cummings Siebert

    Pro

    Contributor Level 10

    5

    Lawyers agree

    Answered . The deed you described does not transfer the farm as it does not correctly describe the property to be transferred which is an essential element of a valid deed. The easiest way to correct this error is to re-file the Quit Claim Deed as a Corrected Deed to reflect the correct legal description and tax identification number. If Dad does not need to go into a nursing home or otherwise need Medicaid benefits within five years thereafter then this should take care of the problem for the most part. However, if Dad might go into a nursing home soon and need Medicaid or if there is some other issue where the date of the transfer is relevant such as a creditor’s claim against Dad for a debt incurred after 2005, then you will need to take more complex steps to correct this error.
    You will need to hire an experienced Attorney to file a Court action seeking reformation of the deed. Reformation is when a court "will modify a written agreement to reflect the actual intent of the parties. This equitable remedy is not designed to change the intended terms of a transaction but to resolve errors in a deed without voiding it. The basis for reformation is an understanding between the parties. What is sought to be reformed is not this understanding, but rather an instrument which inaccurately reflects it. The basis for the reformation would be the existence of a mutual mistake. A mutual mistake is one that is common to the parties such that each labors under the same misconception. In such a case, the parties are in actual agreement, but the instrument to be reformed, in its present form, does not express the parties' real intent.
    Clearly there is a case of mutual mistake here as can be shown by the filing of the gift tax returns which clearly indicate the intent of the parties to transfer the correct farm Though bringing this action will be expensive, it has a major advantage in that it reforms the existing deed so that the transfer would be effective in 2005, not now. So if Dad needed Medicaid now the farm would not be considered in determining Dad’s qualifications as the transfer would legally have occurred more than the current 5 year look back. Good luck.

    Disclaimer. The information contained in this answer is provided for informational purposes only, and should not... more
  2. Stephen Ross Cohen

    Contributor Level 20

    1

    Lawyer agrees

    Answered . Correct it by filing a new Quitclaim Deed and keep a copy of the old one around to explain to the IRS the mistake.

    My name is Stephen R. Cohen and I have practiced over 38 years and can be reached at 213-819-1171. I practiced... more

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