Sell your home for $1

17 Jul 2023 · 1 min

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0:44

In this YouTube segment, Jerry Taylor cautions viewers against the informal strategy of transferring a home to a child for $1 to sidestep probate and Medicaid look‑back periods. He explains that the IRS treats such a transfer as a gift, requiring a gift‑tax return even if no tax is due. He warns that the child, as the new co‑owner, will face substantial capital‑gains tax when the property is eventually sold, especially on long‑held homes that have appreciated dramatically. Finally, he points out that co‑ownership gives the child the legal right to encumber or otherwise act on their share of the property, such as taking a loan, which can jeopardize the original owner’s interests. The overall message is that the $1 sale is legally and financially risky.

Chapters

This is for all the clever people that have told me they don't need no stinking lawyer. They're just going to sell their house for a dollar to their kid. Put your kid on the title to the home for $1 and then you avoid probate if you were to die. And after 5 years, the home is exempt from Medicaid. Brilliant. Here's 3 reasons of many why that's a bad idea. Thing 1: In the eyes of the IRS, that's a gift. Probably won't require gift tax, but you will have to file a gift tax return. Thing 2: Unless your kid lives in the home, they're going to have to pay capital gains tax when they turn around and try to sell it. If you bought it in 1965, for $40 grand and now it's worth a million, that tax assessment is going to be a big number. And thing 3, as a co-owner, your kid can do whatever they want to with their share of the home, including get a loan on it.