DEAR BOB: My husband and I married about eight months ago. Shortly thereafter, we bought a wonderful house together. Well, that’s not quite correct. I had bad credit before marriage, so the mortgage broker advised taking title in my husband’s name alone (he has great income and excellent credit). At the closing, the title company made me sign a quit claim deed so I would have no interest in the house that my creditors could attach. Because my husband made a $100,000 cash down payment on our house, is there any way I can protect my interests in case anything happens to my husband? – Annie W.
DEAR ANNIE: Let me get this straight. You have such bad credit the title insurance company insisted you sign a quit claim deed because they were worried your creditors would attach your interest in the home if you took title as a co-owner.
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Now, eight months later, you want to protect your “interests” in the house to which you contributed nothing, yet you apparently have creditors waiting to attach your ownership share if you ever take an ownership interest.
My suggestion is you pay off your creditors. Then, ask your husband to sign a quit claim deed to you for a 50 percent interest in the house.
However, he has no legal obligation to do so now. He paid the $100,000 down payment, so it is his equity, not yours. For more details, please consult a local real estate attorney.
COMMERCIAL ZONE WON’T HAMPER HOME-SALE TAX EXEMPTION
DEAR BOB: In 1992 my husband and I built a commercial building that we planned to rent out. Instead, we moved in and never rented it nor took any depreciation. When we sell this property, can we keep our $500,000 profit tax-free since we lived in it even though it was originally built as a commercial rental? Or should we make an Internal Revenue Code 1031 tax-deferred exchange? – Susie L.
DEAR SUSIE: Yes, if you both meet the two-out-of-last-five-year ownership and occupancy test required by Internal Revenue Code 121 you are entitled to claim up to $500,000 principal residence sale tax-free profits. That’s presuming the property was your principal residence.
The commercial zoning of the property is irrelevant. The property is not eligible for an Internal Revenue Code 1031 tax-deferred exchange because it was not a rental or investment property. For full details, please consult your tax adviser.
BUYING A HOUSE WITH “LIVE-IN BOYFRIEND” IS VERY RISKY
DEAR BOB: Our daughter is thinking of buying a house with her live-in boyfriend. What are the pros and cons of such a situation without getting married? – Andrea B.
DEAR ANDREA: The situation you describe is extremely risky. If they are not willing to get married, it’s too easy for one co-owner to walk out, leaving the other to either make all the payments or lose the home by foreclosure.
Another potential problem occurs if one co-owner walks away and the other remains but makes all the payments. When that co-owner eventually wants to sell the home, the signature of the walk-away co-owner is needed on the deed. He or she could demand half the home equity in return for the deed signature. For more details, please consult a local real estate attorney.
The new Robert Bruss special report, “Secrets of Tax-Free Reverse Mortgage Income for Senior Citizen Homeowners,” is now available for $4 from Robert Bruss, 251 Park Road, Burlingame, CA or by credit card at 1-800-736-1736 or instant Internet download at www.bobbruss.com. Questions for this column are welcome at either address.
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