Real Estate, joint tenancy, money market fund TOD

[smitty]

I am buying a house and my mom wants to help me avoid a mortgage by contributing financially from her VG account on which I am a TOD beneficiary.  We would have joint tenancy with right of survivorship on this new house.

I would then sell my current house and once sold, transfer the proceeds to her VG account.

Would this work to avoid gift taxes or any other repercussions?  I've asked my realtor, but they didn't feel confident in responding.

[GilesMM]

As long as the her lifetime gift to you is under $14 million, there is not tax due but each gift over $10,000 must be reported.  It sounds more like a bridge loan to me.  If it is interest-free, the equivalent interest would be a gift.

[Catbert]

You're going through a lot of hoops for...nothing?  GilesMM is correct about the 14 million lifetime inheritance/gift exclusion.  The annual cutoff amount to avoid filing a form is 19K in 2025.  No tax until you get to 14 million.  Anything under 19K isn't reported and doesn't count against the lifetime.

If she's selling assets in her Vanguard account she'll pay tax on any capital gains.  Depending on her overall tax situation, of course.

Joint tenancy with the right of survivorship could be problematic if one of you gets sued and loses, gets married and wants new spouse to get something, or you and your mother have a falling out.  TOD can easily be unilaterally changed, but not joint tenancy.

[smitty]

Thank you GilesMM and Catbert.  Just for clarity:

If she gifts me $250,000 then she'll file Form 709, but won't owe any tax on that gift?
And, when I sell my house and gift her $250,000 then I'll file Form 709 and won't owe any tax?

She's let her required minimum distributions pile up in her money market account so I don't think she's worried about capital gains.

I honestly would rather she just loan me the money and then report the interest to the IRS, but we shall see.  She's very generous but is making this harder than it needs to be.

Thanks again. 

[GilesMM]

It's not a gift if you intend to repay her. It is a loan. If the interest rate is 0% (or sub-market rate), then the difference to market rate is a gift.  When repaid she could report the interest difference as a gift if it is over the reporting threshold ($19,000 in 2025).  No tax due on any gifts under a lifetime limit of around $14 million.

[Catbert]

If you're going to pay back the loan over time, I'm sure she could record a lien on the property just like a commercial financial institution.  Much cleaner than having her on the title.