QDEAR BOB: I hold a durable power of attorney for my father, who died several months ago at age 93. When I went to the recorder's office to transfer title to his home according to the terms of his will, the clerk said my power of attorney was worthless after my father's death. A lawyer tells me his estate must now go through probate court, which will take many months because he was worth more than $3 million and he owned real estate in three states. Is this true? -- Todd P.

ADEAR TODD: A durable power of attorney is valid while the grantor is still alive, but perhaps incompetent and unable to make decisions. For example, it is often used when a person has Alzheimer's disease or has suffered a severe stroke.

The probate lawyer is correct. To make matters worse, probate proceedings will probably be necessary in all three states where your father owned property, requiring the hiring of lawyers in each state.

Your father would have done you a big favor with a revocable living trust, which avoids probate after death regardless where the living trust assets are located and, in the event of incompetence, provides for asset management by the successor trustee.

DEAR BOB: I recently read your special report on lease-options. You recommend Professional Publishing Co. as a good source of lease-option and other real estate forms. But when I tried to contact them, I discovered they have gone out of business. What source do you recommend for real estate forms? -- Vicky R.

DEAR VICKY: Many readers recently asked similar questions about this long-time real estate forms supplier. I was shocked when Professional Publishing Co. of Novato, Calif., quit printing real estate forms, which have been available as long as I can remember. The company owner, Jim McKenney, says all the forms are now available on the Internet at www.TrueForms.com. He says the Web site offers desktop and online versions, as well as form sets and single transaction packets.

"We regret that some of our customers do not have computer access. However, since almost all of the users preferred the software versions, we had no choice but to discontinue printing the hard copy," McKenney said.

DEAR BOB: My aunt left her house to my brother and me after she died. He took out a home equity loan against the house, which I signed, because he promised to repair the house with a new roof and siding. My brother has since bought a new car and made no repairs to the house. The money is gone and the bank is threatening to foreclose. My brother refuses to pay the home equity loan. I want to save the house and am willing to make the payments if there is a way to legally have my brother's name removed from the title. Is there a way I can pay the home equity loan and become the sole owner? -- Tania R.

DEAR TANIA: Because you and your brother are now on the title to the house, you can bring a partition lawsuit to force the sale of the property. Partition lawsuits between disagreeing co-owners are quite common. However, it will be up to the judge to allow you to buy out your brother's equity in the house rather than having the house go to a partition sale. Consult a lawyer where the house is located. Do so quickly so the house is not lost to foreclosure.

DEAR BOB: My parents and I bought a house together as equal partners and the mortgage has all three names on it. In about five years, the mortgage will be paid in full. My parents and I are thinking of changing the deed into my name alone. Can this be done before the mortgage is paid off? How do we do it? -- Nancy K.

DEAR NANCY: Yes, the title transfer can be done easily. Your parents can sign and record a quit claim deed to you. The result will be you are the sole owner.

However, depending on the equity transferred, if it is more than $11,000 per donor, they must file a federal gift tax return. No gift tax will be due if their lifetime gifts of more than $11,000 per donee per year, which do not require a gift tax return, do not total more than $1 million.

They should consult a tax adviser about their equity gift to you regarding any tax liability.

DEAR BOB: My mom said she read in your column that when we make a home purchase offer, we can add: "This purchase offer valid for $3,000 above any other competitive purchase offer," or something to that effect. How should we word it? The real estate agent we are working with says that is illegal. -- Stacy H.

DEAR STACY: In a competitive local seller's market for homes (where there are more qualified buyers than homes for sale), you can make your purchase offer the winner.

However, the seller won't have to accept your offer, especially if a lower price bidder appears better qualified. For this reason, be sure you are pre-approved (not just pre-qualified, which means nothing) in writing by an actual mortgage lender.

I suggest a phrase such as, "In the event a higher, legitimate purchase offer is received for this property from another qualified buyer within 24 hours, I offer $5,000 more."

If you don't think that amount is enough to impress the seller into accepting your written offer, change the amount to $10,000 or whatever you think is necessary. There is nothing illegal about including such a clause in your written purchase offer.

