Author Topic: End of Life / Inheritance Planning  (Read 3958 times)

lifejoy

  • Magnum Stache
  • ******
  • Posts: 3924
  • Age: 32
  • Location: Canada, eh
  • Lovin' the Mustachian life!
    • Not Buying This
End of Life / Inheritance Planning
« on: October 01, 2014, 05:33:18 PM »
This December my parents and I will be re-writing our wills and putting my name on the deed to their house. I am the sole heir and they would like to make things as streamlined, simple, and fee-free as possible. If you have any advice or suggestions, that would be great.

WannabeFrugalRN

  • 5 O'Clock Shadow
  • *
  • Posts: 8
Re: End of Life / Inheritance Planning
« Reply #1 on: October 01, 2014, 06:24:25 PM »
I have heard that you should not put your name on their house until after they pass or you will have their original cost basis for taxes ( when they bought it) and you  will be taxed on that when you sell on any appreciation since they bought it.
 If you receive it as an inheritance it will be taxed at the cost when you receive it.

GizmoTX

  • Handlebar Stache
  • *****
  • Posts: 1450
Re: End of Life / Inheritance Planning
« Reply #2 on: October 01, 2014, 08:21:26 PM »
I agree -- putting your name on the house deed or any other property now means you will likely be paying much more in income tax when you sell it than if you simply inherited it.

It's an excellent idea to put everyone's wills in order ASAP. Your parents' wills should each deal with the following scenarios: 1) one of them dies -- I assume the other parent will inherit, 2) both of them die or surviving parent dies -- you inherit, 3) you die first -- who will then inherit & make decisions? They also should do springing power of attorney documents in case of mental or physical impairment, & living wills for end of life decisions. Properly drawn documents will let you have access to their finances & doctors on a demonstrated as needed basis without expensive legal intervention.

Your will is simpler, although you too need springing POA, etc, as well. You need to decide what you want to happen if 1) you survive both parents & 2) a parent outlives you.

Frankies Girl

  • Magnum Stache
  • ******
  • Posts: 3607
  • Age: 83
  • Location: The oubliette.
  • Ghouls Just Wanna Have Funds!
Re: End of Life / Inheritance Planning
« Reply #3 on: October 01, 2014, 08:45:11 PM »
Your parents should not put you on the deed. The others are right about losing out on stepped up cost - basically when you try to sell the house, you'd be paying capital gains on any amount over what your parents paid for it if you're on the deed now (before your parents have passed away). If they'd owned it for some years and the area has had high appreciation, that could be hundreds of thousands of dollars difference. If they leave the house to you in their will, then you can get it assessed at the time of death (or within a few months) or use the property assessment from the county tax assessors (have the executor name either or) as the value, and then only pay capital gains on the amount of the stepped up cost.

Just went through this with my dad's house. House was purchased in 1968 for $35K. At time of death, house was valued at $74K (sister was executrix, named the value in the probate based off of property tax assessment) and we sold it for $93K. So we'll have to pay capital gains taxes on the difference between 74 and 93K instead of 35 and 93K. (you can also deduct out the cost of realtor or other fees associated with selling the house, and cost of any major renovations I believe from what I've read, but I still have to confirm before the 2014 taxes are filed).

I'm obviously not an expert, so confirm the details with lawyer or estate planner.

As far as streamlining stuff...

Any investment accounts (IRAs, 401Ks etc), have them put you down as the beneficiary. Any accounts that have you listed (they can still list each other as primary beneficiary, but have you as the secondary beneficiary - or look for the term "transfer on death" and that should be good. TOD accounts do not go through probate and are not a part of the estate - you just have to file a death certificate with the company along with a letter of explanation asking for the account(s) be transferred, and within a few weeks the accounts become yours. Very quick and easy and better than leaving it up to being covered in the will. It took about 3 weeks to get the one account my dad did list my sister and I as beneficiaries (had to wait on the death certificate or it would have been sooner) but it took close to 10 months to gain control of the accounts he had no named beneficiaries since they were considered part of the estate and had to go through probate. Make sure to find out where the accounts are (account numbers and financial institutions), and contact them when the time comes - there have been some discussions on here about how many places will make zero effort to search out beneficiaries. So keep the list somewhere safe (if you get a copy of the will, just put the list with that).

