My dad wants to put the title of our house in my 20yr old name
July 2, 2009 9:00 AM   Subscribe

My dad wants to put the title of our house in my name. I'm only 20 years old.

Okay, I'm 20 years old, employed part time at a bakery, and a full-time student in college. My dad I guess has been thinking about death and growing old lately (sagging muscles, and I think he has arthritis in his hands now).

He said he wants to put the title of the house in my name so when he dies there are no ifs, and, or buts about who gets the house. I responded with "Oh great, so I can never get a loan when I need it?" and he said "I'm not talking about the loan, just the title."

Now, my dad has two master's degrees and a Ph.D. He is smart. But I don't always trust him. he has done incredibly shady shit in the past and I'm afraid this is part of it.

So, good idea or bad idea? The house is probably valued at $100,000, and surrounded by houses that range in $150,000 to $700,000. It's the most desired location in the area.

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posted by ascetic to Law & Government (46 answers total)
This sounds shady to me but I don't know enough about real estate to say why. If he wanted the house to be yours he could just put it in his will, couldn't he? I also think that if the house is to be transferred that there might be tax implications as the house is income for you.
posted by chairface at 9:05 AM on July 2, 2009

Is there any chance your father may be in some financial difficulty? Could this be a precursor to bankruptcy? If so, I believe he'd need to do the transfer a couple of years before filing for bnakruptcy...
posted by le morte de bea arthur at 9:07 AM on July 2, 2009

It occurs to me that perhaps he has unsettled debt somewhere. You're not necessarily responsible for your parents' and relatives' debts after decease, so maybe putting the house in your name would ensure that debtors can't liquidate the house to pay off the debts?
posted by Phire at 9:08 AM on July 2, 2009

Response by poster: Yeah both my parents have quite a bit of debt. They are trying to get divorced and cannot settle to any terms. is this his way of ensuring my mom doesn't get the house in the divorce?

My dad borrowed $60,000 from a friend and is paying $500 back to him a month. I believe the $60,000 was to pay off the rest of the house....
posted by ascetic at 9:10 AM on July 2, 2009

It's not necessarily shady, especially considering he is getting older and doesn't want to lose the house if he gets sick and ends up applying for medicaid (when you apply for medicaid, they look at your assets to determine eligibility) also they go back 5 to keep people from transferring assets to family prior to going on medicaid. under 5 years = penalties.

How much money is still owed on the house? You need full disclosure on 2nd mortgages and other debts where the house might be used as collateral.
posted by freq at 9:13 AM on July 2, 2009

Response by poster: Since his most recent loan was $60,000, I'm assuming there is $60k left.
posted by ascetic at 9:14 AM on July 2, 2009

One thing to consider is that if you have a house in your name, it will impact how much you qualify for in student loans. Because you are in school, that's something to pretty seriously consider.

Unless there were no other options for my parent, I wouldn't do it personally for many reasons.
posted by ugf at 9:16 AM on July 2, 2009 [1 favorite]

Please check your MeFi mail.
posted by beagle at 9:19 AM on July 2, 2009

But I don't always trust him. he has done incredibly shady shit in the past and I'm afraid this is part of it.

You already know you want to say no.
posted by Nelson at 9:20 AM on July 2, 2009 [7 favorites]

If the house is in your name I am pretty sure that you are responsible for the taxes on the house. Also is your father's health poor? If he is in good health and has done shady things in the past then you have a right to be on guard about this.

Here is a little google Fu on the subject: (HIIIIIIIIYAAAA!) Ok sorry that was terrible.

Link 1 This is interesting because is says that you do not have to add or transfer someone the title if you plan on leaving it for them when you die.

Link 2 This one states that just because the title is not in your name anymore does not mean that you do not have to continue making payments on it. The loan is in your father's name. He is responsible for it.
posted by Mastercheddaar at 9:22 AM on July 2, 2009

They are trying to get divorced and cannot settle to any terms.

In most cases, being in the process of divorce precludes either party from disposing of or transferring property or other assets. (IANAL, but I am divorced.)

I don't see a big up-side for you, especially if you have reason to be suspect. Plus, you would liable for taxes, insurance, etc.

I would give a gracious, benefit-of-the-doubt reason to not do it. ("I appreciate the gesture, Dad, but with school and the uncertaintly of my future plans, I can't really take on the responsibility of being a homeowner, even if it's in name only.")
posted by The Deej at 9:22 AM on July 2, 2009 [1 favorite]

If you own the house, does that mean that you'll be responsible for the property taxes? That seems like a big burden to take on, especially since the property taxes could go way up the next time the property is assessed.

