Widow advised to consult attorney, CPA in sale of house to child

Q: Is it beneficial for a widow to "sell" her house to a child for $1? What might be conflicts to either side? Sibling competition is not an issue. – K.

A: No financial move is right for everyone. What you ask about might be beneficial for one widow and cause problems for another. I know nothing about your situation except that your kids all get along – that’s nice to hear.

Some things to be considered: you and your child’s health, assets, income, marital status, special tax treatment, capital gains tax, future plans and lots more. See the next question for an example and talk with a lawyer who specializes in elder law or estate planning.


Q: What would the tax implications be if we sell my parents’ home up north and their winter condo, as both were signed over to my siblings and me four years ago? They are moving into an assisted living facility. – S.

A: There’s bad news and possible good news.

Bad news first: Because these are not your main homes, you and your siblings owe capital gains tax on any profits.

When you received each property as a gift, you also received your folks’ cost basis, which is used to calculate the gains.

Possible good news: Depending on how those deeds were written, your folks may have retained life tenancy. If so, they’re entitled to a share of the proceeds.

The IRS has tables, based on their life expectancy, showing what portion would be theirs.

On proceeds from their main home, they could take as much as $500,000 profit tax-free.

No special tax treatment for capital gains on the vacation home. No tax break for your shares.

Other possible good news: A lawyer tells me that in cases of inheritance, it is sometimes possible there wasn’t really a legitimate transfer if the original owner(s) continued to live in the house and treat it as their own, paying taxes, repairs and the like.

If that applied, your folks could use the whole home sellers’ tax break on profit from their principal residence. However, there is still no special tax treatment on the vacation home.

Given the Florida real estate market, there might even be a loss on the condo. Depending on whether that was a principal home and whether it was ever rented out, it might show a capital loss that could be useful to someone.

It all adds up to – see a tax lawyer. Probably go see a certified public accountant or an enrolled agent as well.


Q: My husband and I bought a house in 1995. We took out a second mortgage in his name. We divorced in 2008. He signed a quitclaim deed giving me the house.

The mortgage company does not know about the divorce. Can I sell this house without my husband being involved since my name is not on that second mortgage? – W. G., Rochester

A: If that quitclaim deed names you as the sole owner, then you have the right to sell the house. Whose name is on the mortgages doesn’t make any difference. No one will buy unless those loans are paid off, but that’s a different matter.

Edith Lank will respond personally to any question sent to www.askedith.com.

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