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Idle Equity? A Reverse Mortgage Could Be the Answer.
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And because you deeded part of your property away, the tax assessor will probably reassess the property value, forcing you to pay higher property taxes.
Instead, you could have created a revocable living trust and named your neighbors to receive your title after you die. Meanwhile, you would maintain 100 percent control, including the ability to sell if you desire.
After the neighbors inherited your property, they would get a new stepped-up basis to market value on the date of your death and would owe little or no capital gain tax if they sell shortly thereafter.
Sorry to bring such bad news. You should have consulted a lawyer first.
DEAR BOB: You have mentioned several times that when a group of individuals owns and occupies a house, such as three roommates buying a house together, they each will be entitled to a $250,000 principal-residence-sale tax exemption if they each meet the 24-out-of-last-60-months ownership and occupancy test. Would the same condition apply if I place my 7-year-old son on the deed to my home? Will each co-owner then be entitled to $250,000 tax-free capital gains after living in it for 24 of the 60 months before the sale? -- Richmon T.
DEAR RICHMON: Yes, but there are major pitfalls of adding a minor's name to a real estate title.
When you and your wife decide to sell your home, unless your son is then 18 or older, you must have a court-appointed guardian to represent his interests.
Perhaps that guardian might decide his share of the sales proceeds should be held in trust until he becomes 18 (or 21, or some other age). I do not recommend doing what you contemplate.
Remember the rule is minors can receive real estate title, but they cannot convey title until they become 18.
DEAR BOB: My life partner and I bought our home as tenants in common. But I make all the mortgage payments, as I earn most of the income. Can I deduct all the mortgage payments or do they have to be split between the two of us? -- Michael S.
DEAR MICHAEL: Itemized income tax deductions for principal-residence mortgage interest and property taxes depend on who actually paid the payments.
If you pay 100 percent of those expenses, only you can deduct those costs you paid. However, if you pay 75 percent and your co-owner pays 25 percent, then you each get to deduct the amounts you paid. Consult a tax adviser for details.
