Homeowner receives conflicting advice from multiple attorneys regarding estate plan

Q: My mom has a condo in Delaware, but she and I both live in Maryland in our own separate homes. The home my mom lives in is in my sister’s name. Mom’s will says the house she lives in now is to go to my sister after her death. The condo in Delaware is only in my mom’s name. Her will leaves that home to me.

We’ve talked to various lawyers in Delaware and have received conflicting answers to this question: Do I need to be on the deed if I am listed in the will? How do I go about going onto the deed after she passes? One lawyer says I need to be on the deed. The other says the will is enough to transfer ownership.

A: Both attorneys are correct — in different ways. Your mom owns her condo in her name, and only in her name. Upon her death, her will would come into play and designate you as the person to own the home. However, for you to become the owner of that condo, the title to the condo would have to transfer from your mom’s estate to you.

Once your mom dies, you’ll have to hire an attorney in Delaware to file a case in probate court. Probate is the process by which the title to the condo is transferred into your name. Some states may have a simplified method of transferring the ownership of a property from the deceased owner to the person designated in the will.

But in most of these situations, you will have to do something to get the title transferred from your mother’s name into your name. And, there is a cost to this process.

The question you should ask the attorneys is: What will the whole process cost to transfer title once she has passed?

Keep in mind, upon your mom’s death, you’d inherit the condominium at its value at the time your mom died as opposed to what she paid for it.

Let’s say she purchased the condo for $50,000 many years ago and it is now worth $400,000. You would inherit the condo at today’s value of $400,000. If you turn around and sell it for $400,000, you’d pay no federal taxes on that sale.

On the other hand, if you have your mom put you on title to the condo now, you’d effectively become owner of half of the condo today. Upon her death, assuming you took title as joint tenants with rights of survivorship, you’d automatically own the whole of the condo without having to do anything. If you turned around to sell the condo, you’d simply have to provide a copy of your mom’s death certificate to show that you became the sole owner of the condo and could sell it.

However, at the time of your mom’s death you would inherit your mom’s half interest in the condo and if you turned around and sold the condo, you’d pay no federal taxes on that half of the sale. You would inherit your mom’s share of the condo at a stepped-up basis. Now, on your half, you would have received that half of the condo as a gift and you would not get a step-up on that basis. So, if you sold the condo, you might have to pay taxes on your share of the condo and none on the share you inherited from your mom.

Putting you on the title to the condo shouldn’t be too complicated or expensive. However, in some areas the transfer could cause real estate taxes to jump and trigger other expenses. We say this so that you can make sure to talk to an attorney about this issue specifically. You’ll want to understand not only the costs of putting you on the title to the condo, but any potential taxes or costs associated with the title change. You should also ask about the potential federal and/or state tax liability if you choose to sell the condo.

Another option is to have your mom put her home into a living trust. You could be named the successor trustee and successor owner of the trust. Upon her death, you would be trustee and owner of the trust. You’d get the benefits of getting the stepped-up basis and would not have to pay to probate the will. You would have to pay to set up a living trust and also to transfer title of the condo from your mom’s name, as an individual, into your mom’s living trust.

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(Ilyce Glink is the author of “100 Questions Every First-Time Home Buyer Should Ask” (4th Edition). She is also the CEO of Best Money Moves, a financial wellness technology company. Samuel J. Tamkin is a Chicago-based real estate attorney. Contact Ilyce and Sam through her website, ThinkGlink.com.)