Repairs to a house in order to rent it that were paid by the beneficiary, but is still owned by a Trust
"The Trustee has allowed me to act as his ""agent"", continuing to pay   bills, and take care of much of the administrative affairs for my   mother's estate since I did all of it for years before she passed   away. I was not paid for any of this work. ... The expenses were more than $30K last year, and there is still a punch list to go this year. The trust should reimburse your expenses and deduct them on the trust tax return. Since the Trust owned the property in 2015, and I will receive ownership this month, can last year's expenses incurred for the Trust be deducted again future income for my property this year?  Not exactly. The trust will file its own tax return and will report the income/loss attributed to the beneficiaries per the trust rules. What is attributed to you will flow to your Schedule E. From there you own it and if it is a passive activity where the loss is limited - you can carry it forward and offset with future gain. The trustee will have to deal with all the paperwork. Do 1099-misc forms need to be filed for the contractors who worked to get it ready for rental? It is my understanding that since 2010 (and before 2010) landlords who are not in real-estate trade or business are not required to send out 1099. But it won't hurt if you do, also. In any case - for all of these issues you should talk to a tax adviser (EA/CPA licensed in your State)."
The house becomes an asset belonging to the estate of Alice.  The debt also goes with the estate.  The executor of the will should arrange for the debt to be paid off as part of sorting out the estate - they can't just hand out all the assets and leave nothing to pay off the debts. This could be done by selling the house.  But in practice, the executor and the mortgage lender may both be happy if Bob takes out a mortgage, uses that to pay the debt, then inherits the house. He doesn't have to follow through on this, but he could tell this sister that he will stop making mortgage payments, which will result in foreclosure and sale at lower price than might be realized by a voluntary sale. Translation: the house will sold, sis. Do you want to maximize your share of the proceeds?  And, as I said in a comment above: I hope that he is keeping careful records of mortgage an utility payments, as he might (should) be entitled to a refund from the proceeds of an eventual sale (possibly adjusted by the fair rent value of the time which he spent living there) If the house is titled to the estate, neither of you own the house and it cannot be mortgaged. Executor of the will is supposed to provide to you and to the probate court periodic reports as to what is going on. Check them up and talk to your probate lawyer. BLUF:  Continue renting, and work toward financial independence, you can always buy later if your situation changes. Owning the house you live in can be a poor investment.  It is totally dependent on the housing market where you live.  Do the math.  The rumors may have depressed the market to the point where the houses are cheaper to buy.  When you do the estimate, don't forget any homeowners association fees and periodic replacement of the roof, HVAC system and fencing, and money for repairs of plumbing and electrical systems.  Calculate all the replacements as cost over the average lifespan of each system.  And the repairs as an average yearly cost.  Additionally, consider that remodeling will be needful every 20 years or so. There are also intangibles between owning and renting that can tip the scales no matter what the numbers alone say.  Ownership comes with significant opportunity and maintenance costs and is by definition not liquid, but provides stability.  As long as you make your payments, and the government doesn't use imminent domain, you cannot be forced to move.  Renting gives you freedom from paying for maintenance and repairs on the house and the freedom to move with only a lease to break. "From a more technical point of view, a trust is a legal relationship between 3 parties: Trusts can take many forms. People setup trusts to ensure that property is used in a specific way. Owning a home with a spouse is a form of a trust. A pension plan is a trust. Protecting land from development often involves placing it in trust. Wealthy people use trusts for estate planning for a variety of reasons. There's no ""better"" or ""best"" trust on a general level... it all depends on the situation that you are in and the desired outcome that you are looking for." Gift taxes kick in at around $13K per giver per recipient per year. That means that a straight up gift of $200K (as cash or a house) will incur a tax. It is possible, however, that if the father has a spouse, he and the spouse could each give the mother and each child the full gift limit, for a total of about $78K per year, and that money could be used by all 3 of them to buy the house jointly, over a couple of years. I think the children would have to be on the title, since part of the gift money would be theirs (and one is an adult). As far as lending the money, my in-laws are our mortgage lenders, and when we structured the loan, it had to be at a market rate (which could be the lowest advertised rate we found for a fixed-rate mortgage, independent of what we might actually qualify for) or we could not deduct interest payments. Forgiving the loan could also be considered a gift, so they would need to keep an audit trail