HI everyone. I am looking for options , suggestions, and solutations. This is my first post My dad is wanting to convay to me a rental home that he recently purchased with a partner.The title is on their new formed LLC. He will buy it out from his partner.
There is no mortgage This rental comes to me with conditions. (1) He wants to recieve all of the rents, pay all the expenses and maintain and , operate and manage the rental while he is living as though it is his owned rental home but would like me to actually own the title ( have legal title) so that upon his death; I will then assume all of the benifits and it will not be in his estate and he will for now have the peace of mind that it is already my rental in ownership. My dad has several rentals already. He does not want to will it at his death. which would seem to be best since I get no benefit of this property while he is living that i know of
He wants me to have title now as this is a gift from him outside of his estate. (2) the 2and condition is that it only be titled in my name or a LLC which is only in my name not to include my wife on the title for his fear if a martial problem ever came up the property would be divided and he loose his rental benfits. My wife is OK with this. Something is better than nothing
I have been trying to edcaute myself on a landtrust and a LLC for proctection since I will be the leagal owner. He is open to this idea. Should I recieve title in my own name, a LLC, A landtrust, Or some other way? ?? Rember there is no lender. The property is located in Louisiana and I live in Alabama and alredy own one rental home in Louisiana .Does a land trust work in Louiaiana?? Last question for now. Best ways to reduce taxes for both my dad and me. Gift tax etc?? Thanks four your ideas!
thoughts.
First, in some community property states property received after marriage is automatically considered community property, irrespective of your wishes or if you are the single member of the LLC. Your LLC membership would be considered joint property since it occurred after marriage. Generally, inherited assets are not subject to the same treatment unless the inherited property is used for community purposes after it is inherited. You should check with an atty in your state to make sure that this plan with accomplish your goals.
2nd, Gifted property is taken at the giver’s adjusted basis; you assume it at Dad’s basis. Any gain when you sell the property will be calculated using this lower cost. Inherited property gets a step up in basis, so that when it’s sold, the gain will be calculated using the value at death. For property that has significantly appreciated between purchase and death, this can be a big issue.
LLC’s are nice for transferring wealth as membership is considered personal property and passes outside of probate.
I would suggest 1) talking with an atty and 2) having Dad put the properties into an LLC and will the LLC membership interest at his death. this solves A) the basis problem, B) the community property problem, C) probate issues.
why is he opposed to the inheritance route? Sounds like maybe a sibling issue?
Thanks, Mark
I really enjoy and learn from your responses.
From a tax standpoint. If I were to own the house and let my dad rent the house and maitain it. with all rents to him.
would I need to claim any income as I would recieve none ?Would he be able to use any exspenses and deprecation on of this home that I would own?
oh, you could probably enter into a management agreement with him. his fee could be the net income after expenses, etc. he’d see the income/deductions on Sch C, your (or the LLC’s) return would be a “break even” plus depreciation.
Why not have your Dad put the property into a revocable trust. He will remain the primary beneficiary of the trust and you will be the secondary beneficiary.
As long as your father is alive, he retains all the income and tax benefits of rental property ownership. At your father’s death, you “inherit” the trust property at its stepped up basis. The property avoids probate, but will still be included in your father’s estate for federal estate tax purposes.