cathyan Posted April 24, 2013 Report Share Posted April 24, 2013 Hopefully, someone will have knowledge of a situation like this. I've tried searching the internet, but am probably not using the right search words. My client came in yesterday and asked what would be the tax and inheritance consequences if his mother built, with her own money, a home on his property. She's in her 80's and still quite healthy, but is trying to plan ahead. She does not want to go to a nursing home, so, living next to him would allow his family to care for her, if the need arose. Would he need to "rent" her the land she would build on? After her death, how would he inherit it? A TOD on the title? And, what quickly came to my mind, although she is quite wealthy, what if she did need Medicaid assistance? How could the State recoup money from a house on land that she did not own? If anyone can point me in the right direction to learn more about a situation like this, I'd sure appreciate it! Quote Link to comment Share on other sites More sharing options...
kcjenkins Posted April 24, 2013 Report Share Posted April 24, 2013 Well, if you, or if anybody builds a house on your land, you, the land owner, own the house. If you rent some of your land, and the tenant builds a structure that is attached to the land, such as a building, when the tenant leaves the building stays and belongs to you. Now, there are several ways to do this. Mom could, or course, gift the son the money for him to build the house. But assuming the cost exceeds the gift exclusion, which depends on such factors as 'is the son married, so that the gift could be to both h/w and thus double exclusion', etc, it might be preferable to have her just build it and let him simply gain from her action. Remember, the owner of the property also owns any and all improvements to the property. This includes driveways, wells, buildings that are permanent , septic systems. As to inheritance, if she has a proper will, he can inherit whatever rights she has to the house regardless of ownership. But if you are concerned about 'basis', that's going to be based on FMV at DOD assuming she lives in the house the rest of her life. I'd STRONGLY advise you to STRONGLY ADVISE HER TO CONSULT A GOOD ATTORNEY, AND HAVE A PROPER WILL DRAWN UP, AS WELL AS A WRITTEN CONTRACT COVERING THE UNDERSTANDING OVER THE HOUSE. It's not a good idea for you to give legal advice, outside of tax law, that is. Quote Link to comment Share on other sites More sharing options...
Guest Taxed Posted April 24, 2013 Report Share Posted April 24, 2013 Similar situation happened in my extended family. My aunt's mother built a 3 room attached house (had an iternal hallway) on her daughter's land with her own money so that daughter could take care of mother at old age. Daughter consulted an attorney and drew a lease of the land to her mother for her lifetime. The lease called for $1 per month rent. At the mother's death the lease would terminate and the house would belong to the owner of the land (he daughter). Keep in mind on tax records the mom did NOT own that attachment because county billed the daughter for that additional structure. 3 years back mom passed away, now my aunt is the owner of that structure and her kid is living there (rent free!) Thanks grandma! Quote Link to comment Share on other sites More sharing options...
cathyan Posted April 24, 2013 Author Report Share Posted April 24, 2013 Thank you both. KC, I did not intend to give legal advice. I just wanted to know what issues could come up that they would need to discuss with a lawyer. Quote Link to comment Share on other sites More sharing options...
kcjenkins Posted April 24, 2013 Report Share Posted April 24, 2013 I know, just a standard reminder our friend Jainen likes us to add. LOL 1 Quote Link to comment Share on other sites More sharing options...
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