Are There Taxes on My Kids’ Inheritance?

This episode is sponsored by SmartVester. Connect with an investing pro for free at ramsysolutions.com slash invest. You're listening to Ramsey Everyday Millionaires where we talk investing, retirement, building wealth and outrageous generosity. Melinda is whether Melinda isn't spoken. Hi Melinda, how are you? Hi, I'm helping well. Thank you. Good. How can we help? I am.

My question, it's about estate and inheritance. We, on our property, we, I call her my mother in love. Someone she put a ADU manufactured home on our property and we love her and she wants to leave that home to my daughters, adult young adult daughters, eventually. And it has a DMV title.

And looking into she wants it to just be a very simple probate avoiding kind of a thing. So if she adds the girls names to the title, I just want to make sure that there's no unintended consequences. Would she lose her homeowners exemption? Is there any risk to adding names to the title ahead of time?

I don't know because I don't know the law in the state of Washington, and that's what you'd need to find out. You won't—I'm not worried about the insurance, but because this is a DMV title, a Department of Motor Vehicles title, it's more like a car we're dealing with title than we are a house.

And car titles are sometimes dramatically different from state to state as to how they're handled. What I would tell you to investigate with the DMV is, is there a mechanism there in the state of Washington that allows a POD? Paid on death is what that stands for. And so you could put it, it's almost like the beneficiary of a policy.

that uh... can you put that upon death this transfers to your daughter automatically and and it may be it may be for instance some states allow you to do that on a bank account that a simple yes savings account at your bank can have a p o d on it a paid on death to someone and it goes directly to them then it's not a an issue of the will or probate at that point

The, I mean, the mechanics of it is that there shouldn't be any tax issues. Does she owe money on the property, on the mobile home? No, it's paid in full. Okay, that's good. What's confusing to me is that I'm your Spokane in Idaho. If she pays property tax,

for the same, you know, she gets the same kind of a tax bill that we do for our home. So she pays a personal property tax on it. But she doesn't own the dirt under it, right? You do. Yes. OK, so she's not paying property tax. There might be a personal property tax on a mobile home in that area. That wouldn't be unusual at all. But she does not get a she does not get a real estate because she doesn't own any real estate. Right.

Now, can I interfere in your situation? Yes. Don't do this. OK. Your grown daughters are going to own a mobile home sitting on dirt you own. This is going to cause a conflict. OK.

She needs to leave it to you because it's sitting on your property. And then you're going to promise her you're going to leave everything to your kids. And so whatever wealth this represents will ultimately go to your kids, but it's going to cause. I mean, your daughters can't do anything with it. It's sitting on your land. Exactly. Yeah. And I think what I appreciate about what you're saying is we are in a situation where everybody is so amicable and it

There's no conflict right now that it just wouldn't open up opportunities. Yeah, but let's say your daughter wants to sell this thing. OK, now she's got to hook up to it and haul it somewhere and sell it.

Or she's going to come to you and want a piece of dirt under it given to her. And then you're going to have a next-door neighbor that has nothing to do with anything because your daughter wanted to take this money and go buy or whatever. And everybody's still happy and amicable, but it's just really awkward. You're just begging for conflict in this.

That's so interesting. I love hearing an outside perspective on that. Yeah, it's up to you. You all do whatever you want to do. And I think your mother's sweet mother-in-law is sweet as she can be. And she's trying to do a sweet thing here. But I personally wouldn't do that. And if I were your mother-in-law, I wouldn't do it because I don't want to cause potential trouble between my grandbabies and their parents, you know? I want to keep this thing clean. The cleanliness of it is a big deal.

Yeah, I agree. I just think whatever it's worth, I'd sell it and then just keep the money and then eventually put it. I just keep it super simple. Well, or if she does do that, go ahead and have an agreement with your daughter that immediately upon Mother-in-law's death, she's just gonna hook up to the thing and sell it. Yeah. We're gonna get rid of it and turn it into money and you take that money and that was a blessing from your grandmother. And that's good. But we're not gonna leave it there and rent it sitting on, having a rental property in a mobile home next door to you, Melinda.

is my guess is land that you own. That's just starting to get awkward. It wouldn't be on their land if it wasn't the mother law. Exactly. So it's like they don't want it there when she's gone. Exactly. Well, I mean, unless one of the daughters moved into it, but then now we've continued. So it's just, there's all kinds of, you'll end up being a caller on the show later, I'm afraid.