A Tricky (and common) Situation

In this post, Joel A. Schoenmeyer of The Death and Taxes Blog gives the following hypothetical:

Jack and Judy Smith die, leaving four children: Allen, Barbara, Charles, and David. Jack and Judy owned a house at the time of their death — the same house where they raised their children. Jack and Judy had a Will, naming Allen as executor and leaving all of their property equally to their four children. David wants to purchase the house. May he do so?

His short answer is, yes. And he’s right. The info/advice that follows is well-taken. Read Joel’s post for the rest.

I have this situation arise frequently and the first question is almost always: “Why don’t we just give the house to all the kids now, before mom and Dad die?” The simple answer is, taxes. If mom and dad give the house to their kids then the kids don’t get to enjoy the stepped-up basis in the home after mom and dad have passed away.

Probate, however, isn’t always the best way to transfer the house. After all, its probate, and aren’t we all trying to avoid that? Transfer-On-Death (TOD) deeds can accomplish getting the home to all of your beneficiaries equally without having the home pass through your local probate court. But not all states allow TOD transfers. Ohio does, but you’ll need to contact your local estate planning expert to make sure yours does.

Another way to avoid probate and still get the home where you want it to re-title the home into a trust. The trust option gets a little more complicated because you have more options – its more flexible. Again, contact your local estate planning expert to decide on the option thats best for you and your beneficiaries.

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