My in-laws jointly own some property that will be replatted into three separate parcels. We are potentially going to sell one of them before my in-laws die, but in order to avoid some potential probate complications with estranged offspring, the other two lots need to be transferred from my in-laws to my husband and his brother (1 lot each). There is no mortgage on the property.

I don't understand all the different types of deeds, so I am trying to figure out which one is appropriate for this type of transfer. Is a quitclaim sufficient?

Also, my husband and BIL have POA for both parents. My FIL is still able to act on his own behalf, but MIL is not. Does that matter? (We already knows it matters insofar as neither of them have wills)

Gift Deed sounds like what you are looking for.

That said, I highly recommend that you get the services of a family attorney and/or a real estate attorney. There are lots of legal issues for everyone involved. If you are gifted the property, you assume any liens, judgements, and delinquent taxes that may be associated with the property and will be responsible for covering the federal taxes resulting from the 'gifting' transaction. There may be other legal strategies that would be better from both the prospective of protecting the in-laws wishes and reducing tax burdens for all.

Most importantly, your in-laws need to get wills (and other legal docs like Healthcare POA, Living Will, etc) drawn up ASAP! Durable POAs are not valid after death.

Having a lawyer draw up the MIL's will is very desirable (IMO) from the standpoint of probate. That is, if you have the same lawyer probate the will, the judge will likely ask the lawyer questions during the initial probate hearing which will strengthen validity of her will...this is especially important should the estranged kids decide to cause trouble at probate.

Ryan the Temp said:

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My in-laws jointly own some property that will be replatted into three separate parcels. We are potentially going to sell one of them before my in-laws die, but in order to avoid some potential probate complications with estranged offspring, the other two lots need to be transferred from my in-laws to my husband and his brother (1 lot each). There is no mortgage on the property.

I don't understand all the different types of deeds, so I am trying to figure out which one is appropriate for this type of transfer. Is a quitclaim sufficient? HELL NO!!!!!!! PLEASE DO NOT DO THIS. QC deeds should be outlawed.

Also, my husband and BIL have POA for both parents. My FIL is still able to act on his own behalf, but MIL is not. Does that matter? (We already knows it matters insofar as neither of them have wills) Depends on the POA. Some cover real estate, some do not.

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If there is no money being exchanged, it should be a gift deed. However, there are tax consequences for property being gifted versus inherited.

Consult a competent attorney.

The answer is likely a warranty or special warranty deed.

Quit claim deeds have their place. This isn't even close to it. Making a quitclaim deed advertises a lack of title to sell what is being sold. Accepting a quitclaim deed is an acknowledgement of defects, known and otherwise, in the title received.

One example of a reasonable use of a QCD is a political subdivision granting land to a party in a ROW abandonment action.

dudeabides said:

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Having a lawyer draw up the MIL's will is very desirable (IMO) from the standpoint of probate. That is, if you have the same lawyer probate the will, the judge will likely ask the lawyer questions during the initial probate hearing which will strengthen validity of her will...this is especially important should the estranged kids decide to cause trouble at probate.

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MIL is no longer able to execute a will.

The type of deed doesn't matter. I would refrain from using a Quit Claim Deed. All the that matters in the deed is if you are warranting the title (i.e. special warranty deed, general warranty deed, etc.) The biggest problem and most overlooked is the description, that must be accurate. The deed needs to be notarized and filed of record.

Have yall thought about just putting the property in a trust and then it would just get inherited at your parents passing to whoever is designated? That would avoid most tax consequences, assuming it won't meet inheritance tax triggers

Not an attorney by any means, but worth asking about IMO.

Ryan the Temp said:

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dudeabides said:

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Having a lawyer draw up the MIL's will is very desirable (IMO) from the standpoint of probate. That is, if you have the same lawyer probate the will, the judge will likely ask the lawyer questions during the initial probate hearing which will strengthen validity of her will...this is especially important should the estranged kids decide to cause trouble at probate.

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MIL is no longer able to execute a will.

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Very sorry to hear that. Texas Law will dictate how her estate will be divided, unless there is some legal maneuver that can salvage this situation. Without a will, the estate (depending on what all is included and how property is legally identified (i.e., community vs separate)) could be tied up in a lengthy probate process involving a court-appointed attorney, filing fees, and a court hearingall paid for with $$$ taken out of the estate.

Still, strongly urge y'all to consult a lawyer. FIL should get a will and other legal docs together unless y'all want to roll the dice with him too.

Your MIL needs a POA or any actions she takes in regards to this could be challenged. Just because there is a POA, it doesn't keep the person from not acting on their own behalf.

Assuming no issues with liens, judgments, and taxes on the property, likely looking at General Warranty Deed with gift language (consideration). Your FIL can have estate documents prepared (will; POA; Directives; etc), but you may also want to look into pre-planning and limited the amount of the "estate" that would need to pass through probate. It also sounds like there is a POA in place for the MIL who can't execute a will (incompetent/disability/incapacity?). If so, you can review the POA to see what can be done to facilitate these items without the necessity of a will.

I agree that a gift deed with a special warranty makes the most sense here. As mentioned above, a quitclaim deed acknowledges title defects and has historically made it difficult to later the sell the property since title companies will not issue title insurance knowing that alternative title claims may exist. Texas recently changed the law on this (as of Sept) and now, after four years, the acknowledgement of title defect goes away. Still a gift deed with a special warranty from your in-laws will let you get title insurance immediately and should protect them since they are only warranting to defend title claims arising from their actions (which they should know whether exist or not).

One important item I have not seen mentioned yet is to make sure you consult a tax advisor regarding the sale. The gift will likely be a taxable event for your inlaws and they need to be able to take the tax hit for it.

Some are warning of gift tax, but it is very unlikely they or you will have to pay. The parents are responsible for it and they can write if off against their lifetime gift and estate tax exemption. That is currently around $12 million. They would need to fill out a tax form to avoid the tax.

One issue is you and the hubby (and BIL). You will own it at the parent's cost. If you ever sell it, you pay the gain tax. The gain tax would be wiped out if it stayed in the parents name until one passed.

I would think an estate attorney can help and would know all these issues.

I really didn't explain above very well. Feel free to ask questions.

Harkrider 93 said:

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Some are warning of gift tax, but it is very unlikely they or you will have to pay. The parents are responsible for it and they can write if off against their lifetime gift and estate tax exemption. That is currently around $12 million. They would need to fill out a tax form to avoid the tax.

One issue is you and the hubby (and BIL). You will own it at the parent's cost. If you ever sell it, you pay the gain tax. The gain tax would be wiped out if it stayed in the parents name until one passed.

I would think an estate attorney can help and would know all these issues.

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Gift tax isn't the problem. The problem is capital gains when you sell. Gifted property vs. inherited property is a world of difference.

Right, that is what I said.

Perhaps buy the properties with owner financing. The owner then gifts the value of the annual payments and so no money really changes hands. Each parent can gift $16,000 in 2023. But I'm not sure how this works when one parent is not capable of making financial decisions. If the buyer is married, gifts can be made to each spouse.
Edit to add there could be a cap gain tax which, depending on size, might kill this idea .

Don't take the above as gospel, discuss with a qualified CPA.