Does it make sense to me financially if we co-own the property? We discussed this and she is committed to doing what makes sense to me. Her goal is to make sure I can really afford to live in the house after she’s gone. Your thoughts?
ONE: Your sister wants to give you a meaningful gift: a fully paid home. All you have to do is maintain it, pay utilities and home insurance, and pay property taxes. If the house is modest, the taxes are likely to be modest as well.
Homes require repairs and maintenance from time to time. Someone will need to tend the garden, clean the gutters, shovel snow, and fix, fix, or replace things that break, like light bulbs and kitchen utensils.
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In fact, your sister knows how much all these items cost because she is paying all these bills. If she’s willing to give you the house, she’s probably willing to discuss how much it will cost to keep the property running.
Here’s what we’re wanting to know: Where are you living now? If you’re living with your sister and she’s going to leave the property to you when she dies, then it shouldn’t be too difficult to talk about costs.
On the other hand, if you live elsewhere and can continue to live elsewhere, your sister’s house can become an income-generating asset for you to leverage in retirement. Renting the property can bring in income that you can use to support yourself after it is gone.
While she wants you to live in the house after she’s gone, it may not make sense to you socially, emotionally, or even physically. Another idea is to sell the property. If you sell it within one year of receipt, the product must be tax free. This can also help fund a more comfortable retirement.
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You asked a question about co-ownership. There is no reason for you to co-own the property today. As we’ve written many times, it usually makes more sense to inherit a property than to have someone as a gift for you.
If you’re concerned about the cost of probate, it might make sense for your sister to create a trust and put the property title in the trust’s name. She must then name you as the successor beneficiary of the trust. When she dies, the house will automatically pass to you, along with anything else that is titled in the trust’s name, such as checking or savings accounts or other assets.
Another option is to create an instrument of transfer upon death (TOD), which allows your sister to designate you as a beneficiary of the household after her death. You would file this TOD with the Registrar of Deeds office in the county where the property being transferred is located – in this case, DuPage County. This document would also allow you to avoid inventory. Twenty-nine states plus DC allow you to create a TOD (or a beneficiary deed).
Your sister may have already chosen one of these methods to transfer your home to you after her death, but if she hasn’t, you might want to bring it up. Talk about your estate plan and ask for the name of your real estate attorney, tax preparer or accountant, financial planner and banker, if you have one. Make sure she has appointed your power of attorney for financial and health matters so that you have the right to make decisions for her if for any reason she becomes unable to do so.
At the end of the day, it appears that his sister invited him to talk about their future after she is gone. We think you should get her to this sooner or later.
Ilyce Glink is the author of “100 questions every first-time homebuyer should ask(Fourth edition). She is also CEO of Best Money Moves, an app employers provide employees to measure and lessen financial stress. Samuel J. Tamkin is a Chicago real estate attorney. her, bestmoneymoves. with.