Life Tenency


K

KB

In November, 2005 my elderly parents transferred their
condominium unit (jointly owned) to myself and my brother
for a "consideration" of $1. The unit had an assessed
valuation of $355,000 in a town which assesses at full
value. My mother remained as a life tenants on the deed,
with my brother and myself as remaindermen. My father was
not a life tenant. He recently passed and all of his
property passed to his spouse (my mother) under the will.
This all occurs in New Jersey. Questions.

1 What is the value basis, for estate tax and income(capital
gains) to my brother and myself on;

A. The date of original transfer (November, 2005).

B. The date of my fathers passing (June 2006).

C. If my mother elects to leave the unit (giving up her
life tenancy) to move to assisted living or a nursing
home, a real very possibility.

D. If she remains in the unit until her passing.

2. How do we remove the life tenancy in case of voluntary
moving or death,

As a side note, I have full financial power of attorney of
my mothers affairs.
 
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S

Stuart A. Bronstein

KB said:
In November, 2005 my elderly parents transferred their
condominium unit (jointly owned) to myself and my brother
for a "consideration" of $1. The unit had an assessed
valuation of $355,000 in a town which assesses at full
value. My mother remained as a life tenants on the deed,
with my brother and myself as remaindermen. My father was
not a life tenant. He recently passed and all of his
property passed to his spouse (my mother) under the will.
This all occurs in New Jersey. Questions.

1 What is the value basis, for estate tax and income(capital
gains) to my brother and myself on;

A. The date of original transfer (November, 2005).
For estate tax purposes you didn't own anything at all. As
long as your mother retains the right to reside there for
the rest of her life, it's treated all as hers.

Theoretically you could sell your remainder interest. I
don't specifically know, but I would guess that your basis
(if you were to sell the remainder interest) would be a
percentage based on the life expectancy of your mother,
multiplied by her basis.
B. The date of my fathers passing (June 2006).
Since your father apparently wasn't on title to that
property nothing changed with respect to it when he died.
C. If my mother elects to leave the unit (giving up her
life tenancy) to move to assisted living or a nursing
home, a real very possibility.
If it's a true life tenancy, then even if she moves out she
still has all rights in the property for the rest of her
life. She can rent it out if she wants to.

So if she actually gives up the balance of her life tenancy
to you at that time, it's a gift of the entire value of the
property.
D. If she remains in the unit until her passing.
The entire value would be included in her estate for tax
purposes, so your basis would be the value on her date of
death.
2. How do we remove the life tenancy in case of voluntary
moving or death,
If she moves, you don't want to change it, because then
you'd miss out on the stepped up basis when your mother
dies. In case of her death you'll have to record some
papers, including the death certificate. Check with a local
real estate lawyer to determine exactly what needs to be
done.

Stu
 
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