Sometimes investors find themselves in situations resulting from making uninformed decisions many years before. We recently worked with an investor who jointly owned her mother’s home. Nearly 20 years ago, it was likely a viable solution—adding the daughter’s name to the mortgage, establishing joint ownership, and ensuring that the daughter would inherit the house.
Fast forward two decades, the house has nearly quadrupled in value, and her mother passed away. As the investor was on the mortgage, she had Joint Ownership with Rights of Survivorship, meaning when one of the parties dies, their share of the property passes to the surviving owner(s). However, since this was real estate, it was included in the mother’s estate, which received a step-up in basis. Although the wish for the house to go to the daughter was ultimately fulfilled, there is a potential tax issue—if the daughter were to sell the house, she would likely face a significant capital gain on her portion of the ownership.
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