“He has a greedy daughter”: I want to leave my house to my daughter, but I still want to receive income from my husband’s property if I die before him

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I own the house my husband and I live in and I want to make sure it goes to my daughter when I die. How do I protect this home if I die my husband? I’ve paid off a large mortgage and the title to the house is in my name only.

We also own a second home together and we have effectively passed it on to my son who has taken on the mortgage payments. My husband and I both agree that the house is his and we have vacation use for life.

My husband has income from properties he owned before we were married. Our living expenses come from this income. How do I ensure continuity of that income if he dies before me so I can continue living in my current home and my life will not be disrupted?

This is a worrying issue as he has a greedy daughter and this is a second marriage for both of us. All of his income from his separate possessions goes to her. Is a will enough? What if I die before my husband and he makes a new will?

second wife

Dear second wife,

If your husband owns property, it is his right to bequeath it to his daughter, together with the income from that property, if he so chooses. You want to leave your home to your daughter. “Greedy” can also be a synonym for someone who wants the same thing as we do. It’s all relative, and she’s not necessarily greedy just because she expects those qualities.

Anyway, congratulations on paying off your house and having a second home to eventually leave to your son. There are several ways you can leave this home to your daughter, provided only your name is on the deed. Approximately half of the US states and the District of Columbia permit a “transfer-on-death” deed, which bypasses the probate process upon your death.

In some states, including Michigan, Florida, and Texas, a “Lady Bird deed” is similar to a deed of transfer of ownership, allowing people to transfer property to a beneficiary upon death while avoiding probate proceedings and the beneficiary alive remains in the property for life. It may be useful in some states for those looking to qualify for Medicaid.

You could choose a lifetime estate, a formal arrangement that would allow your husband to remain there for life and transfer it to your daughter as heir-designate after your death, thus avoiding a probate court. This could protect your assets from Medicaid liens. If your daughter later sells, she would only pay capital gains based on the value of your home at the time of your death.

As the Winston Law Group points out, if the home is sold while you are alive but your daughter has already inherited it, she will receive a proportionate share of the proceeds and may have to pay capital gains tax. “Finally, if the parent later wants to recover the remaining interest or mortgage the property, the full and voluntary cooperation of all children is 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 allows you to remain in the home for a period of time as determined by the trust. If the terms of the trust expire before you, there are inheritance tax complications and you would have to pay market rent to stay in the house.

In addition to the risk of surviving the trust, MarketWatch Tax Guy Bill Bischoff writes: If the trust is depleted after the specified number of years and you choose to continue living there, you can continue to pay your daughter’s rent and his daughter’s greatness reduce taxable assets. “Of course,” he adds, “if you have a bad relationship with your kids, you might find yourself on the streets.”

Alternatively, you could sell the house at market price; if you have sold it at a lower than market price and are preparing for tax consequences as part of the sale will be treated as a gift. Gifting a home to your daughter has tax implications—your daughter would not receive the base increase for capital gains tax purposes—and may have Medicaid complications later.

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