‘Life estate’ could deny inheritor full possession of house

DEAR BOB: After reading your articles about all the problemshomeowners have when they add their heirs to their titles before death, I havedecided not to add my daughter to my home’s title. However, she will receive myhome in my will. The house is in my name, but I live in it with my husband. Heowns another house where he goes every day to smoke indoors and watch television.In my will, I provide a life estate in my house for my husband if I die first.Do you think this is a good idea? –Gayle T.

DEAR GAYLE: No. I’m glad you benefited from reading aboutthe drawbacks of adding an heir to your title before death.

Purchase Bob Bruss reports online.

But have you also noticed all the problems with lifeestates, especially when the life tenant fails to maintain the residence, letsit run down, and refuses to move out?

If you die first, leaving your house to your daughter butwith a life estate for your husband, he could keep living in that house formany years while it gradually deteriorates. If you die first why should youleave him a life estate in your house, depriving your daughter of fullpossession and ownership, especially since he has another house to live in?That makes no sense.

HOW MUCH TAX IS DUE ON INHERITED HOUSE SALE?

DEAR BOB: In January 2006 I received title to a house Iinherited. I had the house appraised and then sold it at an auction in April2006. How much profit tax do I owe? –Frances A.

DEAR FRANCES: Congratulations. You appear to have doneeverything right by getting a professional appraisal to establish your”stepped-up basis” for the inherited house as of January 2006.

Although I am not a great fan of auctions for single-familyhouses, I presume you had valid reasons for selling that way.

If you received a net amount, after paying all expensesincluding auction fees, exceeding the January 2006 market-value appraisalamount, only that (likely) small amount is taxable. For full details, pleaseconsult your tax adviser.

LEAVING HOUSE TO FIVE SIBLINGS IS A NIGHTMARE

DEAR BOB: When our mother died in 2005, her will left herhouse (worth about $350,000) to her five adult children. One sister, who livedwith mother during her last few years when she was ill, wants to continueliving in the house. But the other four want to sell the house and divide theproceeds (there is no mortgage). There is no reason for the sister to livealone in the big old house. We think she is just being selfish, but she ispreventing the sale. Does majority rule? How can we force her to agree to asale? She can’t afford to buy us out. She doesn’t even have enough income topay the property taxes and the repairs. –George R.

DEAR GEORGE: Leaving the house to five siblings, especiallywhen one disagrees with the majority, can be a nightmare. Presuming you allhold title as tenants-in-common, there is only one way to force a sale of thehouse.

It is called a partition lawsuit. You will need to hire alocal real estate attorney to guide the process through court. It’s up to thejudge to decide. But with a 4-1 vote in favor of selling, a judge would find itvery difficult not to order a partition sale of the property with the saleproceeds divided among the five owners. Consult local real estate attorney forfull details.

The new Robert Bruss special report, “Pros and Cons ofFast and Slow House Flipping for Big Profits,” is now available for $5from Robert Bruss, 251 Park Road, Burlingame, CA 94010 or by credit card at 1-800-736-1736or 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
).

Copyright 2006 Inman News

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