Avoid tax bite while saving brother's house

Gift of half-ownership has consequences

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DEAR BENNY: My brother bought his home about 15 years ago. He holds title only in his name, as a "single man." He lost his job a couple of years ago. He is older and is having a difficult time getting rehired. Long story short: He is now in arrears (18 months), owes escrow for taxes and insurance payments, and is facing foreclosure. His lack of employment is presenting a problem getting loan modifications or refinancing.

I am in a position to help him by paying up all his arrears and escrows. I can then handle all future payments. His mortgage balance is approximately half the current value of the house, so the idea would be that we both become half-owners. Even though the loan will continue to be in his name (I cannot get a new loan), he wants to deed half the property to me, and show us as tenants in common.

I understand he can quitclaim to himself and me as tenants in common, but here is the wrinkle: He married about five years ago, and his wife is not on the loan or the title. Would my brother quitclaim as the current title describes him (single man) or would he have to describe himself as "married man"? And does his wife have to sign as well? –Jorge

DEAR JORGE: You are a good brother and I applaud your concern for your family. However, there are a couple of hurdles you have to overcome. First, I am sure that your mortgage (called "deed of trust" in many states) contains what is known as a "due on sale" clause. This is designed to protect a lender and stop someone with a very low interest rate from selling the property to a third party, who will assume that low-interest-rate loan.