Registering a quit claim deed

[DanR1953]

My mother is terminally ill with possibly only a month or so to live. After my divorce, I moved into her house with her. The house is paid off and we live in Michigan, if that makes any difference to my question. Not long ago, we filled out a quit claim deed adding me, in addition to her, as owner of the house. I have not registered the deed yet.

What are the inheritance tax implications of my situation? She was told by a few people that I should not actually register the deed until after she passes away. On the other hand, I was told by a real estate broker that I should register the deed before her death, as then, I will not be inheriting the house, but already be a co-owner.

[Mr. Knowitall]

You probably don't face estate taxes at all - you have to have a substantial estate to incur estate taxes. If you are the sole heir, or your mother has willed the property to you, you may be better off not recording the quitclaim deed. That is, if you inherit the property you should get a step up in basis (that is, have your basis at the same level as your mother's, which would be the present value of the paid-off property), but if you quitclaim it you could end up with no basis. If this will be your primary residence that may not make much if any difference, but if it will end up as a secondary residence or investment property you could end up facing a much higher capital gains tax. Also arguably the quitclaim would expose your mother's estate to gift tax liability.

If she's still of sound mind, despite her physical condition, consider trying to get an estate plan created by a qualified estate planning professional. That's the best way to ensure that everybody's interests are protected, and present and future tax obligations are minimized.