20 Feb My wife died. Should I change the deed to our home?

Q. My wife passed away in January 2023. We were both on the deed to our home. Our attorney said there are options: have a new deed prepared for the surviving spouse or keep the deed with spouses as co-owners but get an appraisal from the time of death and keep a copy of the death certificate. What are the pros and cons of staying in the home until death, and then the children being beneficiaries and they could sell the inherited home? And on keeping my spouse on the deed and valuing the home: The town had reevaluation in 2022 and the county sent an appraisal for 2023. Is that good enough to establish the value at the time of death?
— Husband

A. We’re very sorry to hear of your loss.

You have several options to consider.

First, if you continue to live in the home and pass ownership to your children through your will, the pro would be that your children would owe less in capital gains taxes on the sale of the property, said Matt Rembish, a certified financial planner with JFL Total Wealth Management in Boonton.

“This is because they would receive a `stepped up’ basis on the property,” he said. “If you bought the property for $250,000, and at the time of your death the property was worth $400,000, your children would have a basis of $400,000.”

If you sell within two years of the date of death and meet the other requirements, you can receive the full $500,000 exclusion for a married couple, he said.

There are cons, he said.

If you need Medicaid before you die, Medicaid can put a lien on your property to ensure that your estate pays what is owed as Medicaid is required to recover funds from the estate of an individual receiving, or who has received, Medicaid benefits on or after age 55, he said.

If you sell the home, the pro? If you owned and lived in the home for two out of the last five years, you would be eligible for a capital gain exclusion of $250,000, Rembish said. If you bought a house for $250,000 and this property was your principal residence for two of the last five years, and you sold it for $500,000, then you would not owe a capital gains tax on the profit, Rembish said.

He recommends you talk to an estate attorney about your options.
In that conversation, you should consider what type of ownership the property has.

“This will affect it if it goes to probate, and how the basis in the property is treated,” he said.

You can also consider whether it makes sense to put the property in a trust, which can protect the property from creditors and offer other benefits, Rembish said.

The estate planning attorney can also help you decide if it makes sense to keep both of your names on the deed, he said.

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This story was originally published on Feb. 20, 2023.

NJMoneyHelp.com presents certain general financial planning principles and advice, but should never be viewed as a substitute for obtaining advice from a personal professional advisor who understands your unique individual circumstances.