MIL moving title to her 4 kids - risks?

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patriot1
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Re: MIL moving title to her 4 kids - risks?

Post by patriot1 »

Rysto wrote:do they have the ability to force 4 Canadian citizens to actually pay anything?
Aren't they also US citizens, since Mom is? You know, like Ted Cruz?
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Re: MIL moving title to her 4 kids - risks?

Post by kombat »

patriot1 wrote:
Rysto wrote:do they have the ability to force 4 Canadian citizens to actually pay anything?
Aren't they also US citizens, since Mom is? You know, like Ted Cruz?
LOL, no, they were all born in Canada and have never applied for US citizenship. They're all 100% Canadian. And MIL is definitely not "rich." Estate will be worth well under $1MM.
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Re: MIL moving title to her 4 kids - risks?

Post by brucecohen »

kombat wrote:
patriot1 wrote: LOL, no, they were all born in Canada and have never applied for US citizenship.
US govt says here that a child born outside the US gets automatic American citizenship only if BOTH parents were US citizens.
Estate will be worth well under $1MM.
So US estate tax is a non-issue. I suspect capital gains on MIL's home will also be a non-issue thanks to the US$250,000 exclusion but she should check with a tax pro or at least a more knowledgeable board like Serbinski. Bottom line: transferring the house to the children is fundamentally a bad idea and likely not necessary.
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Re: MIL moving title to her 4 kids - risks?

Post by ockham »

brucecohen wrote:
kombat wrote:
patriot1 wrote: LOL, no, they were all born in Canada and have never applied for US citizenship.
US govt says here that a child born outside the US gets automatic American citizenship only if BOTH parents were US citizens.
Estate will be worth well under $1MM.
So US estate tax is a non-issue. I suspect capital gains on MIL's home will also be a non-issue thanks to the US$250,000 exclusion but she should check with a tax pro or at least a more knowledgeable board like Serbinski. Bottom line: transferring the house to the children is fundamentally a bad idea and likely not necessary.
I've stopped following this stuff since my partner renounced her US citizenship, but isn't there a real and ongoing problem of filing non-compliance for the OP's MIL?? That is, penalties for not filing, irrespective of whether tax is payable?? And I'm guessing the obligation to file flows through to the executor of an expatriate USian, even where the executor is not a US citizen??
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Re: MIL moving title to her 4 kids - risks?

Post by brucecohen »

ockham wrote: I've stopped following this stuff since my partner renounced her US citizenship, but isn't there a real and ongoing problem of filing non-compliance for the OP's MIL?? That is, penalties for not filing, irrespective of whether tax is payable??
Yes, there would be a problem -- technically. Reality is that for quite a few years IRS has been waiving penalties in order to get people onside. Don't know if the same courtesy would be extended to an estate. MIL would obviously do her kids and executor a big favour by getting onside while still alive.
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Re: MIL moving title to her 4 kids - risks?

Post by SQRT »

brucecohen wrote:
ockham wrote: I've stopped following this stuff since my partner renounced her US citizenship, but isn't there a real and ongoing problem of filing non-compliance for the OP's MIL?? That is, penalties for not filing, irrespective of whether tax is payable??
Yes, there would be a problem -- technically. Reality is that for quite a few years IRS has been waiving penalties in order to get people onside. Don't know if the same courtesy would be extended to an estate. MIL would obviously do her kids and executor a big favour by getting onside while still alive.
Right but putting the house in her kids names wouldn't solve any of these problems would it?
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Re: MIL moving title to her 4 kids - risks?

Post by kcowan »

SQRT wrote:Right but putting the house in her kids names wouldn't solve any of these problems would it?
Actually it would bring it to a head because the CGs would be crystallized (even if exempt in Canada). But at least it would be dealt with.

(I would probably take the risk of ignoring it!)
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Re: MIL moving title to her 4 kids - risks?

