Jewish World Review Sept. 18, 2000 / 17 Elul, 5760
How to inherit a house
DEAR BRUCE: My mother owns her house and has put my name and my sister's name on the deed. Now she wants to take our names off, instead putting the house in her will, and she'll leave it to us when she passes away. She is afraid that if something happens to my sister or me that would cause someone to sue us, she might lose her house in the settlement. Could this happen, and are there any tax consequences to my sister and me? -- B.R., Bayonet Point, Fla.
DEAR B.R.: In theory, there could be a lien placed against your mother's house should you or your sister get into some situation where a judgment was recorded against you. The likelihood is that they could not take the house away during her lifetime, but what she wants to do becomes even more valid from a tax point of view.
If the house passes to you and your sister by virtue of a will, it will come to you in stepped-up value, in other words the value of the house the day she dies as contrasted with the acquisition price. When you sell it, you would have a higher base and less capitol gains tax to pay.
DEAR BRUCE: I am a recently divorced mother of two children that are under 11. I currently carry $100,000 in term life and $50,000 in whole life, but I am having trouble making the premium payments. Would you recommend that I cut back on either of these? If so, which one? - Reader
DEAR READER: If you're struggling making the premiums, you should retain the term insurance and cash in the whole life, which may have better long-term benefits but in the short term is far more expensive from the out-of-pocket perspective. You should discuss with whoever will be the children's guardian in the event of your untimely death how the policies are to be titled and how you would like the proceeds spent on the youngsters.
DEAR BRUCE: I am 36 and have been separated for a year, and my credit is trashed. I owe more than $50,000 in bills for credit cards, mail order items and doctors. I have no property and own a junker car, and I earn about $600 a week. For the last three years of our marriage, my ex-wife handled our taxes. I just recently found out that she never filed. I have been irresponsible and would like to start over. Bankruptcy is supposed to be a last resort, but I can't take the phone calls from collectors anymore. Is it time for me to file? -- D.H., via e-mail
DEAR D.H.: You have got your hands full. With the amount of debt that you mentioned and the earning capacity that you are exhibiting, there is no question in my mind that Chapter 7, while not a pleasant choice, is the only one available to you. As for the taxes, by all means contact a CPA who practices before the IRS or an enrolled agent. Either one can show you how to get square with the government. That shouldn't be too much of a problem, and of course none of the tax obligations will be affected by this
Send your questions to JWR contributor Bruce Williams by clicking here. (Questions of general interest will be answered in future columns. Owing to the volume of mail, personal replies cannot be provided.) Interested in buying or selling a house? Let Bruce Williams' "House Smart" be your guide. (Sales of the book help fund JWR).
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