Today I had someone email me this question.
I bought a house with my wife who is now deceased. I remarried. I believe the house is mine alone since I have not put my new wife on the deed. I want to will the house to my kids. What do you recommend?
If I set up a will (or a trust) can I change those documents at any time prior to my death. I want the kids to inherit the property (at say $500K) at the value of the property at the time of my death. I guess they should have it appraised at that time and they pay capital gains later (when they sell) should the property be value at over $500K at the time of sale.
I emailed my attorney. She gave the following answer. Her contact information is below if you have any questions.
Hello Larry,
Great questions! I can only speak for Wisconsin state law, so please keep in mind that it may not apply the same way in your state. You will want to consult with an attorney who practices in your state.
If you create a will or a revocable living trust (the type of trust most frequently used as a basic estate planning tool), you can change those documents whenever you like while you are alive and competent.
When an asset passes to beneficiaries, whether by will or trust, the beneficiaries have what is called a stepped-up basis. This means that rather than having the cost basis of what you paid for the house, the basis for them will be the value of the house on the day that you passed away. This is great for them because if they choose to sell the house fairly quickly after the death, it is more likely that they will have have little or no capital gains. Even if they hold the property for awhile before selling, it is still more beneficial to them to have the new basis than to have to pay capital gains based on your original purchase price.
In Wisconsin, we can rely on a tax bill assessment to establish the value, or we can have an appraisal done. Sometimes it is worth the cost of an appraisal in order to set a more realistic basis than what the tax bill might reflect. It depends on the accuracy of the tax assessment and the needs of the estate and the beneficiaries. That can be decided at the time the death occurs.
Under current Federal law, however, the capital gains tax law for estates and beneficiaries is in flux due to the sunsetting of the estate tax. Depending on the circumstances and the size of the estate, it may be that beneficiaries no longer receive a stepped-up basis. While people are excited to have no current estate tax, most do not realize that the current law will affect far more families than the estate tax ever did. We anticipate that Congress will provide some clarity soon, but until then we are working in a bit of a vacuum. Generally, any documents you have put in place should be able to account for different scenarios in the law at the time a death occurs.
In our area, most estate planning attorneys offer a free initial meeting. We realize that folks are just not that happy about having to see an attorney to chat about death, taxes and incapacity! We try to make things as easy as possible to take that important step. I am not sure if this is the practice in your area, but I would encourage you to check with firms to see if they also offer this complimentary meeting.
Our firm belongs to a national group of estate planning attorneys, so I am including a link to the group’s website. On this page, you can search for attorneys in your area. Please let me know of you have any difficulties accessing the link:
Warm regards,
Brenda
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Brenda A. Schlais
WI State Bar No. 1058804
Angermeier & Rogers, LLP
312 E. Wisconsin Avenue, Suite 210
Milwaukee, WI 53202
(414) 289-9200
(414) 289-0664 FAX
20975 Swenson Drive, Suite 110
Waukesha, WI 53186
(262) 798-5676
(262) 798-5680 FAX
bschlais@wiestateplanners.com
www.wiestateplanners.com
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