a deal? I pay taxes & I'm on the deed.

behaviorkeltonJune 19, 2007

A friend of mine would love me to pay his high real estate taxes. 30 years ago, he bought a bit of land in florida for 10grand.

It is now worth, minimum, 350,000 grand (It was thought to be 500g, but I am considering the recent real estate slow down).

His property taxes are ~$7,000 a year.

There is now an industrial grade, bulletproof, hurricane proof building on the property ..it's in a very nice neighborhood on the water (it's a two story building, with two very small apartments)...solid concrete top to bottom which includes the roof. Construction was completed a few months ago.

He would like me to make a deal with him: I pay the taxes, I get put on the deed, I get use of the property...and will "get" the property when he passes on (dies). (frankly, I get use of the property any time anyway, so no surprise)

Neither he nor I are financially savvy...so the calculus of all this isn't obvious in terms of deciding whether this is a great deal or not. I tend to think it's a great deal and it's clearly in my favor, but sometimes the obvious conclusion isn't the correct one.

He isn't interested in having a stranger take care of his taxes because he fears what an "investor" would do to the place when he passes on. He simply wants to hang around, and have no big bills. Seven grand a year is over 500 bucks a month.

It's pretty simple. He's a very close friend. I'm not wealthy, but I *could* carry the burden of his property taxes.

Is this a good deal?... or is there more to know?

Thanks

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celticmoon

Oooo. Tempting, but likely very very complicated. Just for starters:

1) You would need to structure this arrangement clearly and legally, to protect your 'investment', to address liability etc, (You need a laywer consult).

2) Without a formal trust, there is a real chance his property could be liquidated to fund his future care needs - regardless of his intent to will it to you. (Again, lawyer needed)

3) Your 'inheritance' tax bill in assuming ownership of the property could be a huge, huge tab. (You need a tax accountant/attorney consult)

4) Florida taxes on a property skyrocket when ownership changes hands. Essentially this is a crisis there now pitting longer term owners against newer owners, and pretty much a big mess as I understand it. (Again, tax accountant/attorney needed).

No answer for you, but this is where my questions would start.

Good luck!

    Bookmark   June 19, 2007 at 11:28PM
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behaviorkelton

Thanks... I knew it wasn't as easy as it seems.

If we are both on the deed, I wonder how a "long term care" facility would be able to take it given that they would have to take it from me?

I assumed I would need a lawyer.

    Bookmark   June 20, 2007 at 12:23AM
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liketolearn

Also quite likely that there would be inheritance tax due upon his death.

You really need a lawyer for this one!

    Bookmark   June 23, 2007 at 3:31AM
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myfask

You need to go see a lawyer that deals with "seniors" and their estates.

    Bookmark   June 23, 2007 at 6:36AM
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devorah

Mightn't this trigger a gift tax now on 50% of the value of the property and then on another 50% of the value when it all passes to you? Since you aren't relatives I don't believe that any amount is exempted.

    Bookmark   June 23, 2007 at 12:15PM
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behaviorkelton

Thanks.
I thought that, maybe, I would get taxed if I were to sell this house 15 or 20 years from.

Frankly, I have very little interest in selling or profiting from the place. I prefer the situation if it were a $60,000 house!

My friend is a cool dude, and I'd like to keep the house as a token of a friendship. The way he designed the place... well, if you knew him, you'd know it was totally "him".

Too bad the property tax load is such a burden... it makes it "feel" like you are renting it even though the place is totally paid for!

Thanks for the tips! Any more would be appreciated.

    Bookmark   June 26, 2007 at 11:24PM
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