That said, your red flags are right on the money. Assets inherited by
your husband are passed on through a “step-up in basis” or are valued at the current value, not the purchase price, says Blake Harris, an
attorney at Mile High Estate Planning in Denver. If your mother-in-law
put your husband’s name on the deed, he would incur capital gains tax,
Harris says. If the house was sold for $1 million, even though it was originally purchased for $500,000, he would have to pay capital gains
tax on $500,000.

However, he would not have to pay capital gains if he sold it after
inheriting the house at her death. And if he sold the house a few years
after your mother-in-law died and it was then worth $1.1 million, he
would only pay capital gains on that $100,000 difference.

Another way to avoid probate: Your mother-in-law could create a
revocable living trust and transfer her home into that. Your husband
would not have to pay capital gains tax after she dies. “Probate is the
court process for distributing a loved one’s property after they pass
away and typically takes one to two years and costs a few thousand
dollars,” Harris adds. “Creating an estate plan that avoids probate is a gift to the beneficiaries.” (Harris advises consulting an attorney in
case there would be any impact on your mother-in-law’s long-term care insurance and whether she might need to go on Medicaid in the future to
help pay for her assisted living or nursing home.)

Bottom line: It appears your mother-in-law is trying to help you and,
contrary to previous letters, she is not cutting anyone out of her will
or stealing money from her son. But she could be helping him even more.
Explain the tax advantages of keeping the home in her name, and explore
other possibilities like a trust. Mothers-in-law get a bad rap. Take a
deep breath, put aside your resentments about the fights with your
husband (you are never going to change her) and your belief that she is
a lady of leisure. Instead, ask her what you can do to help her. It
might help your relationship and provide a shift in the way you think of
her.

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