I'm also wondering where your mother stands in all of this. It sounds like she probably is co-owner of the house, at least until the divorce is finalized. Is she ok with the title being transferred to you? Do either of your parents still live in the house? Are you likely to get caught in the middle of their divorce stuff if you own the house? For instance, is it possible that your mother will want you to sell it and your father will want to continue to live in it, and in the end you'll have to make the call?

Finally, how old is your father? Does he have significant health problems of the sort that are likely to require full-time nursing care or the like anytime soon? This will seem a lot less shady to me if he's 75 than if he's 50.

This really seems like a huge thing to take on when you're a 20-year-old college student. I would be very wary, unless your father gives you a really concrete reason that it's a good idea.
posted by craichead at 9:25 AM on July 2, 2009

Response by poster: Well, all together my parents own four houses. Two of which have 6+ bedrooms and 6+ bathrooms.

I don't know how things work in a divorce, but my mom has nothing to do with the house in question, never lived here, nothing. The other three have at one point or another been permanent residences for both my parents.
posted by ascetic at 9:30 AM on July 2, 2009

I think that you need to talk to a lawyer before you make any decision.
posted by Hanuman1960 at 9:33 AM on July 2, 2009 [1 favorite]

You might consider checking with a lawyer to see if there are any other gotchas beyond the stuff listed above. Your state bar association can probably point you to someone who could give you the rundown and it might not even cost you anything.
posted by jquinby at 9:36 AM on July 2, 2009

My father transferred the deed of the family house into my name when I was 8 years old (26 years ago). He is a lawyer and I'm pretty sure he examined all the angles before he decided to do this. Basically, he did it so if anything ever happened to him, they couldn't get the house.

He has paid all the property taxes on it all these years, done all the maintenance, everything.

I never had any problems getting student loans, getting my own mortgage when I bought my first house last year, etc.

It's nice because when he dies, the house doesn't have to go through probate or anything. It's just mine, free and clear (he paid the mortgage off when I was still a kid).
posted by rabbitrabbit at 9:40 AM on July 2, 2009

He has paid all the property taxes on it all these years, done all the maintenance, everything.
That's nice, but what if he hadn't? What if he didn't have the money to pay the taxes or do the maintenance (because he was the kind of person who borrows $60,000 from a friend) or just decided to be an asshole (because he's the kind of person who has "done incredibly shady shit in the past")? It seems to me that this arrangement would have to be based on a lot of trust. Your father has earned your trust, so it's a good arrangement. It sounds like the OP's father hasn't.
posted by craichead at 9:44 AM on July 2, 2009

Can you AFFORD the house? The mortgage, the taxes, the upkeep? What will it do to your financial aid options for school? Are you planning to live there for five or more years, with or without your father? Evaluate it from that angle, and if you could afford it and are interested in owning it, talk to a lawyer. Your OWN laywer, not your dad's.

This sounds incredibly shady and keeps getting worse. If your dad leaves the house to you in a will, and the estate is worth more than his debts, it goes to you "no ifs, ands, or buts". The fact that he's trying to bypass that system (while getting a divorce nonetheless!) is VERY shady.

There's nothing inherently shady about a 20-year-old owning a house; I've known a few who did so either by buying themselves or inheriting something from family. The situation you describe is unusual and raising red flags for me.
posted by peanut_mcgillicuty at 9:47 AM on July 2, 2009

It sounds like you need to absolutely refuse this deal. You're only twenty, and you have years of financial idiocy ahead of you that you should feel free to act out instead of worrying about losing your father's house over it.

I'm jumping on the shady bandwagon. What with the divorce and the debt....just say no, no, NO. Wills are the legal documents that end all "ifs, ands, or buts" about who gets a house, not dodgy transfers during acrimonious divorces.
posted by motsque at 9:53 AM on July 2, 2009

Does your mom know about this? The fact that they're going through divorce is the biggest clue here. By giving it to you, it may absolve her of any rights to it, or the money that went into purchasing it.

Have you tried flat out asking him why he wants to do this? Get beyond the "i'm getting old" bit. You're 20, you're an adult, and I'm sure you can handle whatever he has to say about debts, divorce and who knows what else.
posted by JuiceBoxHero at 10:00 AM on July 2, 2009

Run away fast. Nothing good is going to come from you agreeing to this scheme.
posted by electroboy at 10:00 AM on July 2, 2009

You guys need to sit down with an estate attorney who will give you the ins and outs of all of this. There are different ways of doing this. I'd meet with a local attorney stat, the two of you.
posted by Ironmouth at 10:02 AM on July 2, 2009 [2 favorites]

I agree with others, about the possibility of bankruptcy, debt or marital asset settlement.

