How to Make Sure that House Goes to One Beneficiary with Cash Available for Others?

 In Long-Term Care Planning, Wills

Question:

My friend wishes to leave me her mobile home but wants to make sure her stepchildren get some money. The value of the home is $800,000, and she wants me to have it in a way that she will not incur tax costs prior to dying. An attorney suggested that she leave the home to me but require that I pay $300,000 to buy it in order to make sure that there’s money to distribute to the stepchildren. I am concerned that my friend may need to access equity in the house should she run out of her long-term care insurance and her savings. I suggested that I could lend her $5,000 a month at a time that she feels she needs it, until it reaches $500,000, at which time the loan would be payable at the time of settling the estate. Can you see any problem with my suggestion other than the $500,000 may have been used up prior to death? Then what?

Photo by Pepi Stojanovski on Unsplash

Response:

I like the idea of your being required to buy the home for $300,000. The way this would work is that your friend’s will would direct that the house be sold, giving you an option to purchase it for $300,000. This would have no adverse tax consequences for her. The only problem with this plan is if your friend had to take out a mortgage, whether from you or from someone else. Then the $300,000 may have to be used to pay off the mortgage rather than being distributed to the stepchildren. This could be corrected by giving you the option of purchasing the property for $300,000 plus any outstanding mortgage.

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