Farm Succession / Inheritance Question

[MinnesotaEric]

Wow, lots of comments that could lead you into deep trouble. You need a proper consultation with an attorney specializing in transfer of farm estates.

Rules here that may/may not apply there: If you should be forced to sell in your lifetimes then the cost basis you figure profit from and then pay taxes on, starts from MIL's purchase long ago. But if you inherit via will (or Trust, here) then upon MIL's death, your cost basis basis jumps up to value at that date. This difference in taxes you owe could be hundreds of thousands of dollars. (My experience was prior to the increase of estate tax exemption recently).

And an issue unique to California: because of inheritance my property taxes are based on the Prop 13 rule: tax 'appraised value' is 1973 value + 3% per year thereafter. My annual property tax bill is only a third, maybe a quarter, of what more recent neighbors pay on comparable property, where appraised value started from market value when they bought the property.

So deeding it to you now in any form while she is living could be very costly later if you were forced to sell due to some unforseen disaster in the future.

I have no idea if this applies to you, I intend only to caution you that you need professional advice. Internet opinions are no help beyond suggesting things to watch out for.

Another concern:

If the MIL winds up running out of money, in the USA medical bills will be charged to her estate, including the real estate. Without a transfer, there could be nothing left to inherit. In the states, we have a five year clawback that begins ticking on the transfer of the RE. The clawback period is why a quit claim may be preferred once the tax event horizon, if any, is understood.

Also, while not seeking to make a political remark, in the USA, thanks to an unforeseen issue with Obamacare, once affordable health plans for the lower income brackets have gone away and replaced with Medical Assistance plans. Those plans will seek to charge the estate for any medical payments after the person becomes age 55. This last one is a becoming a big problem for people working in rural communities where people have land, but do not have year round jobs and so are now being forced to carry medical insurance, that on the lower spectrum is funded through medical assistance. The take away is that the state is now going to take away the inheritance of the lower brackets of working poor.

 

[California]

.... The take away is that the state is now going to take away the inheritance of the lower brackets of working poor.

This issue is unavoidably political. Fundamentally does responsibility to protect the value of an an inheritance rest on the public at large (because assets were allowed to be quit-claimed in anticipation of medical costs), in contrast to the estate of the deceased bearing the cost for that person's medical care. Who we vote to represent us is how such issues are determined.

 

[teejk]

This issue is unavoidably political. Fundamentally does responsibility to protect the value of an an inheritance rest on the public at large (because assets were allowed to be quit-claimed in anticipation of medical costs), in contrast to the estate of the deceased bearing the cost for that person's medical care. Who we vote to represent us is how such issues are determined.

As a tax advisor I always struggled with the ethics of "estate stripping". Otherwise libertarian viewed people saw no qualms in a member of the family with substantial assets becoming a ward of the state (hardly a libertarian viewpoint)...guess it came down to "everybody does it and I've paid for and will continue to pay for others that do it" (that's how I rationalized it anyway). Btw when I started the "claw-back" period was 12 months, then it went to 18 months, then to 24 months, then to...

 

[hosspuller]

My advice is consult a Canadian lawyer... But before you meet with him/her, make a list of your objectives. Lowest cost to transfer, lowest taxes, simplest transfer, shortest probate, etc. You don't yet know what questions to ask. Ask for alternatives and strategy. Make your time with the lawyer quick. Remember, his time is your money.:2cents:

 

[hosspuller]

As a tax advisor I always struggled with the ethics of "estate stripping". Otherwise libertarian viewed people saw no qualms in a member of the family with substantial assets becoming a ward of the state (hardly a libertarian viewpoint)...guess it came down to "everybody does it and I've paid for and will continue to pay for others that do it" (that's how I rationalized it anyway). Btw when I started the "claw-back" period was 12 months, then it went to 18 months, then to 24 months, then to...

I am of Libertarian views. BUT, I am also not stupid. I didn't create the system or environment. I am going to take every advantage the system allows. It is the fault of the system that rewards poor choices. Taxes are the same. I don't do anything illegal, but I'm not going to pay any more than required.

 

[dmccarty]

As a tax advisor I always struggled with the ethics of "estate stripping". Otherwise libertarian viewed people saw no qualms in a member of the family with substantial assets becoming a ward of the state (hardly a libertarian viewpoint)...guess it came down to "everybody does it and I've paid for and will continue to pay for others that do it" (that's how I rationalized it anyway)....

I mostly agree but... :laughing::laughing::laughing:

The flip side of the coin is why should a family loose a life time of work to an inefficient system created/mandated by the government? I am talking purely health care.

I have an elderly relative who I think the tax payer is helping care for in a retirement center and they had to pay until their money was mostly/all? gone. I hate to see it and it sucks, but the taxpayer is paying for a portion of the care, so the person should pay as much as they are able. I would hate to see it come out of the estate but the taxpayer should not be held liable if the patient has the money.

One of my grandparents said she would NEVER go into a nursing home. She said it frequently. Eventually she got to a point she needed to go into a home. The doctor told her she needed to go. My grandmother died in a matter of days. She said she would not go into a home and she did NOT! :thumbsup: I hope I can check out on my own terms as well.

Later,
Dan

 

[teejk]

I mostly agree but... :laughing::laughing::laughing:

The flip side of the coin is why should a family loose a life time of work to an inefficient system created/mandated by the government? I am talking purely health care.
Dan

Further rationalization! I don't do that stuff any more but for anybody looking at it make SURE that any recipients of assets are aware of the rules lest they spend it all and have to pay up when the gov't comes knocking.

 

[dmccarty]

Further rationalization! I don't do that stuff any more but for anybody looking at it make SURE that any recipients of assets are aware of the rules lest they spend it all and have to pay up when the gov't comes knocking.

I do not think it is a rationalization but a fact. The system is the system and if you play by the system's rules you are good to go. That is not a rationalization either. We have to live with the system even if we don't agree with it.

Don't get me started on Social Security...

Later,
Dan

 

[sixdogs]

Anyone know what the OP decided to do?

 

[chado613]

I am going to make an appointment with a lawyer to discuss options.
But so far I will be looking at the following fees:
Lawyer Fee - to transfer names on to ownership($700-1200)
Land Transfer Tax - ($3000)
Admin Fee from Bank to add name(s) to Mortgage -($300-$500)

These are all estimates. The land transfer tax is the kicker