DEAR BOB: My “companion,” age 67, and I (age 66)have been living together in his house for the last four years. Although wedearly love each other, if we get married we have been told our Social Securityand other retirement benefits will be reduced. However, I am very concerned.His health is declining and it won’t be too much longer before we should both moveto an assisted-living center. If he dies first, his will provides that thehouse goes to his daughter. If I can convince him to sell the house, so we canafford to move, I am told there will only be $250,000 tax-free sale profitseven though the net profit will be around $400,000. Should my “significantother” add my name to the home’s title to increase the exemption to$500,000? –Helen R.
DEAR HELEN: If you can convince your companion to add yourname to the title on the house, to qualify for an additional $250,000 principalresidence tax exemption allowed by Internal Revenue Code 121, you must own andoccupy the home at least 24 of the 60 months before its sale.
Purchase Bob Bruss reports online.
However, if you two lovebirds get married, since you alreadymeet the 24-month occupancy test, although your name is not yet on the title,you both can qualify for up to $500,000 principal residence sale exemption ifyou file a joint tax return in the year of the home sale.
In the current situation, if your significant other dies,and the house goes to his daughter by his will, you get nothing. I’m sure youare aware of that. For more details, please consult a local estate planningattorney or tax adviser.
DIVORCE DOESN’T CREATE PROPERTY STEPPED-UP BASIS
DEAR BOB: I have been following your comments about thebenefits of inheriting real estate and other assets because of the”stepped-up basis” benefits. My question is, does the same resultapply to a divorce? My soon-to-be ex-husband has agreed to give me our house inreturn for not having to pay alimony and child support. –Inga T.
DEAR INGA: The “stepped-up basis” to market-valuetax benefits only applies to inherited property. That is why I frequentlyadvise it is better to inherit property than to receive it as a pre-death gift.
The stepped-up basis rules do not apply in divorcesituations. You will receive full title to the house with the sameadjusted-cost basis as before the divorce. For full details, please consultyour tax adviser.
WHO MUST MAINTAIN HANDICAPPED ACCESS RAMP?
DEAR BOB: I followed with great interest your recent itemsabout that handicapped Iraq war veteran who had a problem installing a ramp ata rental apartment, which was otherwise ideal for him. I’m glad the story had ahappy ending. By eliminating the steps, it sounds like the landlord’s buildingis made more desirable for everyone. My elderly parents have a similarsituation at their condominium in Minnesota. Mom is in a wheelchair. Theassociation allowed installation of a ramp and agreed to maintain it for ayear. But I recently learned the association has stopped maintaining the ramp,including shoveling snow in the winter. Before I take issue with thehomeowner’s association, I need to know what rights my parents have to make theassociation maintain the ramp walkway to their ground-floor condo. Who isresponsible for maintenance and liability if someone is injured on the ramp?–Edward N.
DEAR EDWARD: Although the Americans with Disabilities Act(ADA) clearly requires a building owner, presumably including a homeowner’sassociation, to allow installation of a handicapped ramp at the expense of thedisabled individual, the ADA is silent about maintenance of that access.
If just your parents benefit from the ramp, I would thinkthey should maintain it. Presumably, if someone is injured using the ramp, thehomeowner’s association liability insurance provides coverage for negligence.For full details, please consult a local real estate attorney.
WHAT IF LIFE TENANT CAN’T PAY THE PROPERTY TAXES?
DEAR BOB: Lately you have had several questions about lifeestates and “waste.” I am a life tenant, but my problem is I struggleto pay the property taxes. I am now behind and fear the property tax collectorwill try to sell my house because I can’t pay the taxes. It seems to me the personwho will inherit the house when I die or move out should pay the propertytaxes, but I know that is not the law. What should I do? –Irene W.
DEAR IRENE: Most life estates require the life tenant to paythe property taxes and the mortgage interest (if any). Unless the propertytaxes are paid, the tax collector can hold a tax sale of the property, thuswiping out your life estate and the remainderman’s interest.
However, that is unlikely to happen. The reason is theremainderman who receives clear title to the house after you die or move outmust be notified of any pending tax sale. That person is likely to pay theproperty taxes to preserve his or her remainder interest. But the remaindermancould then bring a legal action against you for failure to pay the propertytaxes.
If you are on friendly terms with the remainderman, perhapsyou can make a deal to terminate your life estate now in return for asubstantial payment. Such a transaction could benefit both you and theremainderman. Be sure to consult a local real estate attorney to protect yourinterests.
NO EASY WAY TO GET RID OF AN UNWANTED CO-OWNER
DEAR BOB: About 10 years ago, I added my son to my home’stitle. At the time, I was under stress due to a divorce and I was told ifsomething happened to me the house would go to the state. I now know that isnot true. But my son’s wife has been so nasty to me I want to take him off mytitle. I sent him a quick claim deed, but no response so far. What can I dobesides selling the house? –Johanna L.
DEAR JOHANNA: Just to be correct, it’s called a quitclaimdeed, not a quick claim deed.
There is no easy way to get your son off your home’s title.If you decide to sell the house, his signature will be required on the deed.
Your situation is a classic example why I frequently adviseagainst adding prospective heirs to real estate titles. Circumstances canchange, as you discovered.
SMALL CLAIMS COURT CAN RESOLVE MORTGAGE REFINANCE OVERCHARGE
DEAR BOB: I refinanced my home loan with my previous lender.But they charged me about $350 double interest for the same days on the old andnew mortgages. I requested a refund but was refused. Then I wrote to the U.S.Office of Thrift Supervision. However, they refuse to act. If this happens toothers, there is lots of unearned interest being double-collected by mortgagelenders. What should I do? –Raymond M.
DEAR RAYMOND: Your local Small Claims Court is the idealplace to resolve this alleged overcharge. Although the $350 amount seems small,it is worth pursuing to make that nasty lender show up in your local SmallClaims Court. Of course, if the lender fails to appear, you automatically win adefault judgment.
HOW TO FIND OUT THE PAST MARKET VALUE OF A PROPERTY
DEAR BOB: How can I find out the market value of a house duringSeptember 1991? We need the information for a probate matter. I already checkedwith a local appraiser who says the local multiple listing service (MLS) dataonly goes back five years. Can you help? –Barbara R.
DEAR BARBARA: What you want is called a “retrospectiveappraisal.” Most appraisers are not interested in such work. However, theAppraisal Institute says it has a list of appraisers who specialize in thistype of appraisal. Their Web site is
Retrospective appraisals aren’t cheap, because lots ofresearch time is involved. But the result can be a stepped-up basis to marketvalue on the date of a decedent’s death. Your situation shows why it is soimportant for heirs to keep market value records for inherited real estate toestablish their stepped-up basis.
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 at1-800-736-1736 or instant Internet delivery at
(For more information on Bob Bruss publications, visit his
Real Estate Center).
Copyright 2006 Inman News