DEAR BOB: What is the best way to hold title to my residence to avoid probate and also to get the step-up in cost basis? –Steve L.
DEAR STEVE: I presume you mean you want your heir to receive the stepped-up basis to market value after you die.
Purchase Bob Bruss reports online.
The best way to hold title to real estate is usually in a revocable living trust. While you are alive you can buy, sell, refinance and manage your living-trust assets because you are the trustor, trustee and beneficiary.
However, if you become incapacitated, such as with Alzheimer’s disease or a severe stroke, or after you pass on, your successor trustee takes over and manages or distributes your living-trust assets as instructed in your living trust.
After you die, your living-trust assets are distributed without probate costs or delays, according to your living-trust instructions. Your heirs then receive a new stepped-up basis to market value on the date of your death. More details are in my special report, “24 Key Questions Answered: Living Trust Secrets Reveal How to Avoid Probate Costs and Delays,” available for $5 from Robert Bruss, 251 Park Road, Burlingame, CA 94010 or by credit card at 1-800-736-1736 or instant delivery at www.BobBruss.com.
WILL HOLDING TITLE IN AN LLC AVOID CAPITAL GAINS?
DEAR BOB: How can I avoid capital gain tax on the sale of my property? Will forming an LLC (limited liability company) do that? –Daniel J.
DEAR DANIEL: No. The purpose of holding real estate title in an LLC is not to avoid capital gain tax. The purpose is to avoid personal liability if someone is injured on your property.
If the property is your principal residence, you can avoid capital gain tax upon sale by use of the Internal Revenue Code 121 tax exemption up to $250,000 (up to $500,000 for a married couple filing a joint tax return). To qualify, you must have owned and occupied your principal residence at least 24 of the last 60 months before its sale.
If the property is held for investment or for use in your trade or business, the only way to avoid capital gain tax is to make an Internal Revenue Code 1031 tax-deferred exchange for another “like kind” property of equal or greater cost and equity. For details, please consult your tax adviser.
HOW CAN EX-ROOMMATE GET SECURITY DEPOSIT REFUND?
DEAR BOB: How can I get my half of the rental security deposit returned after I moved out but my ex-roommate chose to continue renting past the one-year lease expiration? –Douglas R.
DEAR DOUGLAS: Your ex-roommate, not the landlord, owes you the security deposit amount you originally paid when you moved in. Because he remains in the rental property, he is using your 50 percent share of the security deposit, plus his own 50 percent.
If he refuses to pay you the 50 percent to which you are entitled, take him to the local Small Claims Court to get a judgment for the security deposit he owes you.
The new Robert Bruss special report. “How to Buy Fixer-Upper Houses with Little or No Cash for Fun and Fortune.” 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 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).