DEAR BOB: My husband and I own several investment properties. We plan to transfer a piece of each property to our daughter (20 years old) within a short period of time. What is the best way to transfer the property without having to pay gift tax? Also, what is the gift tax rate on gifts exceeding $10,000? – Janice L.

DEAR JANICE: Please consult your tax adviser before you make any transfer. I think you are making a big mistake transferring investment property to a 20-year-old who has not earned it. Such a gift is not very smart and could cause major future problems.

Purchase Bob Bruss reports online.

You and your husband must file federal gift tax returns for any gifts exceeding $11,000 in a year per donor per donee (husband and wife can each give $11,000 annually to a donee without filing a gift tax return). But no federal gift tax will be owed unless your lifetime gifts above the $11,000 annual limit per donee exceed $1 million per donor.

HELPING SON BUY A HOUSE PROVE COSTLY TO MOM

DEAR BOB: About four years ago, my then 24-year-old son begged me to co-sign on a mortgage so he could buy a condo. Like a good mother, I agreed. All went well until he got married. She spent more than they earned. Long story short, she piled up big credit-card debts. They fell behind on the mortgage payments. Because I co-signed, my credit was ruined so I couldn’t refinance my own home to take advantage of the recent low mortgage interest rates. Now they are on the edge of bankruptcy and divorce. What can I do to get out of their mess? – “Dear Old Mom.”

DEAR “DEAR OLD MOM:” You can sign a quit claim deed to your son to get off the title to the condo. But that won’t get your name off the mortgage obligation.

Every month the mortgage payment is late, that reflects badly on your credit. Your situation is a good lesson about the pitfalls of parents co-signing on a mortgage.

DON’T PAY OUTRAGEOUS ESCROW WAIVER FEE

DEAR BOB: We recently refinanced our home mortgage at 6.25 percent interest with no loan costs. However, the mortgage lender said if we don’t want an escrow account for our property taxes and insurance, we would have to pay a $750 escrow waiver fee. We thought that was outrageous. Should we have paid? – Henry R.

DEAR HENRY: No. You did the right thing. Mortgage lenders have recently discovered they can charge borrowers, except for FHA, VA and PMI mortgages, which require property tax and insurance escrow impound accounts, an escrow waiver fee.

Even in states with laws that prohibit lenders from demanding escrow accounts, such as California, escrow waiver fees are legal.

I don’t blame you for wanting to pay your property taxes and insurance directly. Mortgage lenders often overcharge, or fail to pay escrowed property taxes and insurance on time.

However, saving $750 was more important. But be sure to keep a very close eye on your mortgage lender to be certain your taxes and insurance are paid on time. If they are paid late, make sure the lender pays the late charge because some dishonest lenders steal the late fees out of escrow accounts.

The new Robert Bruss special report, “Ten Easy Profit Opportunities for Home and Investment Property Owners,” is now available for $4 from Robert Bruss, 251 Park Road, Burlingame, CA 94010 or by credit card at 1-800-736-1736 or instant Internet download at www.bobbruss.com. Questions for this column are welcome at either address.

(For more information on Bob Bruss publications, visit his
Real Estate Center
).

***

What’s your opinion? Send your Letter to the Editor to newsroom@inman.com.

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