showing that payments were made, and her father would need to declare the interest income on his taxes. If he bought the house as a second home and let her and her children live there rent-free, it might work, but I'm not sure. It would, in that case, be an asset of his estate when he dies. I don't know anything about structuring it as a trust. Free rent could conceivably also be construed as a gift, subject to the limits stated above. Disclaimer: Not a tax professional. "I don't know what country you live in or what the laws and practical circumstances of owning rental property there are. But I own a rental property in the U.S., and I can tell you that there are a lot of headaches that go with it. One: Maintenance. You say you have to pay an annual fee of 2,400 for ""building maintenance"". Does that cover all maintenance to the unit or only the exterior? I mean, here in the U.S. if you own a condo (we call a unit like you describe a ""condo"" -- if you rent it, it's an apartment; if you own it, it's a condo) you typically pay an annual fee that cover maintenance ""from the walls out"", that is, it covers maintenance to the exterior of the building, the parking lot, any common recreational areas like a swimming pool, etc. But it doesn't cover interior maintenance. If there's a problem with interior wiring or plumbing or the carpet needs to be replaced or the place needs painting, that's up to you.  With a rental unit, those expenses can be substantial. On my rental property, sure, most months the maintenance is zero: things don't break every month. But if the furnace needs to be replaced or there's a major plumbing problem, it can cost thousands. And you can get hit with lots of nitnoid expenses. While my place was vacant I turned the water heater down to save on utility expenses. Then a tenant moved in and complained that the water heater didn't work. We sent a plumber out who quickly figured out that she didn't realize she had to turn the knob up. Then of course he had to hang around while the water heated up to make sure that was all it was. It cost me, umm, I think $170 to have someone turn that knob. (But I probably saved over $15 on the gas bill by turning it down for the couple of months the place was empty!) Two: What happens when you get a bad tenant? Here in the U.S., theoretically you only have to give 3 days notice to evict a tenant who damages the property or fails to pay the rent. But in practice, they don't leave. Then you have to go to court to get the police to throw them out. When you contact the court, they will schedule a hearing in a month or two. If your case is clear cut -- like the tenant hasn't paid the rent for two months or more -- you will win easily. Both times I've had to do this the tenant didn't even bother to show up so I won by default. So then you have a piece of paper saying the court orders them to leave. You have to wait another month or two for the police to get around to actually going to the unit and ordering them out. So say a tenant fails to pay the rent. In real life you're probably not going to evict someone for being a day or two late, but let's say you're pretty hard-nosed about it and start eviction proceedings when they're a month late. There's at least another two or three months before they're actually going to be out of the place. Of course once you send them an eviction notice they're not going to pay the rent any more. So you have to go four, five months with these people living in your property but not paying any rent. On top of that, some tenants do serious damage to the property. It's not theirs: they don't have much incentive to take care of it. If you evict someone, they may deliberately trash the place out of spite. One tenant I had to evict did over $13,000 in damage. So I'm not saying, don't rent the place out. What I am saying is, be sure to include all your real costs in your calculation. Think of all the things that could go wrong as well as all the things that could go right." "I have a friend who had went on a seminar with FortuneBuilders (the company that has Than Merrill as CEO). He told me that one of the things taught in that seminar was how to find funding for the property that you want to flip. One of the things he mentioned was that there are so-called ""hard money"" lenders who are willing to lend you the money for the property in exchange for getting their name on the property title. Last time I checked it looked like here in Florida we had at least Bridgewell Capital and Fairview Commercial Lending that were in that business. These hard money lenders get their investment back when the house is sold. So there is some underlying expectation that the house can be sold with some profit (to reimburse both the lender and you for your work). That friend of mine did tell me that he had flipped a house once but that he did not receive the funding to that from a lender but from an in-law, however it was through a similar arrangement." You have to pay off the balance on the loan first. Also, FHA loans are not supposed to be used for rental properties. I don't know how you living there for a number of years changes things or how often is that rule enforced but you might need to refinance even if you rent it out. "Three companies may have copies of it: the bank, the Title Company (aka settlement company), and perhaps the real estate agent. The bank (assuming you had a mortgage) is usually the easiest one to contact, as you're probably still making payments to them. They may have