DEAR BOB: The title to our home is in a living trust with my husband and myself as trustees. My husband passed away a few months ago. Should I change the title and record a new deed in my name alone? –Rhoda C.
DEAR RHODA: If you and your late husband had a joint living trust, that document became irrevocable after his passing. I presume the terms of that living trust left the house to you but with title still in the name of the living trust.
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It is generally best to clear up any joint title problems after one of the co-owners dies. But in your situation, it might not be necessary to do anything, depending on the terms of the living trust. Check with a local attorney who specializes in living trusts just to be sure.
If title had been jointly held by another method, such as joint tenancy with right of survivorship, then it would be necessary for you to clear your deceased husband’s name from the title. In most states, all that is required to clear the name of a deceased joint tenant is to record a certified copy of the death certificate and an affidavit of survivorship with the local recorder of deeds.
Unfortunately, many people neglect to clear titles soon after a deceased owner or co-owner dies. Then when the property needs to be sold, time-consuming probate court proceedings become necessary so the title can be transferred. That’s why it’s best to take care of title matters promptly after the death of an owner.
SELLER CARRYBACK MORTGAGE IS USUALLY AN INSTALLMENT SALE
DEAR BOB: In a recent item in your column, you indicted a seller who carries back the mortgage for a buyer is creating an installment sale to spread out the profit tax. A carryback mortgage is a true sale reportable to the IRS. But an installment sale spreads out the income and the seller retains the title. Am I wrong? –Bill McC.
DEAR BILL: When a property seller carries back a promissory note secured by a mortgage or deed of trust recorded against the title, that is an installment sale entitling the seller to spread out the capital gain tax payments to the IRS over the years of receiving payments from the buyer.
When the seller retains the title, and the buyer makes monthly payments to the seller, that is usually called a contract for deed, installment land sale, or other similar name. It is usually treated as an installment sale.
However, an installment sale seller can elect to pay all the capital gain tax in the year of the property sale. The IRS will gladly accept your tax payment.
Either way, the interest portion of each payment received from the buyer by the seller is taxable as ordinary income. For full details, please consult your tax adviser.
IF YOU DON’T WANT A PROPERTY, YOU CAN RENOUNCE INHERITANCE
DEAR BOB: My father died recently. He left about 60 acres of land equally to his five children, including me. In my opinion, this is worthless land, which isn’t good for farming, home building or anything else. About $11,000 of unpaid property taxes are owed on it. My siblings want each of us to pay one-fifth of the overdue property taxes to avoid a tax sale. Can they force me to pay my share? –Jim N.
DEAR JIM: No. You can renounce your inheritance share of that land. The result will be your four siblings then own it but you have no ownership share in it so you then won’t have to pay any part of the overdue property taxes. For more details, please consult a local probate attorney to renounce your inheritance.
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