My grandmother owned a piece of property worth 1.5 million dollars. She is 86 years old. She had transferred the property into a living trust. For some reason that she now regrets, she gave the property to her children to include my mother. They did a "Quit Claim Deed". At the time, we didn't think much about it. But, I have learned from my accountant that she has to pay gift tax on the amount over 1 million. Worst, I was also told by the same accountant that she will lose a "Step Up in Basis" had she left the property in the trust.
My question is whether there is anyway to rescind the gift? Can I ask a court to do something? She is pretty sharp for her age but had NO idea what she was doing.
Do we have to notify the IRS or the State (of Washington)? Suggestions?
Family Law Attorney
With several hundred thousand dollars at stake in taxes, your grandmother should review her facts and options with an attorney.
Quit claim deeds do not write themselves. Who prepared the deed for your grandmother? Did that person review with your grandmother the possible consequences of her action?
Is the grandmother now collecting any public assistance (such as government's assistance for nursing home expenses)?
Divorce / Separation Lawyer
Note that I am not licensed to practice in your state.
Your question is a little confusing. Your grandmother placed her house in trust and then from the trust deeded it over to her children? So the trust has nothing in it now?
If that is the case, then your grandmother is entitled to gift, tax-free, up to $12,000 per person per year. If she gifts over that amount, then she will be subjected to a gift tax but note that the tax does not need to be paid right now. The gift tax is deducted off the lifetime exclusion amount (which changes depending on when she dies). She does meanwhile, need to file a gift tax return.
It is true also that her children will not get a step up in cost basis because when something is gifted, as oppose to inherited, the children takes the basis of the giftor (your grandmother). It would probably be better to have left it in trust and transfered to her children upon her death rather than to gift the property to them at this moment.
The mechanics of how to null a deed transaction, you need to contact an experienced attorney in your area to do. You do not want to take the chance of making the situation worse.