Location: Texas
I co signed on a mortgage with my parents. They moved closer to us.
They paid the down payment and they will be paying all the monthly payments.
I have my own house to worry about paying.
The house was only like 140k and they paid 30k down.
They just needed me to cosign the mortgage to help them get the loan as I have better credit and job.
They are sort of retired.
That being said – I somehow got added as 50% on the deed, and they are the other 50%.
We were under the impression that I would only be on the mortgage not deed.
We realized this when they went to apply for homestead, and the county told them they would only be able to get 50% homestead.
My parents seem fine with this and said they would rather have me on the deed anyways.
We also did a “transfer of deed on death” which means the whole thing goes to me after their death. (no probate).
So here is my question: What about the federal “gift tax” how does this work? Do I have to somehow report this as a gift?
The house is being paid off.. soo? I am half owner from the beginning.. but not actually making any payments on it.. (they are)
Should I be reporting something? Or only when they die and I get the whole house??
Should I be doing this differently? Should I be just taken off the deed and them be 100% for now? Is it too late?
Comments
There’s no gift tax to worry about. Yes you are a half owner starting on day one.
You only need to redo the deed if your parents want to redo the deed.
Nobody should ever want to be on a mortgage but not a deed. At least I can’t think of a scenario.
The same thing happened to my husband and I when my inlaws cosigned for us. The city I live in automatically gives the married couple 1 share of the property. We did a quit claim deed with my father in law so now my husband and I are 50/50.
This isn’t a gift tax situation. You should be on the deed because you’re obligated to the debts by virtue of being on the mortgage.
You are very confused on how this should work here. I’ll start off by saying that the way this was set up for you was the only legally, financially, and ethically way to set it up correctly.
You being on the mortgage is fine. The bank is happy with your credit and their mortgage loan is more likely to be paid. This however gives you 110k debt if your parents never make another payment, so the title company automatically puts you on the deed with them. That’s in your best interest.
Because you’re on the deed, by law you can only get 50% homestead. This isn’t in anyone’s best interest, but you should prefer to be on the deed because…
To transfer the deed on death, the person the deed transfers to needs to be on the deed.
Regarding Gift Tax, there is none. Your parents are simply paying their mortgage. They are not giving you any money directly. There is nothing to report.
The last part is where my knowledge runs out. When your parents die you may or may not need to report the 50% transfer of ownership as part of inheritance. I’m not familiar with Texas law in that regard. You probably want a probate lawyer when they die anyway, you can ask that lawyer.
With all that, based on what information you provided, I wouldn’t change anything. It would be a very bad move. Seems to me like you have a good bank/lawyer/title company that was looking out for both you and your parents.