DEAR BOB: Why did you recently say homeowners need insurance in case our tree falls on our neighbor’s property? This happened to us. Our insurer advised that we had no liability. The neighbor’s own insurance policy will have to pay for our tree’s damage to their fence –Harold W.
DEAR HAROLD: You always need homeowner’s insurance. In addition to providing hazard (fire) insurance, a homeowner’s insurance policy includes negligence liability coverage.
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Liability for your tree that fell on the neighbor’s property depends on the cause. If it was a windstorm (an act of God), then you have no liability to your neighbor because you were not negligent.
However, if the tree was diseased or was leaning toward the neighbor’s house when it fell and damaged the neighbor’s property, you would be liable for negligence, and your homeowner’s insurer would pay for the damage. Please ask your insurance agent to explain further.
HOW CAN SALE OF SECOND RESIDENCE ESCAPE CAPITAL GAIN TAX?
DEAR BOB: How can a second residence qualify for the $250,000 single or $500,000 married capital gains tax exemption, or the tax-deferred exchange benefit? –Patty C.
DEAR PATTY: To qualify for the Internal Revenue Code 121 principal residence sale tax exemption up to $250,000 (up to $500,000 for a married couple filing a joint tax return), you must own and occupy the home as your primary residence at least 24 of the last 60 months before its sale.
To qualify for the Internal Revenue Code 1031 tax-deferred exchange benefits, the property must be a rental and must be traded for another “like kind” rental property of equal or greater cost and equity. For full details, please consult your tax adviser.
IF YOU HAVE A LIVING TRUST, DO YOU NEED A WILL?
DEAR BOB: If I already have a revocable living trust, do I also need a will? –Joe S.
DEAR JOE: Yes. It is called a “pour-over will.” The reason you also need a will is you probably have some assets that are not included in your revocable living trust, which includes your major assets such as your house, bank account, stocks and bonds, etc.
But your automobile, furniture and other personal assets probably are not held in your living trust. When you pass on, your will can specify who you want to inherit real and personal assets not included in your living trust. That is why it is called a “pour-over will.” For details, please consult the attorney who created your living trust.
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.
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