My sister owns a house under her name in Laguna Hills, with an existing mortgage. The family would like to add my brother to the title, since the family doesn't trust the owning sister's husband and is afraid of losing the house completely in case of divorce or her death. Would adding the brother (as joint tenant, not tenants-in-common) cause a reappraisal for property tax?
Real Estate Attorney
Is your sister okay with this plan? Is the house in her name alone? A transfer of a one-half interest to your brother would cause a re-appraisal of the one-half interest. Depending on the date of purchase and the value at the time of purchase viv a vis present fair market value, the tax bite could be from huge to non-existent. If the transfer is to create a joint tenancy, a new deed from your sister to your sister and brother as joint tenants will need to be prepared and filed together with a preliminary change of ownership report describing the transfer.
This answer does not constitue legal advice, nor does it creat an attorney/client relationship. If you are seeking legal advice upon which you intend to rely, you should hire competent cousel familiar with this area of the law in your locale.
11 lawyers agree
The short answer is yes. There is no exclusion for transfers between siblings. Also, Im not sure if you would achieve your goal by this. Note, if your sister is using her earnings to pay the mortgage, or repairs or upgrades to the property, without a pre or post nuptial agreement, she may be creating community property in the house.
Your sister should meet with an estate planning attorney to determine options. If this was a family home and the intent is to keep it in the family, one option might be an LLC (if there are no issues with the loan on transfer to the LLC). 49.9 percent of the LLC interest could be transferred to the brother. No reassessment would occur on contribution or the gift but you would then have an $800 a year minimum tax.
The general advice above does not constitute an attorney-client relationship: you haven't hired me or my firm or given me confidential information by posting on this public forum, and my answer on this public forum does not constitute attorney-client advice. IRS Circular 230 Disclosure: In order to comply with requirements imposed by the Internal Revenue Service, we inform you that any U.S. tax advice contained in this communication (including any attachments) is not intended to be used, and cannot be used, for the purpose of (i) avoiding penalties under the Internal Revenue Code or (ii) promoting, marketing, or recommending to another party any transaction or matter addressed herein. While I am licensed to practice in New York and California, I do not actively practice in New York. Regardless, nothing said should be deemed an opinion of law of any state. All readers need to do their own research or pay an attorney for a legal opinion if one is necessary or desired.
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Estate Planning Attorney
Joint tenancy is a poor estate plan, as illustrated by the earlier answers. Not only do you have the reappraisal issue, you have the problem that the joint tenancy doesn't address keeping the property "in the family". Consulting with an estate planning attorney is a better idea.
The information above should not be considered legal advice and does not create an attorney-client relationship.
6 lawyers agree
Better choice is to form a trust and have sister convey the property to the trust by quitclaim deed. This can help keep it as a separate asset of the sister as against a husband seeking to claim it as a marital asset. The brother can then be added as a co-trustee and put a provision that blocks husband from control and division of this asset in case of a divorce....the brother becomes the protector of the asset f/b/o sister w/o becoming a partial owner. Also avoids any negative gift tax issues if sister is the grantor of a revocable trust sine won't be a completed gift but will have springing provisions to ward of creditor issues in future (like a divorcing spouse).
This is not intended to be giving legal advice and this topic can be a complex area where the advice of an attorney should be obtained.
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