DEAR BOB: My neighbor recently died. She told me her will leaves her assets to her nephews, now ages 14 and 17. They are great boys who looked after her when her husband died a few years ago. I know their parents slightly as they often dropped off the boys who helped with chores around the house and enjoyed spending weekends with their aunt, especially because she was a great cook and had a swimming pool. My question is what happens when minor children inherit real estate? I would like to buy the house from them at market value, just to control who lives next door – Lucy T.
DEAR LUCY: Minors, below age 18, can inherit real estate. But they can’t convey it.
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Presuming your neighbor’s estate goes through probate court, title will eventually vest in the names of those minor children. Meanwhile, I hope their parents make sure the property is maintained, and the property taxes, insurance and mortgage payments (if any) are paid.
The situation you describe shows why it is so important for well-meaning property owners not to will real estate to minor children.
Because you want to buy the adjoining house, this would be a suitable time to contact the parents of the minor heirs to express your purchase interest.
If you all agree on a sale price, after the title vests in the minors, the parents will need to petition the local court to have a guardian appointed to represent the minor’s interests in the sale. For more details, please consult a local probate attorney.
CAN EX-HUSBAND CLAIM PART OF HOME-SALE TAX EXEMPTION?
DEAR BOB: My ex-wife and I were divorced 11 years ago. We have remained friends. There is no hostility. The divorce agreement provided she would live in our house with our three children until the youngest became 18. The youngest is now 22. My ex-wife has finally realized it is time to sell our house as she lives there all alone. I’m glad she didn’t sell sooner because the house has greatly appreciated in market value. Our net sales profit will be around $400,000. As I recall, some time ago didn’t you say there is a special tax rule for husbands like me who now don’t live in their principal residence where they formerly lived? – William R.
DEAR WILLIAM: You have a good memory. Internal Revenue Code 121 provides for divorce situations like yours.
If your ex-wife, who is living in your former principal residence, meets the two out of last five years ownership and occupancy tests of IRC 121, as her ex-husband and co-owner of that property, you also qualify.
This is known as the “in spouse” and “out spouse” tax rule. If your ex-spouse co-owner qualifies for up to $250,000 tax-free principal residence sale profit, you also can qualify for up to $250,000 tax-free profits. For full details, please consult your tax adviser.
IS JOINT TENANCY PROPERTY SUBJECT TO JUDGMENT LIEN?
DEAR BOB: About four years ago, I added my only child, a 24-year old son, to the title of my home as a joint tenant. I thought this was smart so probate can be avoided when I die. However, he got involved in a big lawsuit, which he lost. He has a $225,000 judgment against him. The plaintiff’s attorney threatens to attach my house and force its sale to pay this judgment. Can this be done? – Alicia H.
DEAR ALICA: Run, don’t walk, to a local real estate attorney’s office to discuss your situation.
Because your son owns a half interest in your home, his judgment creditor might be able to attach that interest. However, in most states there are statutes prohibiting judgment lien forced sales of co-owned property.
This circumstance shows why co-owners should be aware of the possible adverse legal consequences when adding heirs to their property titles.
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