I think about it carefully for reasons other people have mentioned: taxes, student loan eligibility.

Other things to think about include:

-ownership of a home may make you ineligible for the first-time home buyer tax credit while the house is in your name, and for three years after you sell it or transfer it back

-he might eventually ask you to take out a second mortgage on the home, using your good credit, to pay off his debts

-If you want to buy a house of your own, your father's home will become a second or vacation home tax liability

-If it is not your primary residence and you sell the house, the capital gains will be your responsibility. They'll be your responsibility whether or not it's your primary residence, but I believe there's a different structure for primary homes and second homes.

I'm not really clear on whether or not he has an outstanding mortgage, you mention he reiterated that he was transferring "the title, not the loan" which would make me believe he did still have a loan on it. Then you mentioned his friend and you assume the loan was to pay off the house, but you don't say whether or not he paid off the house (or if the loan from his friend is formal with the house as collateral). If he does not own the house outright, and has an outstanding mortgage or loans against the house, I don't believe he's able to transfer the title anyway. If he includes you on the title, and creditors try to take action against the house, you will be named in the suit. This doesn't mean you'll be responsible for the debt (I don't know what happens in that scenario), but your name will be attached on public and/or court records.

I know it will be uncomfortable to turn down your father's request, especially since he's packaged it up as a gift to protect your inheritance. One way out of the sticky situation might be to schedule an appointment with an attorney or CPA (maybe someone here can advise which would be better). Let the professional know your concerns ahead of time (debt, marital asset) ahead of time so that s/he can ask your father the relevant questions and then advise based on the truth, or at least full/forced disclosure of red flags. Also ask about tax liability, the second residence issue, school loans, etc. If the professional takes all of this into consideration and advises against it, it takes the pressure off you. If the professional knows all the issues and is able to help you two cross the t's and dot the i's, at least you'll go into it protected (against the known issues).

Good luck!
posted by necessitas at 10:04 AM on July 2, 2009 [1 favorite]

The naysayers are forgetting that you get a house out of the deal, at least nominally. Figure out whether that will be an albatross around your neck, rather than just trust the smell test. This involves a lawyer, period.
posted by thejoshu at 10:06 AM on July 2, 2009 [2 favorites]

Ok, you're in New York. So am I. As I type this response, slacking off from work, I should be typing up a Quit Claim deed with a clause for a life use of the property in question.

If this is what your father is contemplating, it would mean he would transfer ownership of the property to you, but would retain what is called a "life use" of the property. It's a paragraph in the deed that reads, more or less:

"SUBJECT, however, to a life use retained by Grantor herein, (ascetic's dad), in and to the within described property and Grantor shall be responsible for the upkeep and maintenance; pay and keep current all real property taxes, assessments, insurance, mortgage, if any, together with all carrying charges and expenses in connection therewith."

IANAL, IANYL, but I've done real estate stuff in NYS for 10+ years. Talk to a real estate lawyer; they can help.
posted by Lucinda at 10:13 AM on July 2, 2009

Listen to necessitas, OP. She brings up a number of things to think about and/or look into before you make a decision.

Going to the lawyer may also be a good way to sort of feel out your father's true intentions. If he's really after something shady, he's probably not going to want to go to the lawyer; if he isn't, he should be able to accept that talking to a lawyer is the right way to go to make sure everything's legit. Obviously this isn't foolproof, but either way, I'd definitely advocate getting some form of legal advice.
posted by ashirys at 10:18 AM on July 2, 2009

I posted before w/o previewing so I didn't see your response about this being one of 4 houses. Who is living in this house now? Is it the house you live in, or is it an investment property? If the latter, that's even more reason to turn down the request because you will be liable for income tax from the rent. Even if you have some contract with your father that states he will pay the taxes for you, it'll still be reported on your income. If he's "forgetting" to pay the income tax from rent now, he might not be considering this or he might suggest that you do the same since it's worked for him. That would be even worse!!

There has to be another way to protect his asset and protect your interests. See a lawyer, CPA or both!
posted by necessitas at 10:18 AM on July 2, 2009

You guys need to sit down with an estate attorney who will give you the ins and outs of all of this. There are different ways of doing this. I'd meet with a local attorney stat, the two of you.

