- quote -

First of all, thanks for your time.
Second, I can get a clear answer from my mother. I am doing research
first. Don't paint me with your brush of poor money management
skills.

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On Tue, 15 Jan 2008 22:30:37 EST, watchtower7[at]gmail.com wrote:

- quote -

Suggest you request a meeting with the accountant and your Mother.
They can answer your questions - if they want.

My experience is that quite often the reason parents put assets in a
trust has nothing to do with taxes and lots to do with the money
management skills of the beneficiary. The fact that you can't get a
clear answer from your Mother is a clue. Good luck.



-HW "Skip" Weldon
Columbia, SC

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kastnna wrote:
- quote -

Given those assumptions, you're right. We need a lot more information
to be able to give OP the best information for his situation.

Stu

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On Jan 17, 10:19*am, Stuart Bronstein <spamt...[at]lexregia.com> wrote:

- quote -

The OPs post lead me to assume that they intended to give the tax
breaks to the Mother as compensation for using her money as a
downpayment. I am also not up-to-speed on the OPs creditor problems.
That may or may not affect the "ownership status" he wants to employ.
For that reason I gave a scenario in which he captured the deductions
and another in which she did. One in which he was a homeowner and one
in which he was not.

I did not intend those to be his only two options. Admittedly, real
estate law is not my area of expertise. Your method may better
accomplish his goals.

--
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kastnna wrote:
- quote -

I don't see why. She could sell it to him on a land-sale contract.
Under the contract he buys it from her, but title doesn't formally
change until his loan to her is paid off. I haven't researched this,
but it seems to me that he should get the property tax/mortgage
interest deduction, since the set-up is analogous to a grantor trust.

Stu

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On Jan 16, 10:13*pm, watchtow...[at]gmail.com wrote:

- quote -

Good thinking.

To help you get a game plan, does your Mother intend to buy the house
100% with cash or is she going to finance through a bank?

A)If she is financing, she should treat you as a renter. She would get
the mortgage interest deduction, depreciation, and all the deductions
that go with being a landlord. You would get a roof over your head and
a landlord that is easy to work with.

B)If she is paying cash, you could follow Joe's advice and have her
issue a mortgage to you to buy the house from her. In that case you
would get all the normal deductions of home ownership, and she would
get an interest rate that is slightly better than the bank CDs and
money market.

The second option will make things run smoother upon her passing. The
loan could be forgiven and you would own the house outright. To make
things equitable, your brother could be given other, comparable assets
or half interest in the house. If, on the other hand, at her passing
she holds a mortgage with a bank, you could possibly pay-off the loan
with funds from her estate. If that is not feasible you would likely
have to negotiate a new mortgage with the bank. I am not well versed
on this last statement. Perhaps someone here could chime in.

I would have your accountant address all of the issues we have. If he
can tell you what benefit you gain from having a trust involved, I
would be very interested to hear it.

--
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watchtower7[at]gmail.com wrote:
- quote -

Don't you mean that you'll buy the house but she will provide the
mortgage from her funds? If that's what you do, you get the tax break,
deduct the property tax and mortgage interest on your taxes, as well as
get a rate a bit better than market rates for loans. She will get
interest better than today's fixed rates. She can put in her will that
the mortgage is forgiven on her passing.

You may want to take a moment to call the accountant and ask what his
thoughts were regarding the trust. Typically a trust doesn't save anyone
on income tax, it's more a tool for estate planning and to bypass
probate. An irrevocable trust can help one take advantage of the annual
$12K/person gift tax exclusion.

JOE

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- quote -

Well, her accountant recommended the trust aspect, I don't know why.
The further I get into this the more I think she should buy the house
for cash and issue a mortgage to me at a rate between the money market
rate and existing mortgage rate.
Everyone is ahead then.

--
<< ------------------------------------------------------- > << The foregoing was not intended or written to be used, > << nor can it used, for the purpose of avoiding penalties > << that may be imposed upon the taxpayer. > << > << The Charter and the Guidelines for submitting posts > << to this newsgroup as well as our anti-spamming policy > << are at www.asktax.org. > << Copyright (2007) - All rights reserved. > << ------------------------------------------------------- >

On Jan 16, 3:04*pm, watchtow...[at]gmail.com wrote:
- quote -

"puts it in the trust" is a problem. If she gifts it to the trust, she
must file a gift tax return for the value of the house minus $12k (the
annual exclusion amount). That could result in taxes DUE from your
mother or it could reduce the credit her estate receives at her
passing. Another option is that she sells the house to the trust at
fair market value. She will have to extend a loan to the trust and
charge a reasonable rate of interest. This will have tax consequences
for ma. In addition, you will have to be sure that the trust generates
sufficient revenue (from your rents?) to pay that mortgage.

- quote -

I'm confused. So the asset she sells to the trust will be given back
to her (or her estate) at death and then distributed to you and your
brother through probate? Will your brother then own half the house and
you the other half? Who then will cover any remaining mortgage balance
to the bank (they may make you refinance at this point, I don't know)?
Will the estate be large enough to run into estate taxes (you are
adding the value of the property to her estate through this course of
action)?


