DEAR BOB: My “companion,” age 67, and I (age 66) have been living together in his house for the last four years. Although we dearly love each other, if we get married we have been told our Social Security and other retirement benefits will be reduced. However, I am very concerned. His health is declining and it won’t be too much longer before we should both move to an assisted-living center. If he dies first, his will provides that the house goes to his daughter. If I can convince him to sell the house, so we can afford to move, I am told there will only be $250,000 tax-free sale profits even though the net profit will be around $400,000. Should my “significant other” add my name to the home’s title to increase the exemption to $500,000? –Helen R.
DEAR HELEN: If you can convince your companion to add your name to the title on the house, to qualify for an additional $250,000 principal residence tax exemption allowed by Internal Revenue Code 121, you must own and occupy the home at least 24 of the 60 months before its sale.
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However, if you two lovebirds get married, since you already meet the 24-month occupancy test, although your name is not yet on the title, you both can qualify for up to $500,000 principal residence sale exemption if you file a joint tax return in the year of the home sale.
In the current situation, if your significant other dies, and the house goes to his daughter by his will, you get nothing. I’m sure you are aware of that. For more details, please consult a local estate planning attorney or tax adviser.
DIVORCE DOESN’T CREATE PROPERTY STEPPED-UP BASIS
DEAR BOB: I have been following your comments about the benefits of inheriting real estate and other assets because of the “stepped-up basis” benefits. My question is, does the same result apply to a divorce? My soon-to-be ex-husband has agreed to give me our house in return for not having to pay alimony and child support. –Inga T.
DEAR INGA: The “stepped-up basis” to market-value tax benefits only applies to inherited property. That is why I frequently advise it is better to inherit property than to receive it as a pre-death gift.
The stepped-up basis rules do not apply in divorce situations. You will receive full title to the house with the same adjusted-cost basis as before the divorce. For full details, please consult your tax adviser.
WHO MUST MAINTAIN HANDICAPPED ACCESS RAMP?
DEAR BOB: I followed with great interest your recent items about that handicapped Iraq war veteran who had a problem installing a ramp at a rental apartment, which was otherwise ideal for him. I’m glad the story had a happy ending. By eliminating the steps, it sounds like the landlord’s building is made more desirable for everyone. My elderly parents have a similar situation at their condominium in Minnesota. Mom is in a wheelchair. The association allowed installation of a ramp and agreed to maintain it for a year. But I recently learned the association has stopped maintaining the ramp, including shoveling snow in the winter. Before I take issue with the homeowner’s association, I need to know what rights my parents have to make the association maintain the ramp walkway to their ground-floor condo. Who is responsible for maintenance and liability if someone is injured on the ramp? –Edward N.
DEAR EDWARD: Although the Americans with Disabilities Act (ADA) clearly requires a building owner, presumably including a homeowner’s association, to allow installation of a handicapped ramp at the expense of the disabled individual, the ADA is silent about maintenance of that access.
If just your parents benefit from the ramp, I would think they should maintain it. Presumably, if someone is injured using the ramp, the homeowner’s association liability insurance provides coverage for negligence. For full details, please consult a local real estate attorney.
WHAT IF LIFE TENANT CAN’T PAY THE PROPERTY TAXES?
DEAR BOB: Lately you have had several questions about life estates and “waste.” I am a life tenant, but my problem is I struggle to pay the property taxes. I am now behind and fear the property tax collector will try to sell my house because I can’t pay the taxes. It seems to me the person who will inherit the house when I die or move out should pay the property taxes, but I know that is not the law. What should I do? –Irene W.
DEAR IRENE: Most life estates require the life tenant to pay the property taxes and the mortgage interest (if any). Unless the property taxes are paid, the tax collector can hold a tax sale of the property, thus wiping out your life estate and the remainderman’s interest.
However, that is unlikely to happen. The reason is the remainderman who receives clear title to the house after you die or move out must be notified of any pending tax sale. That person is likely to pay the property taxes to preserve his or her remainder interest. But the remainderman could then bring a legal action against you for failure to pay the property taxes.
If you are on friendly terms with the remainderman, perhaps you can make a deal to terminate your life estate now in return for a substantial payment. Such a transaction could benefit both you and the remainderman. Be sure to consult a local real estate attorney to protect your interests.
NO EASY WAY TO GET RID OF AN UNWANTED CO-OWNER
DEAR BOB: About 10 years ago, I added my son to my home’s title. At the time, I was under stress due to a divorce and I was told if something happened to me the house would go to the state. I now know that is not true. But my son’s wife has been so nasty to me I want to take him off my title. I sent him a quick claim deed, but no response so far. What can I do besides selling the house? –Johanna L.
DEAR JOHANNA: Just to be correct, it’s called a quitclaim deed, not a quick claim deed.
There is no easy way to get your son off your home’s title. If you decide to sell the house, his signature will be required on the deed.
Your situation is a classic example why I frequently advise against adding prospective heirs to real estate titles. Circumstances can change, as you discovered.
SMALL CLAIMS COURT CAN RESOLVE MORTGAGE REFINANCE OVERCHARGE
DEAR BOB: I refinanced my home loan with my previous lender. But they charged me about $350 double interest for the same days on the old and new mortgages. I requested a refund but was refused. Then I wrote to the U.S. Office of Thrift Supervision. However, they refuse to act. If this happens to others, there is lots of unearned interest being double-collected by mortgage lenders. What should I do? –Raymond M.
DEAR RAYMOND: Your local Small Claims Court is the ideal place to resolve this alleged overcharge. Although the $350 amount seems small, it is worth pursuing to make that nasty lender show up in your local Small Claims Court. Of course, if the lender fails to appear, you automatically win a default judgment.
HOW TO FIND OUT THE PAST MARKET VALUE OF A PROPERTY
DEAR BOB: How can I find out the market value of a house during September 1991? We need the information for a probate matter. I already checked with a local appraiser who says the local multiple listing service (MLS) data only goes back five years. Can you help? –Barbara R.
DEAR BARBARA: What you want is called a “retrospective appraisal.” Most appraisers are not interested in such work. However, the Appraisal Institute says it has a list of appraisers who specialize in this type of appraisal. Their Web site is www.AppraisalInstitute.org.
Retrospective appraisals aren’t cheap, because lots of research time is involved. But the result can be a stepped-up basis to market value on the date of a decedent’s death. Your situation shows why it is so important for heirs to keep market value records for inherited real estate to establish their stepped-up basis.
The new Robert Bruss special report, “Pros and Cons of Fast and Slow House Flipping for Big Profits,” is now available for $5 from Robert Bruss, 251 Park Road, Burlingame, CA 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.
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