Q: My wife anesthetized abroad recently. The acreage was in our collective names. I appetite to blazon a assurance or quitclaim deed, and alteration acreage to my babe and myself as collective owners and accumulate the accomplishment at home. If I die, my babe can almanac the deed. Is this the appropriate way to go?
A: That aloof won’t work. For a accomplishment to be valid, at atomic two things are required. First, you accept to “deliver” the deed. This agency you physically accept to accord it to your daughter. Also, you should almanac the accomplishment amid the acreage annal in the canton area the acreage is located. Keeping it in your board at home aloof won’t work.
On your wife’s death, d that you captivated appellation as collective tenants (or tenants by the entirety), you automatically, by operation of law, became the sole owner.
If you now add your babe to the title, you accept fabricated her a gift. Unless she will absolutely alive on the acreage at some time in the future, she could accept a ample tax consequence. As I accept accounting on abounding occasions, the tax base of the gifter (you) becomes the tax base of the giftee (your daughter).
Here are your choices:
Prepare a accomplishment abacus your babe on the appellation as collective tenants with rights of survivorship, and accept it recorded. On your death, she will automatically become the acknowledged buyer of the acreage and you will abstain accepting to accept your acreage probated, unless, of course, you accept added assets. But accumulate in apperception this could accept tax implications for her.
Prepare a aftermost will and attestation and name your babe the sole almsman of your house. If you accept added children, accomplish abiding you amusement them as appropriately as possible. On your death, she will accede the house, but it will best acceptable beggarly that your acreage will accept to go through some anatomy of probate proceedings.
Put the acreage into a trust, afresh allotment your babe as the sole beneficiary. This will abstain probate, at atomic for the house.
I acerb acclaim you get admonition on your specific issues from able tax and acknowledged counselors.
Q: If my wife and I accept a $400,000 accretion on our abode that we accept lived in for 20 years and advertise it, we appear beneath the $500,000 exclusion for basic assets tax. If I die and my wife sells this abode three years later, does she still get the abounding $400,000 exclusion, or alone the $250,000 exclusion?
A: Yes, if you and your wife advertise the house, back it is bright that you accept “used and owned” the abode for two of bristles years afore it is sold, you can exclude up to $500,000 of your accretion (or if you book a abstracted tax return, up to $250,000). This is accepted as the “ownership and use” assay that determines whether you are acceptable for that homeowner benefit.
But if you die, your wife can affirmation the abounding $500,000 exclusion if the auction is fabricated not afterwards than two years afterwards your death. She cannot remarry afore the abode is sold. Although she has to accommodated the use assay on the date of your death, either you or she has to accommodated the buying assay on that date. For a added abundant analysis, access IRS Publication 523, “Selling Your Home,” at irs.gov/publications.
While this seems unfair, it is the law. But don’t balloon that on your death, your wife can access a stepped-up basis, based on bisected of the amount of the abode on the date of death. This agency that her taxable accretion will be bargain and should abate some of the tax consequences.
Benny L. Kass is a practicing advocate in Washington and Maryland. No acknowledged accord is created by this column; [email protected]
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