Most couples hold title to their home as joint tenants, but such an arrangement doesn’t guarantee that probate will be avoided when one spouse dies.
DEAR MR. MYERS: A widow who attended our church died recently. Her son tells me that lawyers and the government will get more than half the proceeds from the sale of her home because she did not have a will, and her estate must go through probate. My wife and I do not have a will, but we own our home jointly with right of survivorship. Will our estate have to go through probate, too, or will our joint ownership of the home make probate unnecessary?
ANSWER: Probate is the costly and time-consuming court process that is triggered when someone dies without a will. You and your spouse hold title to your home as joint tenants with the right of survivorship, so full title should automatically pass to one spouse when the other dies, without the need for probate. But don’t let this fact give you a false sense of security: You still need to visit an attorney or an estate planner to formulate a will.
Even though the home itself probably won’t have to be “probated,” everything else that you and your spouse own might well be subject to probate proceedings. Do either of you own stocks, have a pension plan, drive a car or invest in rental property? Those are just some of the assets that could be forced into probate and contested by a would-be heir if no formal will is prepared. Failing to make a will now could give a judge too much power over how assets are distributed later, increase the tax burden on heirs and make a few lawyers even richer.
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DEAR MR. MYERS: What is the difference between a loan officer and a loan underwriter?
ANSWER: A loan officer is the bank representative who interviews borrowers and helps them choose the best mortgage program and fill out their loan applications.
Once an application package is complete, it is forwarded to the loan underwriter, who reviews all the paperwork to determine whether the borrower (and the property itself) meets the requirements of the loan program that was selected. Although the underwriter has the primary say in whether the mortgage is granted, a good loan representative can often think of ways to get the application approved even if it’s initially rejected.
DEAR MR. MYERS: You answered a letter from a couple who wanted to give a vacation home that they purchased several years ago to a charity. You thought it might be a good idea because they could avoid paying capital gains taxes and take a big charitable deduction as well. But what if the property is actually worth less than the original purchase price? Does donating it rather than selling it make sense then, too?
ANSWER: No, it usually doesn’t make sense to donate property that is worth less than its original purchase price. Selling it and then donating any net proceeds to charity is often a better idea.
Why? Because when you sell property (other than your home) at a loss, the Internal Revenue Service will let you deduct some or all of the loss on your next tax return. You can earn another fat deduction if you then donate any proceeds of the sale to charity. Talk your options over with a tax professional before you make your final decision.
DEAR MR. MYERS: Could you please explain the difference between a double-hung window and a single-hung window?
ANSWER: A double-hung window usually has two panes, or “sashes” — one on the top and the other on the bottom. Both of the sashes are moveable, so either pulling up the lower sash or pulling down the top one can open the window. A single-hung window also has two sashes, but only one of them can be moved.
DEAR MR. MYERS: I bought my first home two years ago, and now I want to sell it. Can I sell my house by myself, or do I have to hire a licensed real estate agent to do it for me?
ANSWER: You can legally sell the house without hiring a licensed real estate agent, but I think it would be a bad decision. A licensed agent will probably charge a commission of 5 percent or even 7 percent of the sales price, but the marketing expertise the agent provides will likely result in a higher sales price that offsets the commission while saving you the time and money involved in marketing the home yourself.
David W. Myers’ column is distributed by Cowles Syndicate Inc.