sent you the form in a large packet when you sold the house and paid off the old mortgage. There is a tradition of sending customers their entire mortgage file once they pay off the mortgage after 30 years - which is very rare nowadays but many banks still adhere to it because the mortgage business is built on momentum and very slow to change. Otherwise, the title company should have a copy of it. If you don't know which company was used, they should be named as Trustee on the Deed Of Trust (which in most states is the official name of the document that we call a ""mortgage""). The county recorder's office will have a copy of that Deed Of Trust on record if you can't find it anywhere. Some counties have digitized these so you could find it online, but some would require you to request a copy and pay a small printing fee for it." "Disclaimer: I am a law student, not a lawyer, and don't claim to have a legal opinion one way or another. My answer is intended to provide a few potentially relevant examples from case law in order to make the point that you should be cautious (and seek proper advice if you think that caution is warranted). Nor am I claiming that the facts in these cases are the same as yours; merely that they highlight the flexible approach that the courts take in such cases, and the fact that this area of law is complicated. I don't think it is sensible to just assume that there is no way that your girlfriend could acquire property rights as a rent paying tenant if arranged on an informal basis with no evidence of the intention of the arrangement. One of the answers mentions a bill which is intended to give non-married partners more rights than they have presently. But the existence of that bill doesn't prove the absence of any existing law, it merely suggests a possible legal position that might exist in the future. A worst-case assumption should also be made here, since you're considering the possibility of what can go wrong. So let's say for the sake of the argument that you have a horrible break up and your girlfriend is willing to be dishonest about what the intentions were regarding the flat (e.g. will claim that she understood the arrangement to be that she would acquire ownership rights in exchange for paying two thirds of the monthly mortgage repayment). Grant v Edwards [1986] Ch 638 - Defendant had property in the name of himself and his brother. Claimant paid nothing towards the purchase price or towards mortgage payments, but paid various outgoings and expenses. The court found a constructive trust in favor of the claimant, who received a 50% beneficial interest in the property. Abbot v Abbot [2007] UKPC 53, [2008] 1 FLR 1451 - Defendant's mother gifted land to a couple with the intention that it be used as a matrimonial home. However it was only put into the defendant's name. The mortgage was paid from a joint account. The claimant was awarded a 50% share. Thompson v Hurst [2012] EWCA Civ 1752, [2014] 1 FLR 238 - Defendant was a council tenant. Later, she formed a relationship with the claimant. They subsequently decided to buy the house from the council, but it was done in the defendant's name. The defendant had paid all the rent while a tenant, and all the mortgage payments while an owner, as well as all utility bills. The claimant sometimes contributed towards the council tax and varying amounts towards general household expenses (housekeeping, children, etc.). During some periods he paid nothing at all, and at other times he did work around the house. Claimant awarded 10% ownership. Aspden v Elvy [2012] EWHC 1387 (Ch), [2012] 2 FCR 435 - The defendant purchased a property in her sole name 10 years after the couple had separated. The claimant helped her convert the property into a house. He did much of the manual work himself, lent his machinery, and contributed financially to the costs. He was awarded a 25% share. Leeds Building Society v York [2015] EWCA Civ 72, [2015] HLR 26 (p 532) - Miss York and Mr York had a dysfunctional and abusive relationship and lived together from 1976 until his death in 2009. In 1983 Mr York bought a house with a mortgage. He paid the monthly mortgage repayments and other outgoings. At varous times Miss York contributed her earnings towards household expenses, but the judge held that this did ""not amount to much"" over the 33 year period, albeit it had helped Mr York being able to afford the purchase in the first place. She also cooked all the family meals and cared for the daughter. She was awarded a 25% share. Conclusion: Don't make assumptions, consider posting a question on https://law.stackexchange.com/ , consider legal advice, and consider having a formal contract in place which states the exact intentions of the parties. It is a general principle of these kinds of cases that the parties need to have intended for the person lacking legal title to acquire a beneficial interest, and proof to the contrary should make such a claim likely to fail.  Alternatively, decide that the risk is low and that it's not worth worrying about. But make a considered decision either way." This is called a fraudulent conveyance because its purpose is to prevent a creditor from getting repaid. It is subject to claw back under US law, which is a fancy way of saying that your friend will have to pay the bank back. Most jurisdictions have similar laws. It is probably a crime as well, but that varies by jurisdiction. "That ain't nothing.  It's really easy to get ""whipped up"" into a sense of entitlement, and forget to be grateful for what you do have.  