My mother-in-law wants to deed her house to my husband — what could go
Published: Mar 31, 2016 5:02 p.m. ET
The reason not to give an heir your property before you die
PERSONAL FINANCE EDITOR
My husband and I have been married for over five years and have a son
together. We grew up in somewhat different environments, although we
share some similarities. We both had stay-at-home mothers with fathers
who brought home the bacon. My family’s bacon was middle class,
needs-met, and his was upper class, needs-always-exceeded and over
indulged. Both of our fathers passed away before we met and left behind
our mothers in very different financial situations. My mother had to get
a job and his mother has lived off of monies left behind (and some
When my husband and his mother talk about money they always disagree and
it causes arguments. He may say, “We are going to remodel a bathroom,”
and she will instantly ask how much and, no matter what the answer, she
scolds him for his spending habits, which are our joint decisions. She’s spending too fast and will eventually run out of money. She is 60 and
hasn’t had a job since she was 25. Also it’s important to mention my husband made a few wrong steps with finances 10 years ago and she helped
him out and she can’t let it go. We are both employed and take no
assistance from the government or relatives. We are self-sufficient with
only a car and mortgage loan for debt.
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So here is my question: She recently mentioned that she wants to put her
house in his name. She has a will and left everything to him (there are
no other kids). She said something about it helping us when she passes
away as it will help avoid paperwork. I immediately had red flags go up.
If she somehow can’t pay the mortgage, that would fall on us. She
doesn’t appear to be in need of money. She lives in a nice house and
always has nice clothes. But neither of us knows how much money she has
left and since she still isn’t old enough for widow’s Social Security,
she has no income. Is there any real benefit to having her house in my husband’s name when she passes away?
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We’ve been on a roll here at the Moneyologist with mother-in-law
questions. They tend to come in waves. Before that, it was stepmothers, disgruntled children and controlling parents.
With your letter, I am picking up a lot of antipathy towards your mother-in-law. Let’s look at the evidence: The over-use of the word “she.’ (As my own mother would say, “Who’s she? The cat’s mother?”) The
fact that your mother-in-law has lived off money her husband left behind
and, as you say, “some wealthy boyfriends.” (I don’t care what socio-demographic group she’s from, they are tough words.) You say your mother-in-law hasn’t worked since 1981. (Look at it this way: She is
from a different generation. It’s hard to get back into the workforce
once you’ve taken so much time out, and raising a child is a full-time
job in itself.) She may not be perfect, but she’s the only mother your husband’s got.
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.
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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
Do you have questions about inheritance, tipping, weddings, regifting,
or any tricky money issues relating to family and friends? Send them to MarketWatch’s Moneyologist.
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