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What is a good way for family to pay on our loan and take partial ownership?

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  • What is a good way for family to pay on our loan and take partial ownership?

    My wife and I have a mortgage on our current home. My in-laws are considering rolling funds from another real estate sale into our property to pay off the mortgage. The plan would be that while they have ownership of that portion of the home, it would follow us in future home purchases and eventually be an inheritance.

    What would be the best way to complete such a transaction (should it be in a trust, do they just pay the loan with a contract of sorts to show their partial ownership)?

    Is it better for them to leave the partial ownership as an inheritance or begin to "gift" a percentage of it each year per tax laws of gifting?

    Is there a particular resource that would be best to talk to about the contract setup or tax efficiency of such a transaction?

  • #2
    I'm not much help, but this seems like a bad idea to me. If they want to give you money, why don't they just do that?

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    • #3
      Let them give you that money with the obligation that you then take 'your' money and pay off your house.

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      • #4
        Just a question. I am thinking there must be a reason behind your thought to structure things this way? It sounds complicated in terms of what the expectations might be on each side of this equation.

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        • #5
          Agree that it would be much simpler and clean-cut for them to offer a loan with AFR interest and inherit the loan. No gift taxes involved and gets settled at death.

          Reasons against:
          • Does your wife have siblings? If so, great reason not to go “partners” your house.
          • if you sell the home at a gain after living in it for at least 2 yrs, you can exclude $250k gain per spouse. Otherwise, you have to split with her parents - who do not get the exclusion (unless this is their main residence, also). Which brings up reason 3:
          • The parents may expect the right to stay in “their” property whenever they want, bring guests, etc. May not be a consideration now, but you can never predict the future.
          • The parents can treat their ownership any way they want in their LW&T. Leave to charity or another sibling, for example.
          • Should you divorce in the future, this could/would be a problem.
          Working to protect good doctors from bad advisors. Fox & Co CPAs, Fox & Co Wealth Mgmt. 270-247-6087

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          • #6
            I don’t understand what your asking, but I wouldn’t want to do it.

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