What can heirs do if their stepmom sells the home?
Q: My father died and left his house to his children, but our stepmother had the right to live there. Without telling us, she sold the house, pocketed the money and moved elsewhere. Would a lawyer set an appointment with me to deal with this issue? How much should I budget for this legal assistance?
A: Yes, a lawyer would be able to represent you and your siblings.
You should be prepared to spend several thousand dollars, possibly even tens of thousands of dollars. Exactly how much you should budget depends on how expensive the lawyer is that you decide to hire, how much the house is worth, whether a title company was involved in the sale, plus many other factors.
Q: I normally do our taxes using a computer software program, and it leads me through every step. This year I have a very different situation. My wife died in May 2020. I wonder if her death complicates the return so much that I will need to hire a professional to prepare it for me. I am the sole beneficiary of her will, pension, retirement plans, life insurance plan and an annuity from her former employer. Our other assets consist of our home and bank accounts,
which were all jointly owned. Should I try doing it myself or would it be wiser to hire a tax service?
A: I think you should try using the software program, and if there is a question asking whether your wife died during 2020, then presumably it will guide you in such a way that you prepare the return accurately.
If you are not asked that question, then you should hire a professional.
Q: My wife and I own a $220,000 home that we want to give to our daughter. A few weeks ago, you said that when giving a house to a child, as long as a married couple had not exceeded their lifetime gift limit of $23 million, there would be no adverse tax consequences. But I thought the annual gift limit of $30,000 per couple was the controlling factor. What are the gift tax implications of this gift, and what is her cost basis if she decides to sell?
A: If you give the home to your daughter, you and your wife will each be treated as making a $110,000 gift. Assuming you have made no other gifts to her in the same tax year, the first $15,000 of the gift will be excluded, meaning each of you will be treated as making a $95,000 taxable gift.
But in 2021, each of you can give away $11,700,000 tax free. Your $95,000 gift will therefore reduce your exemption so that each of you will only be able to give away $11.6 million in future taxable gifts.
Note, President Joe Biden and Congress might retroactively change the gift and estate tax laws.
Your daughter’s cost basis will the same as your cost basis.
The information in this column is intended to provide a general understanding of the law, not legal advice. Readers with legal problems, including those whose questions are addressed here, should consult attorneys for advice on their particular circumstances. Ronald Lipman of the Houston law firm Lipman & Associates is board-certified in estate planning and probate law by the Texas Board of Legal Specialization. Email questions to stateyourcase@ lipmanpc.com