Post by twa2w »

Well she could put the house in a trust. She would be the income/capital beneficiary of the trust while alive. Kids or kids survivors woukd be the ultimate capital beneficiaries of the trust on her demise.
She would be the trustee, with the 4 kids as survivor trustees. She may have to make the trust irrevocable though or make the kids the trustees right away to ensure trust is legitimate.
This would allow her to sel the home and purchase a condo if need be, within the trust. It would also allow her to use the proceeds to fund care at end of life.
Protects from kids creditors/matrimonial claims better than trasferring title.
Keeps principal residence exemption.
Keeps funds out of probate
She could add some other assets to trust as well.
Reduces estate for US estate taxes if this is an issue.
Not sure how it would affect the US tax issue for non filing over the years as it would crystslize the gain on her house as of date transferred to trust. This may trigger some gains she would have to pay US tax on if she decides to clear up that issue.
Also protects her estate for children if she remarries or cohabitates.
Issues
May be costly to set up. But the trust is simple so should be just boiler plate trust. There would be small cost to transfer house to trust. Land trasfer should be able to be avoided with the tranfer as most prvinces allow this type of transfer for 1.00.
A little more effort to look after but mostly after house is sold and trust has income. Would only have to file trust tax return if trust has income. And would need bank account etc under trust name at that time.
Once she passes, kids can sell house and dissolve trust.

If you decide to look at this option, make sure you discuss carefully with lawyer as each province has their own trust laws.

Sorry for the typos, typing on a tablet.

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Re: MIL moving title to her 4 kids - risks?

Post by kombat »

I spoke with her last night, and she's decided against the idea. Thanks for all your help and advice, guys.
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Re: MIL moving title to her 4 kids - risks?

Post by Spidey »

I think it depends. It might be a good idea, especially if your MIL is willing to cover the expenses while she's alive. It makes everything clear long before your mother-in-law's death and may avoid squabbling later. I don't think creditors could go after anything more than a person's individual portion of the home ownership but it may be worth checking.

Also sometimes things happen that you may not have imagined:

i) Your mother-in-law could get remarried and you could get nothing.
ii) Your mother-in-law could get scammed and loose the house.
iii) Your mother-in-law could have a falling out with your wife or others and remove you from the will. (Sometimes as people get older their faculties diminish and they become unreasonable.)
iv) Your mother-in-law could find herself in a situation where she is unable to live in the house but you cannot sell it as you do not have title.

I've heard of all of the above happening. As for disagreements about fair price, etc., you will have to deal with this at some point in time regardless. I think if my mother offered to do this I would accept it but my mother is in her 80s.
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Re: MIL moving title to her 4 kids - risks?

Post by Just a Guy »

Yeah, but on the flip side, I've heard of kids who sell the house and spend the money, leaving the parent homeless and destitute.

The house should never be thought of as "their house", it's the parent's house. No one is "entitled" to inheritance, that's a bonus if it ever comes. It's the parent's house, if they decide to go to Vegas and lose it betting on red, that's their perogative, they worked for it.

Personally I wouldn't worry about all the "what if's" that could happen and let people live their lives.

No matter what happens, everyone usually finds a way to deal with the issues in the end...
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Re: MIL moving title to her 4 kids - risks?

Post by Spidey »

Just a Guy wrote:Yeah, but on the flip side, I've heard of kids who sell the house and spend the money, leaving the parent homeless and destitute.

The house should never be thought of as "their house", it's the parent's house. No one is "entitled" to inheritance, that's a bonus if it ever comes. It's the parent's house, if they decide to go to Vegas and lose it betting on red, that's their perogative, they worked for it.

Personally I wouldn't worry about all the "what if's" that could happen and let people live their lives.

