DEAR BOB: My 85-year-old mother is legally blind and hard of hearing. Recently my wife and I bought the townhouse that adjoins our home and invited her to live there so we will be readily available when she needs help. Since my mother will be selling her home of 40 years (its value is the bulk of her assets), we would appreciate your advice on the best way to protect her assets. Should the new house be put into her name instead of ours by selling it to her although we want to keep this property after she moves out? Or should the property be treated as a second residence or a rental property for tax purposes? –Terry P.

DEAR TERRY: If your mother’s capital gain on the sale of her principal residence is $250,000 or less, and if she owned and occupied it at least 24 of the last 60 months before its sale, her sale profit will be tax-free thanks to Internal Revenue Code 121.

Purchase Bob Bruss reports online.

Since you already own the adjoining house, why sell it to your mother and lose your tax benefits? I don’t see any advantage for you or your mother.

If she pays you rent, treat the townhouse as a rental property. Otherwise, treat it as a second residence on your tax returns. For details, please consult your tax adviser.

PITFALLS OF PAYING ALL CASH FOR A NEW HOUSE

DEAR BOB: We will soon be buying a brand-new house and paying cash. But I am concerned I will not have the protections of using a mortgage lender or a real estate agent. Do you have any information on what to watch out for when buying a new house for cash? –Larry K.

DEAR LARRY: If you read my articles regularly, I do not recommend paying all cash for any property unless you are so wealthy you won’t ever need your cash again (just in case you buy a “bad house”).

My best advice is don’t pay all cash for your next home. Instead, pay 10 percent or 20 percent cash down payment and obtain a fixed-interest-rate mortgage. If all goes well, after a few years then you can pay off the mortgage without the worry you tied up most of your cash. Of course, be sure the mortgage doesn’t have a prepayment penalty.

DEAD EX-HUSBAND’S NAME ON TITLE CAUSES PROBLEMS

DEAR BOB: My daughter and her former husband divorced. Subsequently, he died. Together they owned property in the mountains. She presumed the mortgage company took his name off the mortgage. They didn’t. Even though he is now dead, his name is still on the mortgage and on the title. She has continued paying the mortgage. She wants to sell the property but cannot do so until her dead ex-husband’s name is removed from the title. Why would the mortgage company not remove his name from the title? –Margery M.

DEAR MARGERY: You sound a bit mixed up. Having the dead ex-husband’s name on the mortgage is irrelevant.

What matters is the title to the property. If his name is still on the title, the mortgage company cannot remove it. The only way it can be removed so your daughter can sell the property is to have his estate probated.

Somebody is entitled to receive his interest in the property and it is up to the local probate court to determine who inherited that interest.

However, if your daughter and late ex-husband held title as joint tenants with right of survivorship, then probate is not necessary. Your daughter can then clear his name from the title by recording with the county recorder a certified copy of his death certificate and her affidavit of survivorship. For details, she should consult a probate or real estate attorney in the county where the property is located.

The new Robert Bruss special report, “How to Sell Your House or Condo for Top Dollar in a Buyer’s Market,” 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.

(For more information on Bob Bruss publications, visit his
Real Estate Center
).

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