After request for compensation is denied, does any recourse exist?
However, if she inherits the property, she takes advantage of what is known as the "step up" in basis; in other words, the value of the property at the time of your death becomes her tax basis. So if the property is worth only $177,000, that is her basis. If she wants to sell, she will have no profit and no loss.
In general, when the property is worth more than the original purchase price, it makes sense to inherit so as to get the higher tax basis. But, as in your case where the property is worth less than you initially paid for it, you and your daughter have to discuss the options. If she wants to rent out the property, it would make sense for you to give it to her now, since she could then depreciate it based on the higher value. On the other hand, if she plans to sell, it really makes no difference.
But I cannot provide specific legal or financial advice, and I strongly urge you (and your daughter) to consult a financial counselor to make sure that you are going to do the right thing.
DEAR BENNY: I have a reverse mortgage. It is in my name only. My estranged wife gave me a quitclaim deed. She did not qualify anyway. She does not want this house, and neither do any of the kids.
I am 76 and when I die, the mortgage becomes due, but no one except me is responsible. Can my heirs just divide the personal property and tell the mortgage company to come get the keys?
My will is out of date and I'm getting it updated to remove any reference to real property. Should I have the lawyer be executor ?
I have no qualified adult in the family that could do the job. I know how hard the job is, as I had to do it when my son died in 2007. --R.D.
DEAR R.D.: Yes, you must get your last will and testament updated; the laws have changed over the years and you do not want to burden your children if your will causes them financial complications.
In addition to a will, I always strongly recommended that readers should also have: (1) a durable power of attorney; (2) a living will (also called an advance directive) telling everyone whether you want that proverbial plug pulled if you are brain dead; (3) and a durable power for health. Some people combine both durable powers, but often you want different persons to handle your financial affairs from your health matters.
As for your house, under the current rules regarding reverse mortgages, on your death, the loan becomes due. The lender cannot get more than the value of the house. So if the house has no equity (i.e., the reverse mortgage is equal to or greater than the value of the house), your children should just tell the lender to take a deed-in-lieu, and give them the keys and a deed to the property.
But, if there is equity, why should your children lose out? They can sell the house, pay off the reverse mortgage, and divide up the net sales proceeds.
Should the attorney be the executor? I know that lawyers who draft wills for their clients do put themselves in as the proposed executor. I don't think it's a good idea; the potential for a conflict of interest is too great. Of course, if there really is no one else and you have had a long-standing relationship with that lawyer, then go for it.
Benny L. Kass is a practicing attorney in Washington, D.C., and Maryland. No legal relationship is created by this column. Questions for this column can be submitted to firstname.lastname@example.org.
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