DEAR BOB: Although I am only 67, at times I feel I am losing my “marbles.” As a widow with several health issues that I’ve overcome, I feel very fortunate to have a nice townhome with good neighbors who I like and who look in on me to be sure I’m OK. My problem is my 33-year-old son. About a year ago, when I was in bad health, I thought it would be smart to add his name to my title as a joint tenant with right of survivorship to avoid probate when I died. However, I survived! I knew my son had been in an auto accident with injuries to the other party, but I thought he had adequate insurance. He recently had a $400,000 uninsured negligence judgment rendered against him. His auto insurance had lapsed. He is essentially broke. Because he is co-owner of my townhome, the plaintiff’s attorney threatens to levy on my townhome, which is worth around $300,000 free and clear. Is this legal? – Frieda H.
DEAR FRIEDA: The exact answer depends on state law where the townhome is located. Most states have homestead and other exemption laws. But you might not be fully protected because of the substantial value and equity in your home.
Purchase Bob Bruss reports online.
Your situation provides an extremely valuable lesson for every homeowner. Adding a co-owner to the title to your home title could be a very costly, major mistake.
Please consult a local real estate attorney to determine if you can avoid having that judgment lien enforced against your home.
Now you know why I frequently recommend homeowners hold their titles in a living trust to avoid probate and avoid adverse consequences, such as you encountered with joint tenancy. More details are in my special report, “Living Trust Pros and Cons for Avoiding Probate Costs and Delays for Your Heirs,” available for $4 from Robert Bruss, 251 Park Road, Burlingame, CA 94010 or by credit card at 1-800-736-1736 or instant Internet download at www.bobbruss.com.
DON’T BLAME MORTGAGE LENDER FOR UNNEED P.M.I.
DEAR BOB: When I purchased my home in 1996, I made a low down payment and have been paying $97.97 each month for PMI (private mortgage insurance). In 2003, I requested PMI cancellation. The lender said I must have an appraisal at my expense by an appraiser it selects. I placed my PMI avoidance plan on hold because I thought I might sell. But now I don’t plan to sell my home until at least 2006 when I expect to pay all my other debts. I have never been late with a mortgage payment and have excellent credit. Why can’t I cancel my PMI premiums? – Helen A.
DEAR HELEN: Although your shocking letter fails to provide the current mortgage balance and your home’s current market value, after eight years of home ownership in a rapidly appreciating market, I would be surprised if you don’t have far more than 20 percent equity in your residence.
But you, not the lender, are primarily to blame for not insisting on PMI cancellation, which will save you almost $1,200 each year. If you have paid your mortgage on time for at least 24 months, your other debts are irrelevant to cancel PMI.
All you need do is hire one of the lender’s recommended local appraisers, pay the approximate $350 appraisal fee and submit your information proving more than 20 percent equity to get your monthly PMI cancelled.
NO CAPITAL GAIN TAX DUE ON INHERITED HOUSE
DEAR BOB: I look forward to your excellent articles each week. My two sisters, along with our parents, held title to their house. Our father died in 2002 and our mother died in 2003. We sold the house in 2004. Neither my sisters nor I lived in the house. Our parents paid $75,000 for it and we sold it for $130,000. What kind of taxes do we owe? – Ruth J.
DEAR RUTH: Zero. Zip. Nada. Nothing.
If you and your sisters were on the title for convenience to avoid probate after both your parents passed on, no capital gain or estate tax should be due. That is presuming your mother, from whom you inherited the house, did not leave a gross estate exceeding $1 million (increased to $1.5 million for deaths in 2004). For full details, please consult your tax adviser.
TRIM OVERHANGING TREE TO PREVENT DAMAGE
DEAR BOB: My neighbor has severely trimmed his tree, which is on his side of the boundary. It is very heavy on my side of the boundary line. I fear a strong wind will blow his tree on top of my house, causing severe damage. I have asked the neighbor to trim my side of his tree. He refuses. What can I do? – Theresia T.
DEAR THERESIA: The general rule is you can trim your side of the neighbor’s tree that overhangs your property back to the property line.
However, a rule of reasonableness applies. Don’t trim the tree so severely that it dies. Then you could be liable to him for damages.
But you can’t force him to pay for the tree trimming. If I were you, I would trim that tree so it is not in danger of falling on your home. For more details, please consult a local real estate attorney.
DON’T WORRY ABOUT GIFT TAX UNLESS YOU GIVE AWAY MORE THAN $1 MILLION
DEAR BOB: My brother’s son is a schoolteacher who doesn’t earn enough money for a home down payment. He wants to buy a condo. My brother offered to pay the down payment. Would it be best for my brother to take title in his name and later quit claim the title to his son? What about gift tax? – Don A.
DEAR DON: Your brother need not be concerned about federal gift tax unless he has given away more than $1 million in lifetime gifts, which exceed $11,000 per donee per year.
If your brother wants to make an outright gift of the down payment to his son, that’s wonderful. However, if that gift exceeds $11,000 per year per donee (he could give up to $22,000 if your nephew is married), then a federal gift tax return must be filed (although no gift tax will be due). For more details, your brother should consult his tax adviser.
RUN, DON’T WALK, TO ATTORNEY’S OFFICE TO CLAIM MISSING INHERITANCE
DEAR BOB: In 2002, my 86-year-old grandmother died. She had ovarian cancer and was on medications to control her severe pain. I am her oldest grandchild who she raised in her home. For more than 30 years, she often confirmed her intent for me to be sure her wishes were carried out for her home and belongings at her death. Those wishes were explicitly stated in her will. Granny died about two weeks after leaving the hospital. The attorney asked us to meet him at her home for the reading of the will. We were all very surprised when he handed us a sheet of his office letterhead stationary, which was signed by Granny one day before she left the hospital. What happened to her original will? The paper left her home to the attorney to be used for a “Meals on Wheels” local charity, which is headed by his wife. Was this unethical? What can I do to get my grandmother’s house back? I cannot afford attorney fees to sue an attorney. One attorney I consulted said Granny’s lawyer might sue me for slander. Is there anything I can do? – Ann T.
DEAR ANN: Run, don’t walk, to the office of the best attorney in town (presuming your grandmother’s estate has not been closed and distributed). If you can’t find an attorney willing to take your case on a contingency basis, perhaps the local Legal Aid Society is willing to become involved.
The situation you describe is a classic example of elder abuse. Most states now have laws on this issue. That attorney preparing a new will on his letterhead, signed by your ill grandmother, distributing her estate to the favorite charity of the lawyer’s wife, is highly unethical. However, if the assets have already been distributed to the charity, I suggest you forget the matter.
DON’T PUT GIRLFRIEND ON TITLE IF YOU DON’T NEED HER
DEAR BOB: I recently bought a condo. My girlfriend and I each paid half the closing costs. We will be living together and sharing expenses. During the mortgage process, the loan agent suggested I get the mortgage in my name alone because I am earning the income and she is still in school and only works part time. Although my name alone is on the title and on the mortgage, and we plan to marry in a year or two, can I add her to the title or do we have to wait until we marry? – William I.
DEAR WILLIAM: You can sign and record a quit claim deed to your girlfriend before you marry. But I do not suggest doing so.
Much can happen between now and when (and if) you marry. Since you didn’t need your girlfriend’s income or credit to qualify for the mortgage, I suggest not adding her to the title until after you marry. For full details, please consult a local real estate attorney.
The new Robert Bruss special report, “How to Become a Successful Real Estate Negotiator,” 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 download 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).
What’s your opinion? Send your Letter to the Editor to email@example.com.