If this house doesn't exist, what would his costs of housing be elsewhere?  Realistically.  Would landlords rent to him? Would other bankers lend him money to buy a house? Would those costs really be any better?  What about the intangible benefits like not having any landlord hassles or having a good relationship with the neighbors?  It's entirely possible he has a sweet deal here, and just doesn't make enough money.  If your credit rating is poor, your housing options really suck.  Banks won't lend you money for a house unless you have a huge ton of upfront cash.  Most landlords won't rent to you at all, because they are going to automated scoring systems to avoid accusations of racism.  In this day and age, there are lots of ways to make money with a property you own.  In fact, I believe very firmly in Robert Allen's doctrine: Never sell.  That way you avoid the tens of thousands of dollars of overhead costs you bear with every sale. That's pure profit gone up in smoke.  Keep the property forever, keep it working for you.  If he doesn't know how, learn.  To ""get bootstrapped"" he can put it up on AirBnB or other services. Or do ""housemate shares"".  When your house is not show-condition, just be very honest and relatable about the condition.  Don't oversell it, tell them exactly what they're going to get.  People like honesty in the social sharing economy.  And here's the important part: Don't booze away the new income, invest it back into the property to make it a better money-maker - better at AirBnB, better at housemate shares, better as a month-to-month renter. So it's too big - Is there a way to subdivide the unit to make it a better renter or AirBnB?  Can he carve out an ""in-law unit"" that would be a good size for him alone? If he can keep turning the money back into the property like that, he could do alright.  This is what the new sharing economy is all about.  Of course, sister might show up with her hand out, wanting half the revenue since it's half her house.  Tell her hell no, this pays the mortgage and you don't!  She deserves nothing, yet is getting half the equity from those mortgage payments, and that's enough, doggone it!  And if she wants to go to court, get a judge to tell her that.  Not that he's going to sell it, but it's a huge deal. He needs to know how much of his payments on the house are turning into real equity that belongs to him.   ""Owning it on paper"" doesn't mean you own it.  There's a mortgage on it, which means you don't own all of it.  The amount you own is the value of the house minus the mortgage owed.   This is called your equity.   Of course a sale also MINUS the costs of bringing the house up to mandatory code requirements,  MINUS the cost of cosmetically making the house presentable.   But when you actually sell, there's also the 6% Realtors' commission and other closing costs.  This is where the mortgage is more than the house is worth.  This is a dangerous situation.  If you keep the house and keep paying the mortgage all right, that is stable, and can be cheaper than the intense disruption and credit-rating shock of a foreclosure or short sale.  If sister is half owner, she'll get a credit burn also. That may be why she doesn't want to sell.  And that is leverage he has over her.  I imagine a ""Winter's bone"" (great movie) situation where the family is hanging on by a thread and hasn't told the bank the parents died.  That could get very complex especially if the brother/sister are not creditworthy, because that means the bank would simply call the loan and force a sale.   The upside is this won't result in a credit-rating burn or bankruptcy for the children, because they are not owners of the house and children do not inherit parents' debt." The short answer is: the money is yours from the insurance company, they actually can't tell you how to spend it, they can only decide from their tables and your plan, how much you get. The longer answer: Usually the insurance company pays one blanket amount, then itemizes the rest, where you have to submit receipts.  You're also lucky, because damage over time is rarely covered, damage is usually only covered as sudden damage, so they don't pay out for maintenance issues. You can repair your house the way you want, I even do some of my own labor, because some repair jobs just don't get covered what they really cost to do right.   HOWEVER, your mortgage company can withhold part of your claim to verify satisfactory work, this is to maintain the value of the collateral, and the insurance company can choose not to cover pre existing damage.  Generally they don't stray from the assessment.   I do not know of any law that permits an internal inspection of your home without your consent.  They can come look at the outside, but they can't force you to let them inspect inside... Unless they're holding some of your insurance payment hostage, for most banks, receipts are sufficient. A good contractor usually will meet all the needs with an itemized budget and has a bit of wiggle room to fix things the right way, while keeping the bank and mortgage company happy. All money distributed from a Traditional IRA to which no nondeductible contributions have been made is taxed as ordinary income. It does not matter if you think of the money as the original contribution or gains; the taxation is the same.  Money distributed from a Roth IRA is tax-free.  In either case, penalties apply if the distribution is premature.