Q. Why did you tell that man to make out a will to add his companion’s name to the title on their house? Everyone knows that goes to probate.
Why not tell the people the truth? Just go get a quitclaim deed, having the owner quit their claim and add the other person? Then they can add themselves back on so it reads tenants in common with right of survivor. Of course, all this will have to be notarized and then recorded at the local courthouse, but these people do not have to get an attorney involved.
A. This column runs to 800 words, and I like to include several questions. There’s almost always a great deal more that could — and perhaps should — be said on just about any topic, but I must usually limit the answer to the specific query.
“That man” did not ask me whether to add his companion’s name to the title but simply how to arrange it for when he dies. I told him to write a will because if he doesn’t, the state will dispose of his house and other property, possibly in ways he wouldn’t want.
Your second question: I’d never take the responsibility of telling someone to “just go get a quitclaim deed” because that might turn out to be really bad advice. In some cases it could accomplish what they want; for others it might lead to unexpected trouble, for them or for the ones they’re trying to protect. That’s why I send people to a lawyer who specializes in estate planning or elder law. An attorney can explore the whole situation, explain potential drawbacks, and help arrange what’s best for all parties. Besides, probate needn’t be that much of a problem, particularly for simple estates. Television shows and ads that make it sound scary are often just trying to sell you unnecessary products.
Q. I’m not quite sure what your intention was with your reply to the gentleman inquiring about the home he shares with his partner of 28 years, but to ask or imply that he may have a wife is insulting and rude. I don’t know what you mean by “the exact situation.” Possibly, you have personal experience with your husband having a domestic partner that he shares a house with. I’m sure that must have complicated matters for you, but there was no indication of the sort with this writer. You should be embarrassed and ashamed of your response. Have you not learned anything in your 86 years?
A. Yes, I’ve learned that a never-divorced legal spouse from long ago might claim a share, perhaps all, of a decedent’s estate. I don’t see anything rude about alerting the gentleman to that remote possibility. And yes, I am still sure that any lawyer would check out the “exact situation” before giving estate-planning advice.
Q. I’m sitting here reading the paper, and I have to disagree with your advice regarding “leaving the home to a companion when one dies.” If the guy bought the property 40 years ago for, say, $30,000 and it is now worth $250,000, there would be a great big capital gains tax to pay on it if and when the companion sells it. I believe the companion would have to use his buying price as the cost basis, i.e., tax on a profit of $220,000.
I have several rentals and have put them all in a life estate trust so they “pass” to the successor trustee with no tax consequences. Almost like being a joint tenant. And a deed from the owner to himself and the companion as joint tenants would be even easier, perhaps.
A. Inheritance doesn’t work the way you describe. The companion who inherited would receive a new “stepped-up” cost basis value at the time of death, with likely no capital gains tax at sale. And by the way, that original $30,000 cost basis would have been increased over the past 40 years by the amounts spent on improvements, ranging from a new towel rack to a new roof.
Then again, after the companion owned and occupied the home for at least two years, it could be sold with up to $250,000 profit tax-free under the homesellers exclusion anyhow.
Most important — no one financial strategy is right for everyone. Your trust could be entirely wrong for someone else — and that’s assuming you really understand it to begin with.
There’s no way you — or I — can give estate-planning advice without knowing a lot more about the parties involved. I’m not really qualified to do it anyhow. All I can do is warn readers that there may be unintended consequences to do-it-yourself legal strategies and advise them to seek out a professional.
Ÿ Edith Lank will respond to questions sent to her at 240 Hemingway Drive, Rochester, N.Y. 14620 (include a stamped return envelope), or readers may email her through askedith.com.
© 2012, Creators Syndicate Inc.Copyright © 2014 Paddock Publications, Inc. All rights reserved.