My mother's will states that if she passes away, that since I pay the mortgage my wife and I will inherit the house. Should we put the house in all of our names? Or is it sufficient to have a bequest in the will? How can we save time if she passes and the house is still just in her name?
The key is often asking the right questions. Many times the answer is easier then the question. Sounds a bit like you've heard the probate horror stories and want to avoid the long time delays, legal fees and costs, and publicity of probating the house if its bequethed in your mom's will to you. Well, you can do all that for just a bit of cost by having your mom re-title the deed to you now. You'll own the house and no problems will occur on her death becasue the house will already be in your name. That solves all the questions you asked about, but hey would you like to hear a few more questions? Probate is often no big deal. Unless there is something unusual going on there is often no reason to avoid probate if there is a potential down side to doing so. The time delays for most people are not meaningful. If your mother took out the mortgage (probably did -- house is in her name) you cannot transfer the house to you without permission of the lender or the mortgage might be called. You had better address this issue with a real estate attorney. While you speaking to the attorney, be sure to understand that the property insurance will have to be changed to you (this might affect other coverages for your mom and you such as umbrella liability, etc.). Have you spun by your accountant's office lately? If you haven't give it a try and ask if you are able to deduct mortgage interest on the payments you're making for mom's house. Probably its a big no. Have you been taking interest deductions? Ask your CPA to research the issue, but you probably have to have an ownership interest or be liable on the mortgage (it might not matter how much, see below). If your mom transfers the house to you now she's made a gift. Have you thought of the gift tax implications of that? What about the income tax implications? What income tax implications? Well, if your mom owns the house on her death the tax basis (the figure used to determine gain on sale) will step up (increase) to the fair value on her death. That means if you sell the next day, no capital gains tax. If you get the house today (i.e., anytime before her death) the house will have her tax basis which might be very low (when did she buy the house?). These issues must be weighted in the decision. Had enough? Well were not done with you yet. If you still have some gas in your car, take a spin by the office of an elder law attorney and be sure you realize what the implications are of your mom owning or giving the house away to her qualifications for various governmental programs should she need them. While you're sipping coffee in his/her conference room, ask about a deed with a life estate. That might enable you to accomplish a number of your goals -- no probate, tax basis step up, elder law planning, etc. Need more? Well do you have siblings? Do they really understand the deal (or do you just think they do?). While not wanting to spoil the Cleaver family image, siblings can make some pretty nasty fights over money when mom goes. Be sure that you document what you are spending and mom's wishes. Thus, even if you have an attorney prepare a deed with a life estate, the will might expressly confirm the bequest of the house to you to reaffirm the deal in case your siblings question it. And you thought this would be simple. It is, if you don't care if you get the right answer. Unfortunately, most of the financial news sound bites and trite articles in popular financial mags (we won't mention names now) like to promise simple answers (you know, nothing deeper then a headline in length). Those work great sometimes, but usually only if you luck out. Life isn't so simple, so get some good advice.
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