Q: My wife and I loaned our daughter and her boyfriend, who is now her husband, money to buy a house several years ago. At the time, he had poor credit, so his name was not put on the title or the mortgage. Nine years later, it’s time to get our names off the paperwork. Is it possible to remove our names from the mortgage and loan and if so, what would the process be? We don’t want them to have to refinance since we loaned them the money at a very low interest rate.
A: The way to get your name off the paperwork is for you and your wife to forgive the loan by signing two documents. One is a “Gift by Forgiveness of Debt” and the other is a “Release of Lien.”
Of course, by signing these forms you and your wife will be making a gift to your daughter equal to the remaining principal balance on the loan plus any accrued and unpaid interest. Your daughter and her husband should be thrilled, as they will then own their home free and clear.
You and your wife will no longer be receiving monthly payments from them. If you rely on those payments each month, then now may not be the time to forgive the loan.
If the value of the gift exceeds $38,000, then you and your wife will need to file gift tax returns to report the gift. You will not owe any gift tax unless the gift of the loan will result in either of you making more than $13,990,000 in taxable gifts over your lifetime. If you are that wealthy, I think you would have contacted your own team of attorneys.
The two documents you will need to sign should be prepared by an attorney. You should not attempt to prepare these yourself from forms you find on the internet.
Q: I own a grave site in the city of Houston that I transferred to my revocable trust. I want to give this plot to my church. I am the sole trustee of the trust as my wife died over a year ago. The cemetery says that the grave site cannot be given to the church since it is in my trust. Why, as owner of this property and trustee of my trust, can’t I give the plot to the church?
A: If the only reason the cemetery has for not allowing the transfer to the church is the fact that your trust owns the plot, then you (as trustee) should transfer it back to yourself, and then you can give it away to the church.
Before you do anything, though, be sure to confirm that the church will accept the plot and that the cemetery will allow you to transfer it to the church.
The information in this column is intended to provide a general understanding of the law, not legal advice. Ronald Lipman of the Houston law firm Lipman & Associates is board-certified in estate planning and probate law by the Texas Board of Legal Specialization. Email questions to: stateyourcase@lipmanpc.com.
This article originally published at How to remove your name from a family mortgage without refinancing.