I disagree. I think it still needs to be determined if your father has your best interests at heart -- and based on his shady behavior in the past, it's not clear if he's looking out for you. See a lawyer on your own so you can discuss this in private, come up with the information you need to see (in writing and in official documents) from your dad to make sure this is a safe bet, and make a decision that's best for you.

It's not that you should perceive your dad as an adversary. It's that you need to make sure you aren't going to get screwed, and on this issue your interests and his may not align.

If you're worried about how much it will cost, see if your college has legal services for students, or contact legal aid.
posted by foxy_hedgehog at 10:20 AM on July 2, 2009

definitely go see a good accountant before you sign anything. he can tell you the ins and outs and what you'd be entitled to/liable for. Do that before you sign anything. Then you're making an informed decision.
posted by Penelope at 10:24 AM on July 2, 2009

peanut_mcgillicuty writes "If your dad leaves the house to you in a will, and the estate is worth more than his debts, it goes to you 'no ifs, ands, or buts'."

1) The estate being worth more than outstanding debts is a pretty big if; 2) if the father's will is contested it can take years of jacking around before you end up actually owning the house. If the OP has title then no problems.

However if this is only about the inheritance there is an alternative way of doing it. Set up a joint tenancy. The property reverts to you in whole when your dad dies but he's still a registered owner. If you're father won't go for that then you need to examine the reasons why not.

Lucinda's solution sounds even better though if it'll work for you.
posted by Mitheral at 10:31 AM on July 2, 2009 [1 favorite]

If you read newspaper columns on real estate matters, this is actually a common idea by aging parents, but it is rarely a good one from a tax perspective.

I am not your lawyer, or even a tax or property lawyer, but here is my understanding:

If you take title now as a gift, then you will have to pay capital gains taxes on all accumulated gains since your father bought the place.

But if you inherit the house, you will get what's called a stepped-up basis and will not be responsible for the accumulated gains under your father's ownership.

For example: The house is worth $100K, your father bought it for $50K. He puts title in your name today and five years later you sell it for $150K. You will have to pay capital gains on $100K.

But, same scenario, except your father dies tomorrow and you inherit the house. Five years later you sell for $150K. You pay capital gains on only $50K. Big difference.
posted by gabrielsamoza at 10:51 AM on July 2, 2009

There are often incentives/deals/subsidies available to first-home-buyers that are not available to others - he may be aiming to benefit from these.

This could be a great opportunity, or a millstone. I can't tell which (like you) but I'd think it would be worth ponying up some money to sit down with a professional who can lay it all out for you what all the implications, good and bad, are. Caution is important, but by the same token, a house is nothing to be sneezed at.
posted by -harlequin- at 10:57 AM on July 2, 2009

You will have to pay capital gains on $100K.

First $250K is exempt, no?
posted by @troy at 10:57 AM on July 2, 2009

I would be curious as to his reaction when you arrange a meeting with an attorney to discuss the ramification of this more fully. That should suss out how shady he's trying to be.
posted by desuetude at 11:16 AM on July 2, 2009

he has done incredibly shady shit in the past

If the object of said shit was you, and your father is as educated as you say, then he knows exactly what he is doing. Trust your gut and run from it. Or at least talk to a lawyer privately and ask him to imagine as many possible ways this could be bad as he can. And be sure to tell the lawyer that you don't trust him.
posted by rahnefan at 11:48 AM on July 2, 2009

You're going to want to talk to a real estate, divorce and probate lawyer. That may wind up being the same person; it may not. But whoever you talk to needs to be able to talk to you about the tax ramifications for what you're doing, as well as the ramifications of one spouse unilaterally giving what is probably marital property to a child.

There are a few things going on here. First, as has been noted above, when someone makes you a a gift while they are alive, their cost basis in the property becomes your cost basis in the property. I'm assuming that your father bought this house a number of years ago and it has now appreciated rather dramatically in value. If this is true, and he gives it to you while he is alive, your basis in the property will be the amount he originally purchased it for, meaning that when you go to sell it, you have a potentially massive tax bill waiting for you. When property is transferred via will or probate, the recipient's basis is the current, appreciated fair market value of the property, potentially reducing your tax exposure tremendously.

