Long story short, my wife is begrudgingly gifting her portion of her inherited father's homestead property to her step mother to not have to deal with her any more. She inherited her share along with her siblings after her father passed and there was no will.

We know the step mother has the right to live on the property but she is raising hell to get full ownership of the property.

My wife is fine with signing over her portion however her portion would add up to over the $16k gift exemption , so on top of giving up her share, will she now have to pay taxes on gifting it to her step mother? Or does it just go against her lifetime amount?

Is there any way to have the step mom have to pay the gift tax if she agrees to, so no filing or paying has to be done on my wife's side? She just wants to sign and be done, not actually have to file more forms and pay taxes.

Wife owns 1/3 of 1/2. The majority of the people she shares it with, even excluding her step mother, she does not want to deal with anymore.

The step mother's atty is threatening sending bills for her share of property taxes, maintenance ect. The step mom swears whatever is left of her estate will be equally willed out to all children and step children, but we really know she just wants to sell the property eventually to help pay for her to live off of, medical bills ect. My wife just wants to wash her hands of it all.

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Who pays the gift tax?

The donor is generally responsible for paying the gift tax. Under special arrangements the donee may agree to pay the tax instead. Please visit with your tax professional if you are considering this type of arrangement.

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Ya, I saw that, but does that mean if the grantee agrees, then the grantor doesn't have to file a gift tax return at all?

How far over the gift tax exemption? She could do part this year and part next year.

maybe 10k over.

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My wife just wants to wash her hands of it all.

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Lifetime of hassle vs $16K-ish? Sometimes you just gotta do what you gotta do for your sanity. I don't know how to do what she wants to do legally. Stepmom should definitely have to pay for any legal advice/fees/taxes related to it.

The waiting till she croaks sounds promising but then y'all would have to deal with the stepmom's side - still for a relatively small portion of the pie - and you just know that would be a cluster.

Texaggie7nine said:

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Ya, I saw that, but does that mean if the grantee agrees, then the grantor doesn't have to file a gift tax return at all?

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There's nothing the step-mom can do or agree to that would allow you and your wife to avoid paying gift taxes. She could agree to pay them for you, but you'd still have to file them as part of your return and collect the money from her as reimbursement. I'd get the money up front, if you go down that route.

I've seen this situation a few times before, and I know your wife wants to be done with these people, but her share gives her quite a bit of power. Most likely Step-Mom, wants to borrow money against the value of the property, and she needs cooperation from your wife to make it happen. I would move slowly on this deal, and you'll start to get offers to buy you out of your share, so she can close the loan. First offer will be $5K, then $10K....etc.

I'd wait for the $10K and then take it. Based on the math you've provided, gifting her the difference between $10K and the fair value of your wife's share should be less than the gift tax amount, so you avoid that situation too. GL!

My understanding is that you will just need to file that against lifetime exclusion as you suggested, so there isn't actually any tax due on that $10,000. But since no one else agreed with that, I'm second guessing that I'm missing something. Nothing lost assuming you aren't in the 8 figure net worth above gift tax lifetime exclusion... If you are $4000 shouldn't matter!

As partial owner, I would assume wife is responsible for her share of the costs to maintain the property, so i can see that as a valid point. The only way to change that would be some type of tenant agreement placing the responsibility on the resident, correct?

Some things in life fall under the "not worth it" category and very possible this is one of those things for you and your wife and if so, by all means she should just let it go, but please do not let her decision be influenced by some dumb ass attorney making threats that your wife is going to be responsible for taxes or maintenance of property for which stepmom is using and possessing as a life tenant.

https://raniacombslaw.com/resources/what-are-the-rights-and-responsibilities-of-a-life-tenant-in-texas

I am definitely not an expert on these things, but want to understand the situation here.

Your father in law owned the property outright (maybe purchased before they married?) and your stepmom lived there with him? Because my understanding was that if the stepmom co-owned the property with your father in law (as in they bought it together after they were married) that she would inherit 100% of the property on his death?

I'm asking because I could have a similar family situation in my future.

They were married when he bought it. That is why it is community property. They each have a right to half. When he passed without a will and they had children previous to marriage, his half splits to his offspring but she has the right to live there for the rest of her life.

Fear InoculAg said:

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Texaggie7nine said:

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They were married when he bought it. That is why it is community property. They each have a right to half. When he passed without a will and they had children previous to marriage, his half splits to his offspring but she has the right to live there for the rest of her life.

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If it was community property, the step-mother would own 100% of it outright. The fact that your wife now owns an interest along with the step-mother means it was her father's separate property.

I'm assuming lawyers were involved in the administration of the estate and sorted out the character of all of the property.

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If you have children separate from your current spouse, then they get to split your half while your spouse gets to live there till they die.

Total property value is ~$150k, based on your wife's 1/6th value?

$26k / (1/6th share) = ~$150k

It would probably appraise for quite a bit over that. They tried selling it a few years ago for 300k. However 150k is what the county has and what was used as the value in the probate documents that divvied out the interests.

Texaggie7nine said:

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Fear InoculAg said:

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Texaggie7nine said:

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They were married when he bought it. That is why it is community property. They each have a right to half. When he passed without a will and they had children previous to marriage, his half splits to his offspring but she has the right to live there for the rest of her life.

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If it was community property, the step-mother would own 100% of it outright. The fact that your wife now owns an interest along with the step-mother means it was her father's separate property.

I'm assuming lawyers were involved in the administration of the estate and sorted out the character of all of the property.

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If you have children separate from your current spouse, then they get to split your half while your spouse gets to live there till they die.

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Oh yeah, I forgot about the "step" in step-mother.

Sounds like she is being bullied.

From the article above it certainly reads that taxes and all aren't your wife's problem. Please keep us updated as I always learn something in these threads.

Got an email today from Turbo Tax (how I file our taxes) offering a limited time free consult for questions.
I took them up on it and spoke to an expert. So if it is over 16k I have to file a gift tax form but it only goes against my wife's 11.5 mil lifetime exemption or whatever so nothing will be owed from it.

Also said we will need to get an appraisal, and if we do split the gift over 2 years to avoid filing the gift tax form, we probably would need to have it reappraised next year before we know it is under the 16k.

So, looks like we are going to tell the step mom's lawyer that she will need to pay for an appraisal and once it is complete and we have a copy, my wife will sign over her share and we will just do it all at once to be done with it and just fill out the gift tax form.

The "intestate" law is based upon what was common practice (for distributing an estate) at the time. It probably still is, and therefore, likely represents your wife's father's "will" at the time of his death. The stepmom's behavior, while deplorable, is not uncommon. Thus, the reaction from those of us who've experienced it in some form or fashion, and are pushing back in an attempt to maintain community standards.

You can do as you please, but are in no way obligated to accede to the demands of the selfish M-i-L. That said, your father-in-law did your wife no favor by dumping it in her lap.