- quote -

Your mother will get to DEDUCT interest paid on her mortgage to the
bank (if she itemizes), but she will PAY taxes on the mortgage income
paid to her from the trust. Unless the mortgage terms are skewed
heavily against the trust, I cannot see how she comes out ahead. Also,
specifically, where did the downpayment money come from? Did she
liquidate investments that are going to have tax repercussions?

The last sentence in your paragraph above is terrifying! There is most
certainly a difference and the IRS will eat you alive for co-mingling
and/or treating them indifferently. Where the money eventually ends up
is not as important as the route it took to got there. You need to
think of the trust as a business that is entirely separate from your
Mother. In your example, your Mother is essentially and investor in
the trust and the trust is your landlord. You cannot "skip" the trust.

- quote -

Your past problems are your own and I respect your privacy.

My biggest question is this: Why have a trust at all? What is it
adding? Why can't your Mother just buy a house and rent it to you? She
would get all of the same tax benefits with half the headache. The
trust sounds like a very unnecessary middleman in this case. She buys
a house, she rents the house to you, your rent money is used to pay
the mortgage. Bada bing, bada boom!

I see no benefit of holding in trust unless my assumptions above are
way off. There may be some creditor protection reasons not mentioned,
but that doesn't seem to be your focus. I suggest you run this plan by
an estate lawyer and see what he has to say. I suspect you are
overlooking some fundamental aspects of trust law that are going to
throw a wrench in your plans.

--
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<watchtower7[at]gmail.com> wrote:

I don't want to the house to be in my name for various reasons.

This is WAY too complicated for a DIY project, you're going to need a lawyer
in the end anyway, and I'm not sure you want to be airing all details in
such a public forum.

I suggest you and your mother (and any other interested parties) sit down
and figure out exactly what you want to accomplish, then take that list to a
good lawyer who knows taxes, including estate tax, or has access to such.
--
Phil Marti
Clarksburg, MD

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watchtower7[at]gmail.com wrote:
- quote -


To "put it in the trust" would mean the trust would have to hold title
(or rely on the will rolling it into the trust on death, but it's too
big an asset for that to fly, undoubtedly), so that raises the question
of whether the mortgage holder will approve that transaction I would think.

What, pray tell, is the end objective here? W/O that, seems essentially
impossible to suggest anything other than _perhaps_ some mechanistic
answers, but undoubtedly those would be very difficult to ascertain as
to whether the end result of implementing them would be desirable...

--

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Herb Smith wrote:
- quote -

That's normally an excellent response. But with respect to the
specific question, it's less a question of what's in the trust and more
a question of what is in the terms of the mortgage. Most mortgages
(some states use deeds of trust) contain a provision that the entire
loan balance is due when the property is sold or otherwise changes
hands. Does that apply to a trust that continues to hold property
after the settlor dies? Check the mortgage loan documents.

Stu

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- quote -

done yet. My mother has been pre-approved on the mortgage. Your
questions cannot be answered yet but do bring up more to consider. My
initila reaction is that she buys the house in her name and puts it in
the trust.
2. Who is the beneficiary of the trust? I am assuming you are the
only
- quote -

would
- quote -

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On Jan 15, 9:30*pm, watchtow...[at]gmail.com wrote:
- quote -

Lots of questions!

1. How is she buying the house in the trust name? Did the trust get a
mortgage from a bank or your mother to buy the house? Did your mother
gift the money to the trust to buy a house? Did she buy the house
herself and then gift the house to the trust?

2. Who is the beneficiary of the trust? I am assuming you are the only
beneficiary.

3. Who is the Trustee? Is it your Mother (also the grantor)?

4. Why rent? Why didn't the trust issue a mortgage/loan that you would
repay monthly? You are building no equity and getting little/no
homeowner related deductions on YOUR taxes. I am also confused by your
comment that you are paying HER rent. The trust owns the property and
you are renting from the trust. Why are you not paying rent to the
TRUST?

5. What happens to the trust at the death of the grantor (a wise
question that you asked, but only you can answer)? Is the trust going
to distribute an asset (the house) to the beneficiary (assumedly, you)
that is taxable as income? What is the plan of action if the house has
greatly appreciated?

6. What are the tax benefits the trust is "gleaning" from this
arrangement? I already mentioned one instance where it seems that you
are losing out on tax benefits. Are you sure your coming out ahead?

If you can ge the answers to these questions, I think we will be much
closer to understanding and helping with your arrangement.

Good Luck.

--
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On Jan 15, 7:30*pm, watchtow...[at]gmail.com wrote:
- quote -


what kind of trust?

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On Jan 15, 10:30 pm, watchtow...[at]gmail.com wrote:
- quote -


these things are usually governed by the trust document
you should read the trust document
it should provide you with your answers here




<<< Benjamin Yazersky, CPA [NJ & NY] > > -----> real address on hobokeni or hobokenx <-----





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On Jan 15, 7:30�pm, watchtow...[at]gmail.com wrote:
- quote -

Trusts exist in all forms, shapes and sizes. The answers to your
questions should be found in the actual language of the trust created
by your mother.

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My 79 yr old mother is buying a house for me to live in. She is
putting it in a trust. I will be making the payments to her in the
form of rent, the trust will glean the tax benefits.
When she dies, does the house have to be refinanaced or can the trust
continue to make the payments, continuing to get the tax
benefits( which can be redistributed back to me)?

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