DEAR BOB: As a licensed appraiser with 38 years of experience, I especially enjoyed your recent article about appraisals. I'm glad I have an established practice, with four associate appraisers in my office, where we have more lender referrals than we can handle. But I am amazed at the incompetence in our business. You are so right that borrowers (and lenders) should question appraisals with which they do not agree. We have more than our share of crooks who enable fraud on lenders. I just wish there was something we honest appraisers could do. Any ideas? -- Ralph R.

DEAR RALPH: Once a year, after I've paid my life insurance premium, I write my annual "How to Get a Good Appraisal" article, and then wait for the hostile reaction. But this year, the few e-mails and letters I received on this issue supported me for explaining how borrowers can challenge appraisals with which they do not agree.

Being an appraiser is difficult. Borrowers want appraisers to "hit the mark" by appraising the property high enough for the borrower to get the loan desired. But lenders sometimes play dirty tricks, such as instructing the appraiser to determine a "quick sale market value," meaning a below-market value. Sorry, I don't have any brilliant ideas how to clean up the appraisal profession.

DEAR BOB: For the last three years we have owned our condo in what was once an upscale condominium complex. But mismanagement by the board of directors has allowed it to decline rapidly in maintenance quality and ambiance. Too many renters have been allowed to move in. They park their campers in the parking lot and the place looks like low-income housing. Fortunately, the market value has held up because of a desirable location. My husband and I have decided to sell and move to a better condo complex. If we sell, our net profit will be about $145,000. Because we plan to buy another condo of greater cost, will our profit be tax-free? -- Clara H.

DEAR CLARA: Yes, but not for the reason you expect. The old "rollover residence replacement rule" of old Internal Revenue Code 1034 was abolished in 1997.

But it was replaced by the much better principal residence sale rule of Internal Revenue Code 121. Today, if you have owned and occupied your principal residence an "aggregate" two of the five years before its sale, up to $250,000 (up to $500,000 for a married couple filing a joint tax return) of your capital gain is tax-free.

Presuming the condo you describe is your principal residence and it was your primary residence at least two of the five years before its sale, your $145,000 capital gain easily qualifies for this tax exemption. There is no need to buy a replacement home. Consult a tax adviser for details.

DEAR BOB: We bought our house for zero down payment in December 2003. But we pay a stiff monthly private mortgage insurance (PMI) payment of $123 per month. Will we be able to deduct our PMI payments on our 2004 income tax returns? If not, I think we should refinance with a mortgage that doesn't require PMI. -- Sharon V.

DEAR SHARON: Unfortunately, Congress this year did not change the tax law, as was proposed, to allow about 12 million homeowners to deduct their PMI, FHA and even VA mortgage insurance payments as deductible interest.

Maybe it will happen in 2005. This issue will be back because the mortgage insurance industry wants PMI premiums to become tax deductible just like mortgage interest. Meanwhile, you will be better off by refinancing with a non-PMI mortgage.

DEAR BOB: I have been approached by several companies offering tenancy in common investments in commercial properties. I can invest as little as $20,000 to obtain the benefits. What excites me is they say I can sell my apartment building and invest the proceeds in such an arrangement as a tax-deferred exchange and just collect the monthly checks. That sounds wonderful to me with no tenants. What's the catch? -- Hilda H.

DEAR HILDA: Tenancy in common investments have only been around a few years, but they are ideal for your situation to defer tax on the profitable sale of your apartment building, create a tax-deferred exchange and provide future monthly income from a leased investment, such as a franchised restaurant.

For example, friends of mine sold their rental house and made a tax-deferred exchange into a tenancy in common partial ownership of an Applebee's restaurant in Kentucky. Each month they receive a check for their share of the net income from that property. As retirees, they are happy. However, if a problem develops, such as the neighborhood goes bad and the Applebee's franchisee goes broke, that property might become worth far less than its original value. I'm sure you get the idea.

With this investment, you are at the mercy of the property investment management firm. Consult a lawyer for details.

DEAR BOB: My aunt died and I am her beneficiary on her insurance policies. She didn't leave a will and she owned a house that still has a mortgage. I am her only living relative. Is the house mine?

-- Cindy B.

DEAR CINDY: The fact that your aunt named you as beneficiary on her insurance policies is irrelevant.

Because your aunt died without a will, the state law of intestate succession where she resided determines who will receive her assets. This situation would not have occurred if she had a will or, better yet, a living trust to avoid probate costs and delays.

