Use care when sharing mortgage responsibility
need to figure out if your dad would lose out on any of those real estate tax benefits.
The next issue would relate to federal income taxes. Currently your father should receive any federal income tax benefits from owning the home and living there as a primary residence. For one, he can deduct the interest he pays on his mortgage and he can deduct up to $10,000 in real estate taxes. (The maximum deduction for state and local taxes on your federal income tax form is $10,000.) Finally, this deduction will depend on whether you itemize your deduction on your federal income tax form.
For you to deduct interest on the loan, the loan must be a lien on a property you own. If you simply share the expense with your dad, your dad can deduct the interest, but you probably will not be able to do so.
Having said all that, if your dad wants to convey a part of the home to you, you’ll need to formalize that arrangement. You may decide to put the house into a trust. Once the home is in the trust, you and your father could be the beneficial owners of the trust. The trust document would spell out the responsibility for payment of expenses and provide for the distribution of your dad’s interest in the trust upon his death.
You’ll need to have a frank discussion with your father to see what your father wants to do with the home and who he feels should be entitled to it once he dies. What you think and what his actual wishes might be could differ, and you are trying to make sure that you and he are both in total agreement on this issue. For the sake of the family and the relationships you’d like to maintain in the future, you need to be thoughtful about how you proceed on this issue.
The last thing you need is relatives thinking you pressured your dad or took advantage of him.
You’ll want to build a solid paper trail of what you end up putting into the home financially and a record of the desires your dad had for you and the home. (This is where a will comes into play.) It’s also smart for him to write down if he wants any family members to get anything from the home (even small baubles take on larger meaning after a loved one dies).
For all these reasons, you need to sit down with an estate attorney and put a structure in place that will work for your dad, you and the rest of the family. Remember, if you end up having an ownership interest in the home, make sure you let your insurance carrier know so that you have insurance coverage not only for the home but also liability coverage in case somebody gets hurt there.