TOD [Transfer on Death] for home and taxes

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hoops777
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TOD [Transfer on Death] for home and taxes

Post by hoops777 »

If you have a TOD for your home are there any negative tax issues?
When the second spouse dies and the 2 kids inherit the home 50/50, if the parents purchased it at 400K and it is now 1M the kids can sell it for the 1M with no cap gains, correct?
K.I.S.S........so easy to say so difficult to do.
bsteiner
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Location: NYC/NJ/FL

Re: TOD for home and taxes

Post by bsteiner »

The potential disadvantages are:

1. If the house goes to them outright instead of in trust, it will be included in their estates, and will be subject to their creditors and spouses, and Medicaid.

2. Unless there are enough other assets in the estate, the estate won't be able to pay any cash bequests.

3. If there aren't enough assets in the estate, and one child doesn't cooperate, it will be difficult to pay debts, taxes and expenses.

4. It will be complicated if a child dies first.

5. The estate won't be able to deduct the selling and maintenance expenses.
Topic Author
hoops777
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Re: TOD for home and taxes

Post by hoops777 »

Thank you for your response.
The only other thing they will be inheriting are our POD financial accounts so it seemed simple to just do a TOD for the house.
K.I.S.S........so easy to say so difficult to do.
Alan S.
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Location: Prescott, AZ

Re: TOD for home and taxes

Post by Alan S. »

hoops777 wrote: Tue Jan 12, 2021 6:36 pm Thank you for your response.
The only other thing they will be inheriting are our POD financial accounts so it seemed simple to just do a TOD for the house.
Only a few states allow this. And it is usually called a beneficiary deed. Filing it with the county recorders office may cost you a small recording fee.
Topic Author
hoops777
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Re: TOD for home and taxes

Post by hoops777 »

Alan S. wrote: Tue Jan 12, 2021 6:55 pm
hoops777 wrote: Tue Jan 12, 2021 6:36 pm Thank you for your response.
The only other thing they will be inheriting are our POD financial accounts so it seemed simple to just do a TOD for the house.
Only a few states allow this. And it is usually called a beneficiary deed. Filing it with the county recorders office may cost you a small recording fee.
California allows it.
K.I.S.S........so easy to say so difficult to do.
tibbitts
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Re: TOD [Transfer on Death] for home and taxes

Post by tibbitts »

hoops777 wrote: Tue Jan 12, 2021 5:52 pm If you have a TOD for your home are there any negative tax issues?
When the second spouse dies and the 2 kids inherit the home 50/50, if the parents purchased it at 400K and it is now 1M the kids can sell it for the 1M with no cap gains, correct?
The main disadvantage of ToD if you have it for your property in a state that annoyingly doesn't recognize ToD.

Under current law, proposals to eliminate it aside, yes there is still a step-up.

Personally I think 50/50 is asking for trouble but whatever.
Topic Author
hoops777
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Re: TOD [Transfer on Death] for home and taxes

Post by hoops777 »

tibbitts wrote: Tue Jan 12, 2021 7:32 pm
hoops777 wrote: Tue Jan 12, 2021 5:52 pm If you have a TOD for your home are there any negative tax issues?
When the second spouse dies and the 2 kids inherit the home 50/50, if the parents purchased it at 400K and it is now 1M the kids can sell it for the 1M with no cap gains, correct?
The main disadvantage of ToD if you have it for your property in a state that annoyingly doesn't recognize ToD.

Under current law, proposals to eliminate it aside, yes there is still a step-up.

Personally I think 50/50 is asking for trouble but whatever.
Just curious what you see as the problem going 50/50. I would imagine you see a possible fight over to keep it or sell ?
What would your solution be? Leave the majority to one?
K.I.S.S........so easy to say so difficult to do.
PatrickA5
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Re: TOD [Transfer on Death] for home and taxes

Post by PatrickA5 »

My dad's house was TOD and when he died it was a simple process of filing an affidavit and death certificate with the county. My brother and I were 50/50 on the house and sold it with no problems less than a month after dad died.

My current home is set up the same way - splitting ownership equally among our three kids. Obviously, problems can happen when kids inherit an asset like a house. I haven't come up with a decent solution that would fix these problems and would welcome alternatives. Right now, we have our estate set up so that probate won't be necessary (i.e. TOD/POD).
Duckinator
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Re: TOD [Transfer on Death] for home and taxes

Post by Duckinator »

Mom recently changed her home/acreage to TOD to my sister and I, as her financial accounts already are. Sister and I get along fine so no issue there.

If sis or I pass away first, mom will need to change it all. If she is then incapable there will likely be an issue, unless the person with POA can fix it.
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