As your late aunt's only living relative, you probably will receive title to her house. However, a probate court proceeding will be required. You should consult a local probate lawyer for guidance in how best to proceed with your aunt's estate. If you don't act, the city or county public guardian or administrator will take control of the property for distribution.

DEAR BOB: We own a mobile home with no permanent foundation. We need to find a senior citizen reverse mortgage lender that will lend on our mobile home. Where can I find one? -- John N.

DEAR JOHN: Senior citizen reverse mortgages are only available on houses and condominiums that have individual title deeds. In most states, a mobile home that is not on a separate lot with a foundation is not considered real estate and it is not eligible for reverse mortgage benefits.

DEAR BOB: My father-in-law died in July 2004 and my mother-in-law died in 2003. I know her $250,000 exemption expired. The house needs to be sold. Does the house have to be sold in 2004 to claim that $250,000 exemption? -- Barb P.

DEAR BARB: You left out a key component of the puzzle. Who inherited the house after your father-in-law died?

I will presume your husband inherited the house. As a result, he received a new cost basis, which is stepped-up to market value on the date of his father's death.

Whenever he sells that house, his capital gain is only the difference between his stepped-up basis and the actual sales price. If the house sells for less than the stepped-up market value basis, no capital gains tax will be due. Consult a tax adviser for details.

DEAR BOB: My husband and I have owned and lived in our home almost 11 years. We owe about $199,000 on the mortgage. Our neighborhood has skyrocketed in market values. If we sell our home, we can walk away with about $700,000 in profit. We would like to move to a cheaper area. If we buy another house for $400,000 for cash, must we pay capital gains tax on our sale profit? We would like to get a small mortgage on our next home for the tax breaks. But neither of us is employed. Can we get a mortgage and what should we do with the extra cash? -- Kris A.

DEAR KRIS: Let me presume you owned and occupied your principal residence at least two of the five years before its sale. That means you qualify for the Internal Revenue Code 121 home-sale tax exemption up to $500,000 for a married couple filing jointly (up to $250,000 for a single home seller).

Your mortgage balance is irrelevant. What matters is your $500,000 exemption on the difference between your adjusted sales price (gross sales price minus selling expenses) and your adjusted cost basis (purchase price plus capital improvements added during ownership). I presume that is $700,000.

The result is about $200,000 of your capital gain will be taxable. Sorry.

The purchase price of your next home is irrelevant. To obtain a mortgage on it, because you are both unemployed, I suggest you consult an experienced mortgage broker. He or she can probably arrange a no-documentation mortgage if you have a FICO credit score of at least 700, but you won't get the lowest interest rate.

DEAR BOB: How can I avoid having a lease-option being characterized as a land contract sale? Can I submit the lease-option to the IRS and receive a favorable advance ruling? I want to offer lease-options to my tenants but am terrified of the consequences if it should be determined to be a land contract sale. -- Scott W.

DEAR SCOTT: Stop worrying. Unless your lease-option is a disguised property sale, you have nothing to fear. I am unaware of any tax court decision reclassifying a lease-option as a land contract sale.

DEAR BOB: My wife and I bought a $132,000 triplex 25 years ago. Today it is assessed at $880,000. To minimize future inheritance taxes, we want to transfer ownership to our two children with a series of tax-exempt $11,000 annual gifts and quit claim deeds. If we each give $11,000 to our son and daughter ($22,000 total each year), will it take us three years (three times $44,000, or the original $132,000 purchase price) or 20 years (20 times $44,000, or the current $880,000 value) to transfer ownership to our children?

-- Gerard P.

DEAR GERARD: It will take you 20 years at $11,000 each to transfer $880,000 of market value to your children. Why bother?

After you or your wife dies, presumably your will or living trust leaves the property to your surviving spouse. That is a 100 percent tax-free event. If the surviving spouse dies in 2004 or 2005, up to $1.5 million of assets will transfer free of estate tax. Unless you have a large estate, your plan seems like wasted effort. Consult a lawyer for details.

Readers with questions should write Robert J. Bruss at 251 Park Road, Burlingame, Calif. 94010 or contact him via his Web page, www.bobbruss.com.

{copy} 2004, Inman News Service