Second, such a transfer may well be void, as depending on the type of tenancy your parents have in the house, your father may not actually be able to give you good title here. Your mother has an interest in the house which he may not be able to affect, meaning that even if this does wind up being in your best interest, the transfer may not be legally possible without your mother's consent. Given that she's in the middle of what looks like a rather acrimonious divorce proceeding and stands to lose a significant amount of money if your dad can get rid of his largest asset in this way, that's going to be a tough sell at best.

Third, the fact that the divorce is currently pending may affect your father's ability to dispose of marital property. I don't know jack about family law, but that strikes me as being entirely possible. Courts tend not to look terribly kindly on spouses who try to screw each other out of money, and if that's what's going on here, you've got a problem.

I disagree with the above suggestions that you should categorically refuse. This has the potential to be quite a good thing for you. But it also has the potential to be financially disastrous, not to mention the hit your relationship with your mother is going to take once she finds out your father is trying to hide the house from the divorce negotiations. On balance though, I can't see any terribly compelling legal reasons for him to want to do this, and I can think of a few reasons why he shouldn't. Ergo, you need to talk to a lawyer.

This is probably worth paying for, as both the potential cost and potential benefit are significantly higher than the few hundred bucks in legal fees getting this done right is going to cost you.
posted by valkyryn at 11:55 AM on July 2, 2009 [1 favorite]

But I don't always trust him. he has done incredibly shady shit in the past and I'm afraid this is part of it.

Reason enough to say no. Trust your gut.
posted by scody at 12:12 PM on July 2, 2009

First $250K is exempt, no?

This is true only if it is your primary residence. He lives there now, but he might not be living there five years down the road.
posted by gabrielsamoza at 12:17 PM on July 2, 2009

In Canada, if you accept a non-arm's length transfer of property from someone who has a tax debt, you could be on the hook for that person's tax debt, to the extent of the value that you received through the transfer. Don't know about US/NY law, though.
posted by pluma moos at 12:20 PM on July 2, 2009

I'd say this is a textbook opportunity to see a lawyer to determine if there is a specific and legal way to do this transfer with no negative consequences for you. If the lawyer says no, it's money well-spent to find out that (regardless of your father's intentions) it's a bad idea, and if he says yes it's money well-spent to get you a house.

Of course, if the lawyer lays down a specific way to do it that protects you, and your dad balks at doing it on those terms, you'll know for certain that his intentions were shady all along. Again, money well-spent to find out.
posted by davejay at 12:40 PM on July 2, 2009 [1 favorite]

I think you need to figure out what the real motivation is. Also, if his reasons are to protect or shelter the house, there are probably ways of doing it (via trusts) that don't involve you, or would involve someone else acting as a trustee, with you as the beneficiary. That would have the same upsides for you — getting the house if he dies, free and clear — as transferring the title directly, but wouldn't make you the owner of record in the meantime, which might be good as you apply for student loans or if you ever need to go on some form of assistance.

Basically talk to a lawyer who does wills and trusts, but after you work out what your father's angle is.
posted by Kadin2048 at 12:42 PM on July 2, 2009

Locate an Elder Law attorney. There are too many pitfalls nowadays to do this without at least consulting a lawyer.
posted by dhartung at 2:22 PM on July 2, 2009

IAAL, but IANYL. You need a lawyer. Find someone who specializes in estates - the real estate/probate/family law issues presented here should be pretty familiar to someone in that specialty. It may cost you, but it will be money well spent. Is the house current on its taxes? Do you know what a "fraudulent conveyance" is? There are a lot of potential pitfalls to this proposal, and a lawyer who can get a full grasp of the facts and is familiar with the applicable law will give you much much better advice than anyone here can.

Also, with respect, I disagree with dharthung that you need an elder law attorney - that would be more for your dad, especially if he was of an age or infirmity that made him unable to satisfactorily look after his own affairs. What you need here is to look out for your interests, and so you need your own lawyer.
posted by AV at 5:05 PM on July 2, 2009

Whatever the legal implications (which have been discussed well above; you'll talk to your own lawyer, right?), by signing onto this you will be sucked into your parents divorce. Unfortunately, children can become ersatz escrow agents:

"I don't want you to have the house and you don't want me to have the house, so how about we agree to give it to the kid?"

Sounds good, in that they both (hopefully) have a positive view of their offspring. However, the parents could continue to resent and brood over the disagreement - embodied in the child's ownership of the asset. No child (of any age) needs that.
posted by GPF at 6:42 AM on July 3, 2009

Do not do this.
posted by Asparagirl at 8:44 AM on July 4, 2009

Care to elucidate Asparagirl?
posted by Mitheral at 10:23 AM on July 4, 2009

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