The Moneyist: ‘He has a greedy daughter’: I want to leave my home to my daughter, but I would also like to continue receiving income from my husband’s properties if I die before him

United States

Dear Quentin,

I own the house my husband and I live in, and I want to make sure it goes to my daughter upon my death. How do I protect that home if I pre-decease my husband? I have paid off a large mortgage, and the house title is in my name only. 

We also own a second home jointly, and we have effectively turned it over to my son who has taken over mortgage payments. My husband and I both agree that the house goes to him, and we have lifetime use for vacations. 

My husband has income from properties he owned prior to our marriage. Our living expenses come from that income. How do I secure the continuance of that income if he predeceased me so that I can continue living in my present home and my life would not be disrupted? 

This is a worrisome issue as he has a greedy daughter, and this is a second marriage for both  of us. All his income from his separate properties go to her. Is a will sufficient? What if I predecease my husband, and he makes a new will?

Second Wife

Dear Second Wife,

If your husband owns properties outright, it’s his right to leave them to his daughter — along with the income on those properties — if he so wishes. You wish to leave your home to your daughter. “Greedy” can also be a byword for someone who wants the same thing as we want. It’s all relative, and she is not necessarily greedy just because she expects these properties.

That said, congratulations on paying off your home, and on having a second home that you can eventually leave to your son. There are several ways you can leave this house to your daughter, given that your name alone is on the deed. Approximately half of U.S. states and the District of Columbia allow for what’s called a “transfer-on-death” deed that bypasses probate upon your death. 

In some states, including Michigan, Florida and Texas, a “lady bird deed” is similar to a transfer-on-death deed, allowing people to transfer the assets to a beneficiary upon their death, while avoiding probate and allowing the beneficiary to live in the property for their lifetime. It can be useful in some states for those who wish to qualify for Medicaid.

You could choose a life estate, a formal agreement that would allow your husband to remain there for his life, and deed it to your daughter as the designated heir upon your death, thereby avoiding probate court. Doing this could protect your estate from Medicaid liens. If your daughter sells at a later date, she would only pay capital gains based on the value of your house at the time of your death.

As pointed out by the Winston Law Group: If the home is sold during your lifetime but already deed to your daughter, she would receive a proportionate share of the proceeds and might have to pay capital gains tax. “Finally, if the parent later wishes to have the remainder interest returned or needs to borrow on the property, the full and voluntary cooperation of all of the children will be required,” the law firm notes.

A Qualified Personal Residence Trust (QPRT) is a special type of irrevocable trust that allows you to transfer your home to your daughter and permits you to remain in the home for a set period of time, as defined by the trust. If the terms of the trust expire before you do, there are inheritance tax complications and you would have to pay fair-market rent to stay in the house. 

In addition to the risk of outliving the trust, MarketWatch Tax Guy Bill Bischoff writes: When the trust is up after the stipulated number of years, if you choose to continue living there, you can pay your daughters rent, further reducing the size of his taxable estate. “Of course,” he adds, “if you have a poor relationship with your kids, you might find yourself out on the street.”

Alternatively, you could sell the house at market price; if you sold it at lower-than-market, and prepare for tax consequences as part of the sale would be treated as a gift. Gifting a house to your daughter comes with tax implications — your daughter would not receive the step-up in basis for capital-gains tax purposes — and can come with Medicaid complications down the road.

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