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  1. #1
    Join Date
    Aug 2015

    Default Selling Real Estate That is Subject to a Life Estate

    My question involves real estate located in the State of: South Carolina
    Before my mom passed, she and dad made their home a life estate for my sister and me.

    My dad has subsequently remarried. He and his new wife life in the home.

    He is getting older and would like to move into a single floor home.

    He wants to sell the house. My sister and I are trying to honor the wishes of our mother and help my dad.

    What is the best way for my sister and I to sell the house. Buy him a new house that would be a life remainder and not suffer any negative tax consequences?

  2. #2
    Join Date
    Sep 2010

    Default Re: Selling Life Estate Real Estate

    You need to be more precise in your terminology. Are you saying that your parents deeded the house to you reserving a life estate for her and your father? Or are you saying that they gave you a life estate in property they owned. It makes a large difference.

    The time to think about these tax consequences was before the property got deeded away to begin with. There's little that can be done about it now. Depending on just what happened here determines the property basis and how much (if any) capital gain there is on the house. Further, it would determine if you qualify to exclude any of that gain under the principal residence exclusion. There's no longer a "rollover-replacement" rule for excluding capital gains if you just want to swap one property for another.

    You'd be advised to talk to an attorney, for both handling disposing of the existing porperty and what would be the best way to title the replacement property consistent with everybody's objectives.

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