Help your children be prepared to sell your house one day
Q. One other piece of advice to a widow leaving a house to multiple children, especially if they live outside her immediate area, is to choose a real estate agent in advance. If the family members are from out of town, they might not be able to easily identify the best agent to help get the best value for the property. There are agents who specialize in probate sales, and her attorney may be able to recommend one if she does not already have one.
A. Good advice. All my kids are out of town, even out of the country. I recently suggested an agent they may want to use. As it happens, she once lived on my street, and 20 years ago she took the licensing course I was teaching. More recently, she helped me straighten out a new property-tax assessment.
I don't tell the kids what to do, but I did send them her name.
As for the attorney recommending an agent, my experience is that rather than going on record as recommending, a lawyer is likely to simply provide the names of several brokers who specialize in real estate.
Q. My husband is being transferred out of the state, and we will be moving. We had no trouble selling our house at a profit even though we've only owned it a year and a half, because real estate is hot here, and we bought it at a bargain and fixed it up.
We will be renting it from the new owners till we leave. Now I found out that is a mistake, and we should have owned it at least two years so our profit is not taxed. But if we rent it back from the buyers for six more months, can we qualify to not pay tax on the profit?
A. You're asking about the home sellers special tax treatment, which allows tax-free gain of up to $250,000 if you owned and occupied your main residence for at least two of the five years before you sold it. In fact, for a couple filing jointly, you could have up to $500,000 tax-free profit.
No, you can't tack on rental time to make up the required two years of ownership. All is not lost, though. You could take a portion of your gain free of capital gains tax if your move is required for a new job more than 50 miles away. You owned and occupied the house for three-quarters of that two years, so you would claim the home sellers exemption from income taxes on three-quarters of your profit. That's better than nothing, and the remainder will qualify for long-term capital gains rates.
The IRS also applies the same rules if you need to move because of certain other changes in your situation. Qualifying possibilities include divorce, the death of a spouse or - how about this one? - giving birth to twins or triplets.
Protecting a partner: When a reader asked for advice about how to protect the partner who had shared expenses on her home for that past 25 years, I suggested writing a new deed naming both as owners with the right of survivorship. That would give the survivor automatic title to the whole property when the other dies. But that brought a letter from a lawyer.
Q. I am a retired attorney (mostly tax work), and my husband (Tom) is a practicing real estate (etc.) attorney. I asked him about your suggestion of a new deed naming both parties as co-owners with right of survivorship. Here is his response: "Absolutely not! If she does that, then they each would own a half interest in her property. That would require both owners to approve a sale of the property, would provide either owner the right to force a sale of the property and (most worrisome of all) would subject the property to a judgment lien if one of them were to declare bankruptcy or be assessed a large judgment in court."
Tom once had a client who added his daughter as co-owner of his home even though Tom advised against it. The daughter declared bankruptcy, and the trustee was going to sell the property to raise funds for the bankruptcy estate. The father had to buy back her half interest in the property from the bankruptcy estate in order to protect his interest in the property.
I hope that helps. Please let me know if you have any more questions.
A. Thanks for a lawyer's advice on the subject.
• Contact Edith Lank on www.askedith.com, or 240 Hemingway Drive, Rochester NY 14620.
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