Real Estate the Ramsey Way - My Parents Left Me With A Huge Tax Mess

Episode Date: July 6, 2026

Being gifted a home by your parents can create unexpected tax questions and consequences. We walk through what a quitclaim transfer means and how to think about the potential tax impact before making any decisions. Next steps: ·   🏠Not sure what to do next when buying or selling your home? Check out our ⁠⁠Real Estate Home Base⁠⁠ for free tools and resources to guide your next steps. ·   🏠And if you’re ready to buy or sell your home, ⁠⁠connect with a RamseyTrusted® real estate agent⁠⁠. They’re experts who’ll help you confidently navigate homeownership the way we teach. Explore more from Ramsey Network: 💸 The Ramsey Show Highlights 🧠 The Dr. John Delony Show 🍸 Smart Money Happy Hour 💰 George Kamel 📈 EntreLeadership   Ramsey Solutions Privacy Policy

I lent my mom and dad $40,000 20 years ago. They put my name on their house via a quick claim in 2012. And I haven't lived in their house for 40 years. Well, they've both passed. They have a will that says to pay me $75,000 off the top and split the rest between myself and my three other siblings. What kind of a tax mess am I in? Are you the only one on the deed or were they on the deed with you after they quit claimed you?

They were on the deed with me after they quit claimed. Okay, so you're going to need professional tax advice, but I'll take a stab at it. Okay. Okay. Here's what would happen if they had taken themselves off completely and it was just you. when you sell the house, you're going to be taxed on every dollar above what they paid for the house, which was nothing probably. Yeah, it paid $13,000 and now the house is worth $500,000.

Yeah, so you'd have capital gains tax on $500,000 if the house was in your name. So you may have tax on half. of that since the house is in their name and your name. You probably have tax on that. And so what I would do is require that that tax be paid before and my $75,000 be repaid before we divvy up any proceeds. And so you need to get tax advice, figure out what your tax bill is going to be. And I would add that and make the estate pay that because you got screwed. So my husband and I are considering purchasing a new home. Our house is currently up for sale.

We've identified a property that we would like to purchase. With the equity from the sale of our current home, we would have a rather sizable down payment looking to put down at least 50, if not 60%, on a new house. My husband has brought up the idea of getting a first lien helock with a sweep account versus a conventional mortgage. And he's explained to me that with, this first Rock Hughack with a sweep account, rather than getting into a 15 or a 30-year loan,

we would be able to pay off a $400,000 mortgage in eight years. So I was wondering. Is he clarifying? No, the speaker came on as son. I apologize. Oh, it's all good. So I was wondering, it sounds great. I've never heard of this before.

So I was wondering what you guys thought about that? So this in the TikTok world is called Velocity Banking. He may have heard about it on social media. I don't know where this is it, but it's a trend where they call it like a mortgage accelerator. And the idea is there's this revolving line of credit, almost like a big credit card that's secured by your house. But it's your only loan on the property. So you're right. It's your first lien in that there is no mortgage there.

And so then what you do is you dump all of your income into this helock, draw it out for expenses. and if you do it perfectly, you can save a little bit on interest, which supposedly pays off the house faster. So that's what he is wanting to do. There's still a lot more risk with it, and it sounds sophisticated, and it's more complex, and that doesn't make it better. So have you guys priced out a traditional 15-year mortgage on this? We've priced out a 30. We have not priced out a 15. Okay. I would price out a 15 and see if you guys can afford that payment, where it's a quarter of your after-tax monthly income. And if not, it tells me the house that you're looking to buy is too much house.

So your recommendation would not be to do a first lane? No, I wouldn't do it. I wouldn't do it. No. And I think the way he found this was probably online. And there's a bunch of people out there who are proponents of this. And again, it's called Velocity banking. You can look this up on social media and it's going to be some slick dude telling you how this is the hack.

here's the only hack that works. You get a 15-year mortgage, which is going to have a lower interest rate than either of these, and then you pay it off aggressively. Here's the thing that if you take out a, if you have a $400,000 mortgage and you all put down 50%, and you have $200,000 left,

there is no secret loan that makes you not have to pay back $200,000 plus interest. And so the only true way, like, so, like, we can do a 30-year note, but we can pay it off in eight years, you're still going to pay back that money plus interest. And so if y'all want to pay it off in eight years, that's amazing.

