Deed Parent's House in Our Name?

"My dad died in 2005 and the will has not been probated yet. Mother is still alive and her house is still in both their names. The house will go to me (their son) upon her death. What to do? Should I deed the house into our name now? We don't want to sell the house as we hope to possibly retire in it."
~ Kay in Dallas

No, it might be a big mistake to transfer (confer) the deed into your name now. When real estate is inherited, you also inherit the stepped up basis (current value of the home) with it. That means that the moment the new deed is recorded the home is now worth on paper whatever the current market value says it is. Later, if you change your mind and sell the home, the inherited value plus any additional cost of improvements/repairs will help determine the basis when you sell. You'll possibly pay taxes later on the difference between your basis and the proceeds of the home sale if you exceed IRS guidelines ($250,000 individual / $500,000 married filing jointly) for primary residence capital gains. If you wait until your mother passes away, any inherited appreciation will basically go untaxed to you later when you sell (since your stepped-up basis is then higher). Clear as mud?

Be sure that your dad's will is probated or a less expensive option such as "muniment of title" (a unique Texas procedure where the will is filed through a probate proceeding to transfer ownership of real estate in Texas to the beneficiaries in the will without a deed or a full probate). If no will existed, there are other procedures that may help in this situation, such as "affidavits of heirship". If there is a will and only real estate in Texas is owned by the deceased, it is one of the least expensive ways to "settle" the deceased's affairs.

Your mother should get the deed conferred to her name as executor of her deceased husband's estate. I highly recommend my attorney Matt Spahn, 210-391-2824 if you need help.

Bottom-line, be sure your mother has a properly executed will that clearly leaves the home to you and wait until your mother passes away to confer the deed.