Got a question about the mechanics of investing, how it fits into your overall financial plan and what strategies can help you make the most out of your money? You can write me at beth.pinsker@marketwatch.com. We own two houses – one is a primary residence and one is a beach house that we use as a secondary home.
The bad end The worst thing to do is nothing. If you own property and you and your wife die without a will – what’s known as intestate – your heirs will be stuck with property they can’t sell right away, but they’ll still have to cover property taxes, upkeep and possibly a mortgage. They’ll have to go through probate, and depending on your family dynamics, that could be expensive and time-consuming.
The trouble with this kind of ownership is that you lose out on a key benefit of passing along a property at death at today’s price, which is known as the step-up in basis. Instead, the gift is based on the fair market value at the time the heir is placed on the deed. But there are also some drawbacks. “If you’re transferring an asset to heirs immediately on death, there might not be the resources needed to address final expenses, outstanding tax bills, and then that imposes all the obligations on the heirs” says Eric J. Einhart, an officer on the board of directors of the National Academy of Elder Law Attorneys, who practices in New York. Whereas in a trust, your heirs are protected from creditors.
The trouble with this way is the time it takes to go through probate with a will. If your heirs are not going to sell your houses, they can just plod through it. But if they wanted to put them on the market, they could be jammed up from selling for several months to more than a year.
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