Appraisal

[Greene's Basin Girl]

Unfortunately my wonderful mother (age 93) recently passed away. She left the family lake house to my sister and I. Our lawyer suggested we get it appraised in case we want to sell it in the future. He mentioned something about " for tax purposes". Does anyone know what this all means? I thought you had it appraised when you wanted to sell it. We do not plan to sell it. Does anyone know why our lawyer would want us to do it now?

[Steveo]

Since your Mother willed the house to you you could be subject to estate or capital gains tax. There is an exemption amount that can be willed and not be subject to tax. I think it is like $2M. You need to establish a basis price for the house (house value) when your Mother gave you the house. That way you might have that amount be covered under the exemption. Once you have that basis price you will only be responsible for tax on the capital gains above the basis price when you sell.

[MeredithMan]

First and foremost, condolences on the loss of your Mom. As SteveO indicated, the value of the home needs to be determined at the time ownership passed from your Mom to you and your sister. This becomes your "basis" (cost, if you will), for tax purposes if you ever choose to sell in the future. The appraisal is also needed to help compute the total value of your mother's estate to determine if any estate tax is due.

I would also highly recommend that you and your sister consult an attorney, (preferably one who is versed in estate planning, not just a generalist or real estate atty), to offer you guidance on how you take title to the home. If you both have spouses/significant others and children and perhaps grandchildren, it could get complicated, (ugly), when one of you passes at some point in the future. Look no further than what is going on with Market Basket for proof....

A little forethought and investment now can save your family a lot of heartburn in the future.

Good luck again, my sympathies on the loss of your Mom.

MM

[MariaNYC]

Condolences to you on the loss of your mother.
I echo the comments of MeredithMan about getting capable counsel, who you may already have, and thinking about what happens down the road. I don't post much but having practiced as a lawyer and having hired many, many lawyers, I'd also like to throw in my two cents on this one. You should always feel free to ask your lawyer what he means when he suggests a course of action. And you should also feel free to ask "why?" Sometimes we lawyers forget that what is routine to us is completely new to our clients and don't really explain ourselves very well. A good lawyer will welcome questions that help clarify the advice.

[dave603]

My condolences also. We are in a similar situation.
Good advice from all above,
You may also want to talk to your council about rolling it into a family trust.

[Shreddy]

As echoed - the appraisal will provide an accurate fair market value at the date of death. Our tax laws and regulations allow for a step up in basis to fair market value at the date of death for inherited property. As such, that appraisal will serve as your basis going forward. For example, if your mother only paid $100K for the property (her basis) but the appraisal comes in at $500K, then $500K will be your basis in the property. If you sell down the road for $700K you're only looking at a realized gain of $200K rather than $600K. The recognized gain may be a whole different story. This is a very vague example, but you get the gist. Needless to say, I'll also advise to consult a professional within the industry. There's a reason their advice tends to cost a little bit now because it can save you a fortune later.

Additionally, as mentioned, pending the size of the estate and the different vehicles she had setup in her original estate planning, the appraisal will serve to help determine the entire value of the estate for estate tax purposes. Again, there are many laws and regulations within this area and a history of positions taken in the past will be utilized by the professional you consult with.

Disclaimer: The above referenced information cannot and should not be relied upon in any way. You should consult with a licensed professional

[SIKSUKR]

I would highly advise an estate planner attorney also. When talking with one, certainly ask about the advantages of putting your assets in a revocable trust. I've done it and the money savings can be enormous down the road to however you may leave your assets to.

[Descant]

Sorry to hear of your loss.
In looking through the online tax assessment records for Gilford, I notice that very few shorefront properties are owned by individuals. Many trusts, and I bet no two alike. An estate planner I know suggested very strongly at his seminars that after your attorney draws up a trust, before you sign it, you pay a second attorney for a second opinion. Well worth a few hundred dollars. As a courtesy, I'd let attorney number one know that you plan to do this.

[tis]

We went through this with my parents and are now planning for us. I hate it. We have 3 different lawyers-one I fired- and each one has a little different idea. I am so sick of the whole thing I am ready to say forget it. We have had a trust for quite a while, this is just some revisions and it seems one leads to another. I am getting to the point where I don't care what happens when I die!

But yes, we needed to get my parent's appraised because if we sold it we had to know it's value at the time of their death AND if we had to pay estate taxes. We got three appraisals and you can use the lowest one. Right now as far as estate taxes go, an estate can leave their kids $5,400,000. (not exactly 400) before they need to pay estate taxes. So if your mother's place is not worth more than that you won't have to pay estate taxes.

[Misha888]

Be well. And take your time in finding an attorney, though not too much time as there are deadlines imposed by the probate court.

[SAMIAM]

Sorry for the loss of your mom GBG.....let me play devils advocate for a moment. You might be able to sell your primary home, pay no tax and then move into the lake house for two years and sell that tax free as well.
We had a similar situation 10 years ago and it worked out well. Don't remember all the details but it's always smart to consult a good estate attorney

[Steveo]

Originally Posted by SAMIAM

Sorry for the loss of your mom GBG.....let me play devils advocate for a moment. You might be able to sell your primary home, pay no tax and then move into the lake house for two years and sell that tax free as well.
We had a similar situation 10 years ago and it worked out well. Don't remember all the details but it's always smart to consult a good estate attorney

Be careful, it is tax free up to the $250K exemption ($500K for married). You still wanted to establish a new basis value in the house when it was willed

[SIKSUKR]

Just an fyi. One good reason to put your property in a trust is a revocable trust is probably the best way to ensure that your property remains available to be used for your benefit, should you become physically or mentally incapable of managing your own affairs. If you become disabled and you have neither a revocable trust nor a power of attorney, an expensive, lengthy, and potentially embarrassing court proceeding is generally required to appoint a conservator or guardian before your property can be used to benefit either you or your family. Another is the amount of time money it will save by not going through probate court. Typically a trust starts to make sense when one's worth surpasses 1-2 million dollars.

[P-3 Guy]

Originally Posted by Steveo

Be careful, it is tax free up to the $250K exemption ($500K for married). You still wanted to establish a new basis value in the house when it was willed

Hmmm... I'm pretty sure the $250k single/$500k married is an exemption on capital gains when selling a primary home. As long as an appraisal is done to establish a value as of date of death, the property will be inherited with a stepped-up basis (i.e., current value). If the property is then occupied as a primary home for two years and sold, there shouldn't be any tax owed, assuming the value of the property hasn't increased in that time by $250k/$500k.

[Greene's Basin Girl]

I want to thank everyone for explaining why an appraisal is necessary. The lake property was put in an irrevocable trust for my sister and myself. We are very happy that was done because there is a third sibling. It would have been extremely difficult if our brother was part of the mix. My mother also had a revocable trust. Unfortunately we never went to the bank to place her money into the trust. Now it has to go to probate and that takes time and money. After probate the money will go to our brother. All I can say is that is that it can be very difficult to settle an estate when there is lake property involved.

[tis]

Originally Posted by Green's Basin Girl

I want to thank everyone for explaining why an appraisal is necessary. The lake property was put in an irrevocable trust for my sister and myself. We are very happy that was done because there is a third sibling. It would have been extremely difficult if our brother was part of the mix. My mother also had a revocable trust. Unfortunately we never went to the bank to place her money into the trust. Now it has to go to probate and that takes time and money. After probate the money will go to our brother. All I can say is that is that it can be very difficult to settle an estate when there is lake property involved.

Oh no! What a shame. You are so right, estates are not easy. They almost always cause at the very least hard feelings and at the very best differences of opinion.