Real estate living trust a safer bet than joint tenancy

Incapacitated titleholder could impede home sale
By: Robert J. Bruss: Inman News
DEAR BOB: My husband and I hold title to our home in joint tenancy with right of survivorship. But lately he is showing signs of dementia. I am very concerned if he declines into Alzheimer's disease. A close friend had that situation with her spouse and, when she could no longer take care of him at home, had to move him to a convalescent home. Although he receives excellent care, the monthly cost is more than $4,000. After reading several of your articles, I am concerned what would happen if my husband declines. Would I be able to sell our home to pay for his care (which is not covered by Medicare)? – Betty Y.

DEAR BETTY: You ask a great question. The answer is the signatures of all joint tenants (or tenants by the entireties in states allowing such title method) are required to sell a joint-tenancy property.

If your husband becomes severely incapacitated so he is unable to understand and sign his name to the deed to your home, you cannot sell it alone without his signature.

The legal solution is to then have an independent conservator appointed to look out for his best interests. In most states, a spouse cannot be appointed the conservator.

While your husband is still competent, I suggest you consult a local attorney about
placing the title to your home and other major assets into a living trust. Then, if your husband continues to decline, and if it becomes necessary to sell your home to pay for his care, you will be able to sign the deed without his signature as the successor trustee of your living trust.

NO WAY TO GET RID OF A DEADBEAT SPOUSE ON YOUR CREDIT REPORT

DEAR BOB: My wife and I divorced in 2001. She got the house and the obligation to pay its mortgage. At the time, she earned more income than I did. However, she lost her great job in a "corporate downsizing" and is struggling to keep up the mortgage payments on her house. But my name is still on the mortgage. She is often more than 30 days late, so her late payments ruin my credit reports and FICO (Fair, Isaac and Co.) rating. I asked the mortgage lender not to report her late payments on my credit reports, but they say there is nothing they can do. Is this true? – Roth R.

DEAR ROTH: Unfortunately, the information you received from the mortgage lender is correct. You both signed your names to that mortgage obligation. Although you no longer hold title to the house, your name is still on its mortgage.

If your wife should lose the house in foreclosure for nonpayment, in some circumstances the mortgage lender might come after you for a deficiency loss. But that is highly unlikely.

I wish I could tell you about a secret technique to get your name off that mortgage. But I am not aware of any such method. Unless your ex-wife sells or refinances the home, you are stuck with her late mortgage payments showing up on your credit report.

UNDEDUCTED RENTAL PROPERTY LOSS CAN BE CARRIED FORWARD

DEAR BOB: In 2004 I had deductible tax losses from my rental property, which I deducted against my ordinary income for $25,000. But my paper tax loss exceeded that amount. Can I claim that undeducted loss exceeding $25,000 in future tax years? If so, what IRS tax form should I use? – Charlotte P.

DEAR CHARLOTTE: Yes, you can claim undeducted tax losses from your rental property in future tax years, or upon sale of the rental property. These losses are called "suspended losses."
For example, over the years, because I didn't need to use all my rental property tax losses against my ordinary taxable income, I had substantial suspended losses, which I eventually used when selling my rental properties. But I am not aware of any IRS tax form on which to record your unused suspended tax losses. Just keep a careful record for future use. For full details, please consult your tax adviser.

The new Robert Bruss special report, "How to Get Started Investing in Real Estate for Big Profits," is now available for $4 from Robert Bruss, 251 Park Road, Burlingame, CA 94010 or by credit card at 1-800-736-1736 or instant Internet PDF download at www.bobbruss.com. Questions for this column are welcome at either address.