Some people have owned a second home or condominium in the mountains for many years. When the kids were younger, they swam or skied or hiked or boated there. It was before the death of one of the parents.
The surviving parent was abit lost by the early death. And never got fully back on their feet. Mentally. The kids called just about daily. There was a date or two but never remarriage.
Now, almost 90, the widow wants to get the property to one of several grown children. Two of the four children would like to continue to use the place, Less use than the one that is slated to receive it. But, the two have children of their own by now and would love the quiet the place affords its inhabitants.
What to do? What not to do?
SALE TO ONE OF FOUR CHILDREN. One child has made an offer to buy it. Seeing that any use of it would end for the two that still would love a week or two a year for say 4 years after sale, the new buyer says no.
This is not a good estate planning approach. There is income tax due upon the sale. The property has been in the family for 50 years. While the death of one spouse 35 years ago increased the tax basis abit, the tax basis is still low.
GIFT TO ONE OF FOUR CHILDREN: This may make more sense tax wise. No capital gains tax.
ALLOW USE OF PROPERTY FOR 2 WEEKS A YEAR FOR 4 YEARS. Either sale or gift can include making the two who still would love some use fee much better about the whole thing.
DIE WITH THE PROPERTY: Given the age of the owner, dying with the property would allow it to get a new step up in income tax basis. So no income tax would be due until sold in the distant future,
Moral of the story: Estate planning really does affect the living. Poorly done, it can leave scars on family members. Think it through with all members of the family and a professional advisor who knows tax law.
I'm Joel Bernstein, an estate planning attorney with over 30 years of experience. I use plain English to help you understand wills, trusts, and the other documents you need to protect your loved ones and your estate.
Most middle-aged people aren’t ready for their inevitable death. We make estate planning simple, affordable, and quick. So people can live in peace, knowing their affairs are in order.