No matter what happens, everyone usually finds a way to deal with the issues in the end...
I would agree with most of this except that it is the mother's idea, not the children's. I would assume that she trusts them or she wouldn't make the offer. I'm just presenting the other side. It is actually a fairly common scenario for a parent to get remarried, die first and have the inheritance eventually go to the new spouse's adult children when he/she eventually also passes away. I've known people that this has happened to. Perhaps no one is entitled to their parent's money while they are alive and they are free to go to Vegas or spend it as they choose but I'm not sure that no one is entitled to an inheritance - If that were the case a lot of lawyers would be out of work. At the very least, they are likely morally more entitled than a new spouse's family would be.
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Re: MIL moving title to her 4 kids - risks?

Post by Just a Guy »

I think you are confusing morality with greed. Unless the children had a hand in making the money, they shouldn't have any claim on what happens to it.

What if the children were people like Ted Bundy, Karla Halmarka, and other such "deserving" children, would you feel the same way?

Morally speaking, the money should probably be donated to charity where it could help many people rather than a few.

I'm not saying children shouldn't get inheritance, I'm saying they aren't entitled to it. The parents can give it to anyone they want, they earned it.
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Re: MIL moving title to her 4 kids - risks?

Post by twa2w »

Just a Guy wrote:Yeah, but on the flip side, I've heard of kids who sell the house and spend the money, leaving the parent homeless and destitute.
...
It is easy to protect against this sort of thing as well as other issues noted by other posters.
The home could be transferred to the childrens names with the mother registering a life interest in the home givingher sole possession and exclusive right to live in the home until she either relinquishes that right or dies.
The problem then arises if she has to move to an assisted living facility at some point and needs the funds from the house to pay for it. So then there are several ways around this. She either goes to a government funded facility(she has limited assets once house is in kids names so no funds from house needed) or in addition to the life interest, she holds a mortgage on the home for the value of the house which would be paid to her on sale of house or forgiven on death. No payments and no interest required on mortgsge. Or she trusts her children.
Depending on how life interest is worded, it may or may not protect the principal residence exemption.
Lots of solutions, none are perfect and none cover every eventuality.

Cheers
J
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Re: MIL moving title to her 4 kids - risks?

Post by Spidey »

Just a Guy wrote:I think you are confusing morality with greed. Unless the children had a hand in making the money, they shouldn't have any claim on what happens to it.

What if the children were people like Ted Bundy, Karla Halmarka, and other such "deserving" children, would you feel the same way?

Morally speaking, the money should probably be donated to charity where it could help many people rather than a few.

I'm not saying children shouldn't get inheritance, I'm saying they aren't entitled to it. The parents can give it to anyone they want, they earned it.
Perhaps you are right and it is greedy to desire an inheritance. I guess I have to plead guilty but most of us do like money. It appears admirable that you would seem to direct an inheritance towards charity. I feel that I'm a reasonably charitable person but I can't say I can live up to your standard.

I don't disagree with you that parents should direct their money to anyone they want and that children shouldn't feel automatically entitled to an inheritance. They should be able to give it to the mailman if they see fit and are of sound mind. What is a shame is when it is directed in a way they didn't want, which is sometimes what happens when they die before a second spouse or are swindled. Getting back to the original post it is obvious to whom the mother-in-law wishes the money to be directed. My only point is sometimes people become vulnerable as they age and their wishes do not end up being met.
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Re: MIL moving title to her 4 kids - risks?

Post by ockham »

What MIL needs is a will and a POA. If she gets romantically involved, she needs a pre-nup. The transfer-of-title-to-4-kids idea wasn't a reasonable solution to any problem identified in this thread.
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Re: MIL moving title to her 4 kids - risks?

Post by Spidey »

ockham wrote:What MIL needs is a will and a POA. If she gets romantically involved, she needs a pre-nup. The transfer-of-title-to-4-kids idea wasn't a reasonable solution to any problem identified in this thread.
Possibly, but lawyers will tell you that prenups do not always work I suspect this is especially with a small estate and a home. Mom gets married and both parties become established in the home. Then mom dies - with or without a prenup the other party could probably make a good case that this is now his home and that he has contributed in several ways towards it. I can't see a court forcing him to leave.

