How many years in advance must my father put his home in my name so that I avoid paying inheritance tax in TX.

Question

We live in Texas. My father wants to know how many years in advance must he put his home in my name to prevent me from paying inheritance taxes. He thinks it is 6 years. Is he right? All is left to me in his will. Seems strange that I must pay taxes on my inheritance of a home which has no lean, other than regular yearly county and state taxes. Has anyone confident information on this subject?

Answer 1

Your Father should NOT put the house in your name at all.  Unless his estate will be over $2 million this year or $3.5 million next year, there are NO Estate/Inheritance taxes.  However, if he puts the house in your name as a gift, there WILL be gift taxes AND when you go to sell the house you will owe capital gains taxes on the difference between what HE bought it for and what you sell it for.  If he leaves you the house in his will/trust then your basis cost in the house is stepped up to the value at his death.

For example if he bought the house for $25K, gives it to you (your basis cost is now the same as his $25K),he dies-the house is now worth $200K and you sell it for $200K then you OWE capital gains taxes on $175K.  BUT if he bought the house for $25K, dies, leaves you the house that is now worth $200K you have a basis cost of $200K so you can sell it capital gains tax free.

Answer 2

Well, the estate tax is only on estates over a certain amount.  That limit changes each year.  Unless he has a million dollar home, you should not have to worry about it.

If he gives you the house he is going to lose out on his homestead exemption and his frozen property taxes.

You should talk to an estate planning attorney about created a family trust.