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dkline1998 · Joined: 14 Jan 2008 Posts: 3 2.66 Dollars($)

Hi, my mom's dementia/Alzheimer's is getting worse and my dad is breaking down. I am considering moving back home and buying their home so it stays in the family. There is still a mortgage and any equity would be mine since my sibling will be giving up their rights if I move in and take care of my parents.

I have over 720 FICO but won't have a job if I move back home...may take awhile to find one in this market.

I've been informed to do an interfamily deed of transfer rather than apply for a loan since their rate is fairly low for the next 2 years. I was also told to keep copies of the mortgage payments as proof so I can take the tax deduction and when I need to apply for refinancing to show that the house is mine. After six months or a year, I can remove my parents name from the deed, but I should have them apply for a home equity line now so I have access to the equity in case it's needed. It'll be easier and that way I can wait out the year before refinancing or whatever. Seems to me this is a good tax benefit to me and the property tax won't be reassessed. Is this right or is the broker pulling my leg? Is there a gift tax issue? Any help is appreciated.

Thanks.

sara

Hi Dkline,

Welcome to the forums.

I can feel how miserable you're feeling since your mom's health is getting worse.

As far as I understand, the interfamily transfer should be done with the approval of the lender who has earlier offered a mortgage on the property. There is a possibility that the lender may ask you to refinance now. If possible, he may also allow you to take over the mortgage by the process of novation but prior to doing so, he will check your creditworthiness and financial situation.

However, The idea of taking a home equity loan isn't a good one, I mean I am not convinced with the explanation your broker as given. If at all you wish to pull out equity, do a cash-out refinance on the property. In such a case, you'd be paying off the existing loan as well as taking out extra cash.

Regarding the tax benefits, well, it is effective only when you itemize. Do you itemize or is it the standard deduction that you follow? There are limits up to which you can get tax benefits by taking a home equity loan/line of credit.

As for the gift tax issues, well, that has to be paid by your parents because they are the ones transferring their property-interest over to you. However, there are exemption limits on gift tax.

Hope I could clarify your doubt. If you have further queries, feel free to ask me.

Take Care

gmakerley · Posted: Tue Jan 15, 2008 8:37 am Post subject:

honestly, i don't understand the reference to your siblings giving up their rights. i feel quite sure you don't want to get into a legal battle with them over this situation - we all recognize that failing health of parents will cause great alarm in families. that ought not cause a falling-out of the children of the family. my condolences to you at this time - i hope you and your siblings can come together in agreement on this.

please be careful how you proceed. i don't have much faith in the advice that claims to tell you that you can deduct interest on your tax return for a property you do not own. you would be well-advised to consult with an accountant in this matter.

i also suggest you retain legal counsel, as you will want to ensure that your parents' rights are protected as well as yours and your siblings. moving forward without such counsel is an invitation to legal proceedings against you later, especially if there is a family dispute.

adonis · Posted: Tue Jan 15, 2008 12:48 pm Post subject:

DKline, there's a sample Interfamily deed transfer declaration form at http://www.gov.pe.ca/forms/pdf/1145.pdf . Just have a look. I'm not aware of which state you are in. If you let me know, I can provide you the one approved by your state.

dkine1998 · Joined: 15 Jan 2008 Posts: 4 2.15 Dollars($)

Hi sara, thanks for the response. Itemizing would benefit me greatly. In regards to the equity, I'm sorry I meant that it was suggested a home equity line be applied for (not sure if it is the same as a loan). The line would only be drawed upon in an emergency...but I'm hoping I'll get a job first then I can refinance.

dkine1998 · Joined: 15 Jan 2008 Posts: 4 2.15 Dollars($)

Hi gmakerly, I was just making it known that my siblings have given up their rights on any inheritance/equity in the home since I will be absorbing all the costs of healthcare and providing for my parents. Didn't know if that would make a difference on how you or anyone would respond.

I've talked to an accountant. He says that as long as I make the payments and keep copies of the checks, the IRS will allow me to deduct the interest on the property.

dkine1998 · Joined: 15 Jan 2008 Posts: 4 2.15 Dollars($)

Hi adonis, I'm in California.

dkine1998 · Joined: 15 Jan 2008 Posts: 4 2.15 Dollars($)

Thank you all for your response and thoughtfulness to my family's situation.

sara · Posted: Thu Jan 17, 2008 6:16 am Post subject:

Yeah Dkline, I understood that it was a home equity line of credit and that's a loan actually, that too, against your home equity as the security. What I shall suggest is, you don't go for a home equity line of credit because already you have a loan and then there'll be one more. So, won't that create a problem for you because your parents' health isn't going good; may be you need money for their treatment too.

Take Care

lisascherzer · Joined: 04 Jan 2008 Posts: 755 1.12 Dollars($)

Have your parents add you to title and do a surviorship deed. In the event of death, the home will automatically transfer full ownership to you. At that time, you can then refinance the property to put the mortgage into your name. Hopefully it is many, many years before you have to worry about that. But get the surviorship deed done soon.

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