Family who got home wonders if gift tax applies to bequest
Q: My mother passed away recently, and left her modest $90,000 home to my three siblings and me using a Transfer on Death Deed. However, to simplify things, she gave the home to my brother, who would give our shares to the rest of us later. Now we are concerned about his tax liability. Would the $15,000 gift tax exemption help minimize his tax liability? What's the best way for him to handle this?
A: There is virtually no chance your brother will incur any tax liability when he gives each of you one-fourth of the house.
He is not selling the home, so there will be no capital gains taxes. The only possible tax would be gift taxes.
The value of his gift to each of you will be $22,500. You are right that he can give each of you $15,000 each year using the annual gift tax exclusion. If your brother happens to be married, his exemption essentially doubles because his wife can join him in making the gifts, thereby doubling his exemption to $30,000. In that case, the gift tax issue is solved.
But even if your brother is not married, if he exceeds the annual exclusion by $7,500 for each of you, or $22,500 in total, he still won't owe gift taxes because he can give away a total of $11.18 million before he will be required to pay gift taxes. (His $22,500 taxable gift would leave him with a lifetime exemption of $11,157,500.) Assuming your brother has not already made $11.18 million in taxable gifts, that means no gift taxes will be due.
Another option is for your brother to give each of you oneeighth of the home this year, and the other one-eighth early next year. That way, all of his gifts will be under the $15,000 annual limit.
Your brother and his wife should talk to an accountant to determine whether gift tax returns must be filed.
It is worth noting that it would have been far better for your mother to have named the four of you in the Transfer on Death Deed to receive the home in equal shares upon her death. That would have been very easy to do, and your current issue would not exist.
Q: We are a small neighborhood with a dysfunctional HOA Board of Directors. They have closed door meetings, keep no minutes and have no annual budgets. The bookkeeper is also a homeowner and is paid about $17,000 annually by the HOA, but she hasn't paid her own HOA dues for five years. The other homeowners are trying to vote them out and terminate the bookkeeper. What recourse do the homeowners have to collect the $5,000 in unpaid dues from the bookkeeper?
A: Once a new board in place, one of their first orders of business should be to initiate proceedings to collect the unpaid dues from the bookkeeper.
If the new board is not certain about the proper steps to take, they should hire an attorney who specializes in homeowners' association law. The information in this column is intended to provide a general understanding of the law, not legal advice. Readers with legal problems, including those whose questions are addressed here, should consult attorneys for advice on their particular circumstances.
Ronald Lipman of the Houston law firm Lipman & Associates is board-certified in estate planning and probate law by the Texas Board of Legal Specialization. Email questions to stateyourcase@lipmanpc.com.