This homestead estate planning issue concerns a single retired parent of an only adult daughter and how to transfer the home to the daughter. Should the daughter simply sell the house when her mother dies, or should the daughter be added to the deed now while her mother is alive?
Also, is there a court hearing?
In many states, there is no reason or requirement to go before a judge to probate your estate, says nj.com in its recent article “Should I add my daughter’s name to my home’s deed?”
In Florida estate planning, there are three primary questions to answer about the transfer of the home. First, adding the daughter to the title of the homestead property could jeopardize the property’s homestead status. This can lead to a substantial increase in property taxes.
Second, there would possibly be some significant capital gains if the mom adds her daughter to the deed prior to death.
Also, if the mother winds up requiring Medicaid, Medicaid might put a lien against the home after she dies for the value of the services it provided.
Generally, when a home has been owned for a long time, the mother should try to preserve the step-up in basis for tax purposes that happens, if the real estate is still in the mom’s name at her passing.
Whether that step up is preserved and whether the homestead status is affected, depends on how the daughter is added to the deed.
Adding the daughter as a joint tenant or tenant in common won’t preserve the step-up basis for taxes and will negatively affect the homestead status. Ask an elder law attorney what this means in your specific situation.
A better option may be the Enhanced Life Estate Deed, where the mother transfers the property to her daughter but retains an enhanced life estate in the property. The mother retains her authority to sell and put a mortgage on the property without the consent of the daughter. Since there is no current transfer of the property the homestead status is not affected. And since, the daughter receives the homestead at the mother’s death, that will preserve the step-up in basis at death.
This can also get complicated when there’s an outstanding mortgage, so speak to an experienced estate planning attorney.
Reference: nj.com (Dec. 15, 2020) “Should I add my daughter’s name to my home’s deed?”