Legal Question in Wills and Trusts in Michigan
Estate, Living Trust or either?
My single father is very ill and and I am his only child (age 34). As of yet, there is no estate, trust or will and my name is not on anything. In about two weeks he will be closing on a home he sold. Should I get my name on the ''quick claim'' deed? What would be the best way to handle this to avoid probate and paying capital gains or taxes? Should an estate be set up if the home is really all he has or would a living trust work better? Is there a difference?
2 Answers from Attorneys
Re: Estate, Living Trust or either?
Regarding capital gain taxes on sales of the home: Each individual can excude up to $250,000 ($500,000 for married couple) of capital gains from the sale of their principle residence, in which the taxpayer has "owned and used" the residence for at least two year during the five years immediately preceding the sale/exchange of the residence. Your father must report the sale on schedule D of his income tax return, but can exclude up to $250,000 of capital gain taxes.
Regarding a Will, Trust, and Probate: If your fathers only asset is his home and he is selling it, then the proceeds (cash) from the sale of the home will be likely be deposited in a financial institution. Therefore, the bank account holding the proceeds from the sale of the residence would need to be probated upon your father's death in order to transfer title. According to the facts, your father's only asset is a home that is being sold. Therefore, in order to aviod probate a joint bank account can be setup and title to the account will transfer to the surviving joint owner upon the death of the first to die. However, if you and your father die together, then the bank account will need to be probated.
If you setup a joint bank account, then no Will or trust needs to be established if your father's only asset is a bank account and he intends for you to be the sole beneficiary. However, if your father has specific requests/desires reqarding the distribution of his assets, or if he estate includes other assets (such as life insurance, family business, assets in more than one state), then I recommend that he consult an estate planning attorney.
Re: Estate, Living Trust or either?
If your father is competent, have him sign a quit claim deed from himself as grantor to himself and you as joint tenants with full rights of survivorship. Then, upon his death, the house is automatically yours. You will have to file all the deeds to show a good chain of title. However, this has nothing to do with taxes. Bill Stern 248-353-9400
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