DEAR BOB: After reading your articles about all the problems homeowners have when they add their heirs to their titles before death, I have decided not to add my daughter to my home’s title. However, she will receive my home in my will. The house is in my name, but I live in it with my husband. He owns another house where he goes every day to smoke indoors and watch television. In my will, I provide a life estate in my house for my husband if I die first. Do you think this is a good idea? –Gayle T.
DEAR GAYLE: No. I’m glad you benefited from reading about the drawbacks of adding an heir to your title before death.
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But have you also noticed all the problems with life estates, especially when the life tenant fails to maintain the residence, lets it run down, and refuses to move out?
If you die first, leaving your house to your daughter but with a life estate for your husband, he could keep living in that house for many years while it gradually deteriorates. If you die first why should you leave him a life estate in your house, depriving your daughter of full possession and ownership, especially since he has another house to live in? That makes no sense.
HOW MUCH TAX IS DUE ON INHERITED HOUSE SALE?
DEAR BOB: In January 2006 I received title to a house I inherited. I had the house appraised and then sold it at an auction in April 2006. How much profit tax do I owe? –Frances A.
DEAR FRANCES: Congratulations. You appear to have done everything right by getting a professional appraisal to establish your “stepped-up basis” for the inherited house as of January 2006.
Although I am not a great fan of auctions for single-family houses, I presume you had valid reasons for selling that way.
If you received a net amount, after paying all expenses including auction fees, exceeding the January 2006 market-value appraisal amount, only that (likely) small amount is taxable. For full details, please consult your tax adviser.
LEAVING HOUSE TO FIVE SIBLINGS IS A NIGHTMARE
DEAR BOB: When our mother died in 2005, her will left her house (worth about $350,000) to her five adult children. One sister, who lived with mother during her last few years when she was ill, wants to continue living in the house. But the other four want to sell the house and divide the proceeds (there is no mortgage). There is no reason for the sister to live alone in the big old house. We think she is just being selfish, but she is preventing the sale. Does majority rule? How can we force her to agree to a sale? She can’t afford to buy us out. She doesn’t even have enough income to pay the property taxes and the repairs. –George R.
DEAR GEORGE: Leaving the house to five siblings, especially when one disagrees with the majority, can be a nightmare. Presuming you all hold title as tenants-in-common, there is only one way to force a sale of the house.
It is called a partition lawsuit. You will need to hire a local real estate attorney to guide the process through court. It’s up to the judge to decide. But with a 4-1 vote in favor of selling, a judge would find it very difficult not to order a partition sale of the property with the sale proceeds divided among the five owners. Consult local real estate attorney for full details.
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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