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DEAR BOB: What is the most cost-effective way for my parents to leave me their home? They want to just add my name to the title. But I would like to avoid as much tax as possible. –Jeannine T.

DEAR JEANNINE: Unless your parents each leave net estates over $2 million, if they die in 2007 federal estate taxes will not be an issue. Your goal should be to avoid probate costs and delays as well as receiving a new stepped-up basis to market value when you inherit the property.

Purchase Bob Bruss reports online.

One method is to add your name with all three of you holding title as joint tenants with right of survivorship. Presuming your parents die first, then you would be the sole surviving joint tenant. Joint tenancy does not require probate. The surviving joint tenant simply files a certified copy of the deceased joint tenant’s death certificate and an affidavit of survivorship.

But there are joint-tenancy drawbacks, especially if one joint tenant becomes incapacitated and the property needs to be sold.

The best way to accomplish your goals and your parents’ goals is to deed the house title into their revocable living trust. Your parents can name you as the successor trustee after they pass on or become incapacitated. Until then, they control the property as they now do, including selling or refinancing it.

Holding title in a revocable living trust avoids probate costs and delays, allows you to distribute the living-trust assets if your parents die first, and gives you a stepped-up basis to market value after they both pass on. For more details, please consult a local attorney who specializes in living trusts.

CAN HOME BE TITLED IN JUST ONE SPOUSE’S NAME?

DEAR BOB: Our question pertains to Internal Revenue Code 121. In order to receive the $500,000 exclusion, we understand both spouses must occupy the principal residence at least 24 of the last 60 months before its sale and IRC 121 can only be used once every 24 months. Can the home be titled in just one spouse’s name? –Linda D.

DEAR LINDA: Yes. Although I personally think it is best to have the names of both spouses on the home’s title, IRC 121 requires title be held in only one spouse’s name. The reason I like having both spouses’ names on the title is then no matter which spouse dies first, the surviving spouse gets the benefit of a stepped-up basis to market value.

For example, suppose only your name is on the title to your home but your husband dies first. Because his name wasn’t on the title and you didn’t inherit anything from him, you would not receive any stepped-up basis benefits. For full details, please consult your tax adviser.

MORTGAGE LENDER SHOULDN’T SEND BILLS TO BANKRUPT DEBTOR

DEAR BOB: My mortgage company continued to send me monthly payment statements during my bankruptcy and even after the bankruptcy was discharged. Then they stopped. When I called, they admitted their mistake. Did my mortgage company violate any laws? –Robert G.

DEAR ROBERT: It appears your mortgage company should have discontinued sending you monthly bill statements while you were in bankruptcy, presuming the lender was informed of your bankruptcy filing.

However, the mortgage company is a secured lender so you still owe the money and you were not discharged of mortgage debt in the bankruptcy. I suggest you forget the matter and use your “fresh start” to do something productive instead of complaining.

The new Robert Bruss special report, “Everything Home Sellers and Their Realty Agents Need to Know About the $250,000 Tax Exemption Rules,” is now available for $5 from Robert Bruss, 251 Park Road, Burlingame, Calif., 94010, or by credit card at 1-800-736-1736 or instant Internet delivery at www.BobBruss.com. Questions for this column are welcome at either address.

(For more information on Bob Bruss publications, visit his
Real Estate Center
).