Estate Law Questions? Ask an Estate Lawyer.
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I have read your question and it appears that the family might be concerned about undue influence. If so, there are many social agencies that will assist you. Are you aware of these?
Additionally, if an individual holds title to certain property, that property can pass outside of probate, simply by virtue of how it is held. For example, if someone owns property as joint tenants with the right of survivorship, the property automatically passes to the person named on the deed, and generally does not go through probate.
I will await your response to see what your thoughts are on the above.
My mother is a willing participant in my sister's follies, including a very expensive vacation home that she allowed my sister to put in her (my sister's) name only. It's my mother's money and she can do with it what she wants. This last asset, however, she entrusted to me and I intend to make sure that it's there for her if she needs it.
I am aware that I can hold property in joint ownership. What I am not certain of is what the tax consequences are. I would rather it remain in some kind of irrevocable trust in my mother's name, but if I have to take joint tenancy, I will.
My purpose is twofold here: 1) I want to absolutely protect this asset from my sister, and 2) I want to minimize the tax consequences to me should I sell it, either for my mother or myself. The unit has appreciated since my mother bought it, primarily through a major remodel, and she has held it for four years now. If she needed to sell it, could she take the $250,000 tax exclusion? If I held it jointly and needed to sell it for her or after she passed, would I have to pay more taxes than if I simply received it through a trust?
My mother is asking that I outright take title to the coop, but I would prefer her name remain on it. I want her to retain her sense of independence as long as possible.
My mother is not broke and in no danger of being destitute. Thanks to a generous pension and excellent health care insurance, she never will be. She has always given my sister anything she asks for and always will. My mother knows she is being taken advantage of, but she would help my sister out even if she asked for the money after the fact, which she often does. My mom is of sound mind, just foolish. I don't think legally I could challenge my sister's behavior right now and even if I could, it would kill my mom. Thus, I need help figuring out how to best hold this asset.
That is a sticky situation. If a child takes joint ownership with a parent, then that child does not receive the stepped up basis (FMV based on parent's date of death) upon the parent's death for the child's 1/2 of the property. So for example, if the child takes joint ownership now, and the parent dies in 10 years, instead of the child receiving the FMV basis of the property in 2023, the child would be responsible for appreciation between now and 2023, at least for their one half of the property. Traditionally, if the parent dies and the child inherits the property, then the child gets a stepped up tax basis which is the FMV on the date of the parent's death. This is important for property that has appreciated. Another alternative is the irrevocable trust, as you mentioned, naming you as trustee. The thing with an irrevocable trust is that the settlor gives up all control to the property, hence the name "irrevocable". Once the irrevocable trust is established, it is very hard to revoke it (usually not possible). However, this would generally protect the asset from third parties. Irrevocable trusts can be tricky, so it is best to use an estate planning attorney, versus a "trust mill". (the attorneys that come into town and have a "free" informative meeting regarding trusts, and then schedule appointments for that afternoon to form trusts for the audience). If your mother lives in the home currently and sells it, then the $250K tax exclusion would be applicable (basically you need to have the home as a primary residence for 2 of the past 5 years). Most people advise against joint ownership for 2 main reasons: one being that the child does not receive the tax benefits as mentioned above; the other being that it exposes the property to the child's debts, as you witnessed in the case of your sister (even if the child has no debt and is financially responsible, a personal injury lawsuit can result in the loss of the home). The trust should be updated since your dad has passed. It is possible to sell a house that is in an irrevocable trust - provided that the trust document specifies when and why (under what circumstances), along with what the proceeds may be used for. It would be at the discretion of the trustee, versus the discretion of the settlor. A will or trust should always be updated based on any major life change.