I think it is often a lot simpler to deal with such issues when you have the time and you can think rationally rather than suddenly in the midst of the crisis and strained emotions that often surrounds a death. I tend to think the mother's idea was a good one as long as she is willing to pay the expenses and as long as her children are fairly decent people (which I assume they are or I can't see her making such an offer) but I seem to be the only one.
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Re: MIL moving title to her 4 kids - risks?

Post by AltaRed »

Ockham gave perfectly sound advice. If she doesn't have it, the mother needs a POA and a Will....and a pre-nup if she ever remarries, or a co-hab agreement if she lives common law.

A thousand things can happen in a multi-party joint title that make such a complex arrangement become a Hatfield McCoy title for a television movie. The passing of a last parent brings out the monster in enough decent siblings as to make any presumed harmony to a screeching halt. I've seen it happen in families of friends. It is not pretty. There are way too many complications in a title of 4 or 5, even if it is Tenants in Common (as it probably should be if it happens) rather than a Joint title of undivisable interest (generally rights of survival). See my earlier post for a range of issues that need to be covered in such agreements.

Trnasferring a title to 4 siblings is a lawyer's nightmare/wet dream. Either a lawyer will laugh them out of the office or have dozens upon dozens of billable hours trying to hammer out an agreement everyone can live with. It is just plain dumb, dumb, dumb.

P.S. The post about a life interest is a great suggestion to assure the mother of certain rights on any transfer of title, but that does not diminish the need for a complex agreement regarding multiple owners to title. The siblings are still the wild cards.
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Re: MIL moving title to her 4 kids - risks?

Post by twa2w »

The home with a life interest can have a simple agreement in place that once mom dies the home is to be sold and proceeds divided.the agreement would be similiar in terms to how proprty divided under a will i.e. per sterpes.

This is what would happen if the mother died with a will.

It is pretty common to see properties with multiple owners, other than spouses etc. I haven't seen many issues. Although the potential is certainly there as AltaRed points out.
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Re: MIL moving title to her 4 kids - risks?

Post by ockham »

The original objective was "to simplify estate planning" for 65 yr old MIL in good health, 4 adult kids, everybody gets along, etc.

The simplest ESTATE plan of all is for her to sell the house now, divide proceeds equally among the 4 kids, rent, and then ask kids (equally of course) as needed for help with living expenses as the years pass (everybody gets along, remember!). Settling the estate will then be easy. What's wrong with this plan?? Too many things to list.

To twa2w's point, I have no doubt it's possible to craft a 5-party commercial agreement, whether it concerns a house or whether it concerns the proceeds of sale of a house. Doing it right, however, will require a lot of work, thus becoming either a lawyer's nightmare or wet dream, as AR says.

MIL has a life expectancy of about 30 years. A lot of things can happen in 30 yrs. It's in my view sheer folly for her to tie up her house now in a 5-party contract so as to "simplify" an estate distribution that is likely still a generation away.

To repeat myself, what she needs is a will and POA, and get on with living.
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Re: MIL moving title to her 4 kids - risks?

Post by Spidey »

ockham wrote:
The simplest ESTATE plan of all is for her to sell the house now, divide proceeds equally among the 4 kids, rent, and then ask kids (equally of course) as needed for help with living expenses as the years pass (everybody gets along, remember!). Settling the estate will then be easy. What's wrong with this plan?? Too many things to list.
I don't know that would work as renting over the long term costs more than owning, particularly in the maritimes and seniors are often attached to their houses. I suspect the OP has made up his mind, so our advice and/or discussion is probably moot. There is not necessarily a right or wrong answer - it depends on the dynamic, personalities and needs of the members of the family and I suspect our advice is based on our own experience in that regard.
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Re: MIL moving title to her 4 kids - risks?

Post by AltaRed »

I think you may have missed the sublety of Ockham's sarcasm re that option?
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