How probate, tax issues could have been avoided

By Robert J. Bruss
Inman News

DEAR BOB: In 1993, my wife's father died. He left everything to her in his will. There are no siblings or other close relatives. Knowing she inherited the house, we moved our family in and have been living in the house and paying its mortgage ever since. Now that our kids are grown and on their own, we want to sell the house and "downsize" for our retirement years ahead. However, when we talked with a Realtor about listing the house for sale, she said we can't sell it until my father-in-law's estate is probated and the house title is transferred to my wife. Is there any way to avoid probate? --Jerome W.

DEAR JEROME: No. However, many states have speedy small estate probate procedures for situations like the one you describe. Because your late father-in-law willed his house, probate court proceedings are usually required.

Probate could have been completely avoided if he held title in his revocable living trust, specifying that after his death the house should go to your wife. However, it's now too late for that.

I suggest that your wife consult a local experienced probate attorney to probate the will. He or she can often expedite uncontested probate matters in less than the six to 12 months usually required.

But your wife has another problem to consider. When she receives the title, she will receive a new stepped-up basis to market value in 1993. Since then, the house has probably greatly appreciated in market value.

However, you and she can't qualify for the Internal Revenue Code 121 principal-residence-sale tax exemption up to $500,000 because she hasn't owned the house at least 24 months (although you both clearly meet the 24-month occupancy test). Consultation with your tax adviser is strongly suggested.

IS HEIR LIABLE FOR PROPERTY TAX ON WORTHLESS LAND?

DEAR BOB: About five years ago, my aunt died. She left everything to me, including a worthless lot. I consulted several nearby Realtors and they wouldn't even list it for sale as it is only worth around $5,000. However, the county keeps sending me the property tax bills, which I haven't paid. They have tried to sell the property at a tax sale but nobody will buy it even for the amount of unpaid property taxes. Now the county reported to the credit bureaus that I owe the unpaid taxes and this is hurting my credit rating. What can I do? --Ralph R.

DEAR RALPH: It is very unfair for counties to report unpaid property taxes to the credit bureaus, especially when you inherited worthless property you don't want.

Perhaps you can contact the county tax collector to see if he will accept your quitclaim deed in return for canceling the property taxes. Then you can tell the credit bureaus the property taxes have been cancelled so the adverse information can be removed from your credit reports.

go to www.LagretRealEstate.com