Pay it off in eight years. But that just means every month you're going to be paying more towards the principal balance to pay it off faster. But there's not like a secret loan you can do that you pay back $100,000 to pay off $200,000. You get what I'm saying? Like the whole hack is technically you can get a lower interest rate

and technically you can take that lower interest rate that you're paying and pay off more principal. But the same thing applies to just paying it faster. Understood. The way he was explaining it to me, and this is kind of where my brain starts to shut down and my eyes, the place over. Same girl, same. He's more of the finance person. He was explaining to me that it gets paid off quicker because they compound the interest daily. Yeah, the way it's calculated.

that's where the interest savings come in. But there's still all of the elements of a helock, which is a variable interest rate, which means the payment can go up. The banks can freeze or call the line, which adds more risk to it. It's a revolving line of credits secured by your home. And so all of that just makes me go,

why are we doing all this? Why all this gyration to maybe save a little bit of interest? I, especially with all the volatility in the world right now, like go back 10 years in your life. Can you have imagined now, right no none of us could have and so with all the volatility in the world the chances of me touching a variable interest rate is zero right right and so you can get in if you got in today and the banks

and suddenly jerome powell comes up tomorrow and says hey because of x y or z we're raising interest like man y'all are on the hook for it right and there's far more of these ending up in foreclosure versus a 15-year mortgage. And so that's where I go, okay, why aren't we doing a 15-year mortgage and just putting extra on the principal? It's the exact same thing without all the extra risk and complexity. And I'll go one more. I'm putting my baggage out in the world, so this may not be you and your husband. But if you give me a revolving line of credit and suddenly I don't like my floors, I'm going to get new floors because it's not real money. It's just coming out of the revolving line of credit. Oh, we need to fix this cabinet. We need to get a new fridge.

It's a monopoly mind. Let's just go ahead and do it. It becomes not real money. And yeah, I'm just going to lock myself in and pay it off. And if I want to accelerate and pay it off faster, I'm going to do that. I don't know that we can convince your husband, but I hope we convinced you, which I hope puts enough of a wedge between you guys that you don't do this. And here's my rule of thumb, George. If somebody's explaining something to, you know how I learned this from, of all people? Ashton Coucher. Not on my bingo card. And here's why. He was talking about, somebody was asking him once on a panel, why do you seem to have so much success with these companies you invest in as an angel investor? And I forgot all, I think, Airbnb and

pop chips. And Uber. He got in on the ground floor of all six. And he said, he, I think he dropped out of high school, or maybe he finished high school, but didn't go to college. And he said, his one line was, explain this to me like I'm a high school dropout, or explain this to me like I'm a high school. and if they couldn't do it, I didn't invest. And so for me, when somebody's trying to explain to me a thing we're getting into and hey, Deloney, I want you to invest in this thing, if my eyes start glazing over, that I'm out. If you can't explain it to me very simple, here's why, here's the terms, here's the payout, or here's the risk we're all going to take together.

If you can't do that in a sentence or two, I don't want to participate in it. Yeah. Because it's not worth all the complexity. Because now the more variables, the more fragile the whole system is. And the more dependent it is on other people to do what they said they're going to do. And that what those other people said they were going to, I'm out. I'm out. It's too fragile.

Yeah. Well, there's a lot of people that talk about these things and I see very few people actually doing it. I've never heard of someone saying, yeah, the way I paid off my house early was I did Velocity banking. I know zero people who have told me that line. There's a lot of people talking about it, though. And so that tells me something. It gets the clicks and the views, but it doesn't work in reality. And you don't see the people who foreclose on their home.

They're not sharing that on Instagram. They're only sharing the wins. And so I'm always very cautious with any financial advice on the internet that I don't understand. And we always tell people, don't invest in anything you don't understand. The same applies to crazy mortgage hacks. Here's a hack. Get as small a loan as possible on a short of a term as possible and pay extra towards it. I can understand that.

I could explain that to my toddler and she would get it. There you go. So the real question is, how are you going to approach us with your husband in a way where you come to a compromise? And I hope that compromise is go with the thing that you both understand, that you both can handle. Hey, guys, thanks for listening to Real Estate the Ramsey Way. Now, if you're here, you're probably thinking about buying or selling a house. It's exciting. And one of the biggest financial decisions you'll ever make.

But you don't want to do it with an inexperienced agent who will rush you into costly mistakes, like the ones some of our callers find themselves in. You need a pro who knows what the flip they're doing and will keep you on track with your financial goals. That's why we only recommend Ramsey trusted real estate agents. These are vetted, hand-picked pros who actually listen to your needs, guide you through the process,

and fight to get you the best deal. To find a Ramsey trusted agent near you, go to Ramsey Solutions.com slash trusted agent. That's Ramsey Solutions.com. slash trusted agent.