Tthings that go through probate will get put on hold until all debts are settled, and depending on the state you will need to keep the estate open for 6 months to a year so dispersing everything will have to wait, so the less stuff having to go through probate, the better.

Any property, like the house and contents, savings and checking accounts, cars and such can be covered in the wills - if you're the sole heir once both parents are gone, then it should be pretty straightforward. Any decent estate lawyer can set this up easily and simply.


« Last Edit: October 01, 2014, 09:02:31 PM by Frankies Girl »

TN_Steve

  • Bristles
  • ***
  • Posts: 257
  • Age: 61
  • Location: fly-over country
Re: End of Life / Inheritance Planning
« Reply #4 on: October 01, 2014, 08:46:21 PM »
This December my parents and I will be re-writing our wills and putting my name on the deed to their house. I am the sole heir and they would like to make things as streamlined, simple, and fee-free as possible. If you have any advice or suggestions, that would be great.

Your profile indicates that you live in the lovely country to my north.  If so, that really limits input for me.  For example, the initial responsive posts indicate caution needed to ensure that you can take advantage of step-up-in-basis at death of your parents.  Is that the law in Canada?  (It is in US, but I don't know what provincial and federal law in Canada may provide--and even in the US, there are circumstances in which the step-up prior to title passing may not be beneficial.)

Generally speaking, at least in the US, for most seniors (I.e., the "95%"), durable healthcare powers of attorney, generally applicable powers of attorney, Payable/transfer-on-Death forms on financial/retirement accounts, and "living wills" are at least as important as wills, trusts, and the like.  If I were you, I'd seek out advice from people knowledgeable about Canadian/provincial laws, which could be very different from the US in this area (Indeed, there are many differences among US states.).  And, especially if your folks are beyond the "95%," I'd consider retaining an expert for a short time at an hourly rate to ensure that you don't hurt yourself in your planning.

Good luck.

lifejoy

  • Magnum Stache
  • ******
  • Posts: 3924
  • Age: 32
  • Location: Canada, eh
  • Lovin' the Mustachian life!
    • Not Buying This
Re: End of Life / Inheritance Planning
« Reply #5 on: October 01, 2014, 08:56:03 PM »

This December my parents and I will be re-writing our wills and putting my name on the deed to their house. I am the sole heir and they would like to make things as streamlined, simple, and fee-free as possible. If you have any advice or suggestions, that would be great.

Your profile indicates that you live in the lovely country to my north.  If so, that really limits input for me.  For example, the initial responsive posts indicate caution needed to ensure that you can take advantage of step-up-in-basis at death of your parents.  Is that the law in Canada?  (It is in US, but I don't know what provincial and federal law in Canada may provide--and even in the US, there are circumstances in which the step-up prior to title passing may not be beneficial.)

Generally speaking, at least in the US, for most seniors (I.e., the "95%"), durable healthcare powers of attorney, generally applicable powers of attorney, Payable/transfer-on-Death forms on financial/retirement accounts, and "living wills" are at least as important as wills, trusts, and the like.  If I were you, I'd seek out advice from people knowledgeable about Canadian/provincial laws, which could be very different from the US in this area (Indeed, there are many differences among US states.).  And, especially if your folks are beyond the "95%," I'd consider retaining an expert for a short time at an hourly rate to ensure that you don't hurt yourself in your planning.

Good luck.

I think that's the best advice right there: get a local expert to tell me what's what :)

Catbert

  • Handlebar Stache
  • *****
  • Posts: 2130
  • Location: Southern California
Re: End of Life / Inheritance Planning
« Reply #6 on: October 02, 2014, 01:37:18 PM »
Check to see if there is a "transfer on death" option on real estate in your province.  A few states in the US have this option.

hred17

  • 5 O'Clock Shadow
  • *
  • Posts: 28
Re: End of Life / Inheritance Planning
« Reply #7 on: January 31, 2015, 02:07:45 PM »
Posting here to follow thread / reference.