DEAR BOB: My elderly mother, age 86, owns a large home. When she passes on, her living trust specifies it is to go to my two sisters and me. My wife and I would like to then buy it from my sisters. What would be the best way to finance this type of purchase? Also, will we receive a stepped-up basis although our mother holds title in her living trust? Finally, will the property tax be reassessed? – Jerry VonB.
DEAR JERRY: I’m glad to learn your wise mother holds title to her home in her living trust. When she passes on, probate court costs and delays will then be avoided.
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Although title is held in a living trust, the heirs will still be entitled to a new stepped-up basis of market value on the date of your mother’s death. A living trust is just a title-holding method, which has no effect on tax benefits.
After you and your sisters receive title under the terms of the living trust, then it is up to you to negotiate with your sisters to buy out their two-thirds interest in the house. The easiest way for you to finance this purchase would be to obtain a new mortgage for 66 percent of the home’s market value.
As for your property-tax reassessment question, please consult your local tax assessor for full details.
IS IT WISE TO BUY A HOME SURROUNDED BY TWO-FAMILY DUPLEXES?
DEAR BOB: We are considering buying a new house that a developer plans to build. There will be two-family duplexes on both sides, and across the street. How will the market value of our single-family house be affected by these duplexes? – Pam H.
DEAR PAM: There is no advantage to owning a single-family house surrounded by two-family duplexes, which will probably be occupied by lots of renters.
Nobody can predict if such a single-family house will appreciate at the same rate as houses located in single-family neighborhoods. Being located next to renters is never an advantage.
Incidentally, I recently had lunch with a real estate broker who told me he and his wife recently bought a “two-family villa” in Florida. When I inquired further, he said it looks just like a two-family duplex. But those savvy Florida marketers call them “villas.”
CAN LIFE TENANT BUY OUT THE REMAINDERMAN?
DEAR BOB: Please help with my “sticky situation.” When my husband died, I received a “life estate” in his house. After I die or permanently move out, his 28-year-old, unemployed, playboy son (from my late husband’s first marriage) gets the house. I would like to fix up the house, but I am reluctant to do so because the son will benefit more than I will. The son and I get along, but we’re not close. A friend told me I should offer him cash for a quit claim deed to the house. Would this be wise? – Joyce V.
DEAR JOYCE: Yes. The remainderman can give up his interest to you by means of a quit claim deed. After you record that deed, then you will own the entire fee simple absolute. Only at that time would it make financial sense for you to fix up the house. Be sure you obtain an owner’s title insurance policy so there are no surprises.
The new Robert Bruss special report, “The 10 Key Questions Condo Sellers Hope Their Buyers Don’t Ask,” is now available for $4 from Robert Bruss, 251 Park Road, Burlingame, CA 94010 or by credit card at 1-800-736-1736 or instant Internet PDF delivery at www.bobbruss.com. Questions for this column are welcome at either address.
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