Gifting a home? No contract!
My mom bought a home for 160k in 2012 rent to own for my sister upon her divorce. Now the home is valued at 325k. It seemed the most generous thing my mom had ever done. No contract was drawn up. My mother put 40k into the home and wants that back w interest. Her calculation in 60k. My sister has paid rent of $231k. Mortgage remaining is 80k. My sister is a retired teacher w little extra money. My mom is 82. Now my mom sees the home as an investment and wants 50% of the equity. My sister wants to move or would consider buying it. My mom wants the lowest capital gains and tax implications.
How would you suggest this situation be dealt with. I don’t think it has been addressed in my mom’s will,thus it would go into the estate and be divided between 5 children. Think her estate it 1.5 million.
My sister wants a win win. My mom seems like she wants to cheat my sister. Of course there are many family opinions and many, many feelings involved.
Terry Says
Whew, this is a classic example of why family “deals” need a written contract! Your mother holds all the cards. Period. If she dies, there will be no capital gains tax, so everyone is better off if she doesn’t sell.
The first question is how the house is titled. I’m presuming it’s completely in your mother’s name. (If not, and it is in joint tenancy, your sister would inherit the mother’s half upon her death.)
Assuming the house is in mother’s name, she holds all the cards.
The “motherly” thing to do would be to keep her promise, and specifically leave that property to her daughter.
Plan B is for your sister to simply move out and rent in a senior community, and leave your Mom holding the bag — to either sell (and pay taxes on the gain) or rent to a stranger. Maybe that threat would convince her to at the very least, change her will, to give it to her daughter.
But it’s a threat your sister would need to follow up on! It could backfire, and she could get angry and write your sister completely out of the will.
PS. I hope, if it’s all in her name, she has been declaring the rent as income all these years!!
