Serious Question about putting name on deed

[The Bad Guy]

My in-laws have run into some financial trouble over the years. They built houses that they couldn't sell which impacted their living situation and added mortgages.

My FIL just was able to sell one house and just sold the house he was living in. I guess he still owes some people money, but since he has cash to pay for a house, doesn't need to finance anything.

He came to my wife and wanted to put it in the name of her and her sister. My wife was concerned that doing this would screw up when we go to get a house as first time homebuyers. He said he just wants to protect his assets.

Could putting this house in her name have any negative ramifications on her and our situation? I'm leery because I don't want to screw myself, but it might be a good opportunity.

I know likely I'm not going to get a solution to this on here, I just want to solicit some opinions.

[Rain Man]

With $8,000 on the line for "first-time homebuyers", I think I'd be safe and decline. I'm not an attorney outside a couple of sub-Saharan African countries with easy bar exams, but it sure seems like a risk for you with regard to that credit.

[kstater]

I wouldn't become involved in helping someone hide their assets. Something tells me no good comes from it.

[nstygma]

taken from http://www.federalhousingtaxcredit.com/2009/faq.php#1
The law defines "first-time home buyer" as a buyer who has not owned a principal residence during the three-year period prior to the purchase. For married taxpayers, the law tests the homeownership history of both the home buyer and his/her spouse.

[Param]

but since he has cash to pay for a house, doesn't need to finance anything.

He came to my wife and wanted to put it in the name of her and her sister.

Is the home being paid off in full?

Who gets the house if something happens to him?

[RJ]

He wants the house in your name so he doesn't lose it when he files bankruptcy.

Tough call being as it's family.

What does your wife think?

[underEJ]

I'm naturally suspicious, so take this with a grain of salt, but this sounds like someone preparing to declare bankruptcy to stick someone else with the rest of his debt while keeping his positive assets away from the process. Involving yourself in that, if it does end up to be the case, is an ethics question for you.


Edit-- RJ got there first. I'm not the only suspicious one.

[MahiMike]

I buy and sell homes quite a bit. If someone wants to give you their deed - TAKE IT!!! Just don't sign on the mortgage and you're fine. If he ever wants the deed back, $5K should do the trick. If not, you could always rent/sell, whatever.

[Mr. Flopnuts]

I wouldn't do it dude. He's hiding it for a reason, and it's going to cost you 8k in the first time home buyer plan at a minimum. It could cost more than that. And if anyone finds out about it, I'm pretty sure it's illegal. I'll do some checking.

[MahiMike]

Put the property into a trust (123 Elm street residential land trust). Make yourself the beneficiary. Trust is not recorded - only the deed.

[Frosty]

Wouldn't there be a tax impact here, since he is essentially "giving" the house to your wife and her sister?

[Brock]

Sorry man, you're going to have to buy a lawyer if you want really good advice.

[seclark]

Sorry man, you're going to have to buy a lawyer if you want really good advice.

brock shoots...brock scores!
sec

[wild1]

Most obvious reason would be that he wants to shelter this house from being sold during bankruptcy. But go talk to a real estate attorney.

[Mr. Plow]

Eh, I'd be concerned.....family or not.

[CrazyPhuD]

Wouldn't there be a tax impact here, since he is essentially "giving" the house to your wife and her sister?

yes this is a potential 'BIG' concern...you think the 8K matters...what about being audited by the IRS....

[Iowanian]

He's hiding it from someone.

If the deed is in your name, you're responsible for the taxes, insurance, upkeep of the property.....

Is he "giving" you the house, or is it put in her name for safe, temporary keeping? If it sells, what happens to the proceeds?

[The Bad Guy]

Thank you all for the replies.

Her dad is nice to me, but he's a shady guy in general. He is paying cash for the house, but that also brings up the question that if the house is going in her and her sister's names and they aren't employed (my wife is 8 and a half months pregnant), isn't someone going to question where the cash came from?

Anyway, my wife does not want to do it right now. They told her today they are putting it on her sisters and my wife can add her name to the deed after we have bought or built our house so we can get the 8k credit.

I know going to a lawyer is the right avenue, but I think she is just going to go that route of doing it later.

[MahiMike]

Thank you all for the replies.

Her dad is nice to me, but he's a shady guy in general. He is paying cash for the house, but that also brings up the question that if the house is going in her and her sister's names and they aren't employed (my wife is 8 and a half months pregnant), isn't someone going to question where the cash came from?

Anyway, my wife does not want to do it right now. They told her today they are putting it on her sisters and my wife can add her name to the deed after we have bought or built our house so we can get the 8k credit.

I know going to a lawyer is the right avenue, but I think she is just going to go that route of doing it later.

There's no law that says an in-law can't "gift" a house to their relative. Happens all the time for $100 minimum consideration. As far as the tax implications, etc. If they did try to collect, it'd tie onto the property - which is owned by a trust - of which you are the beneficiary. The fact that there is no mortgage is even better. You have no one to tell it transferred other than the insurance company. Insurance may be a bit more costly but what do you care if the FIL is paying?

Basically, you have all the advantages (control) without the disadvantages.

If you don't want to do it, I will...:)

[Great Expectations]

As far as the first time home buyer part is concerned it shouldn't affect you. All you typically have to do to qualify as a 1st time home buyer is show 3 years worth of tax returns showing no deductions due to mortgage interest.

I don't see much of a downside here financially, he can't borrow money against it without the signature of both daughters so there really isn't a way to get in trouble.

[The Bad Guy]

As far as the first time home buyer part is concerned it shouldn't affect you. All you typically have to do to qualify as a 1st time home buyer is show 3 years worth of tax returns showing no deductions due to mortgage interest.

I don't see much of a downside here financially, he can't borrow money against it without the signature of both daughters so there really isn't a way to get in trouble.

I agree with all of this, which is why he is going to add my wife after we get our house situation settled. The benefits will still be there without any potential risk.

I just don't trust my FIL to do things on the up and up.