Capital Gains and Interspousal Transfer Deed
If I acquire ownership of our home as my sole and separate property througn an interspousal transfer deed, what will be used as the basis for capital gains if I should sell the home? We are planning to divorce but haven't done so yet. We have been married for 27 years, owned the home for 20 years, and have lived apart for 4 years. What happens if we don't divorce prior to my selling the house? Lastly, if I don't sell, how is the inheritance tax liability figured?
Thank you for your time.
1 Answer from Attorneys
Re: Capital Gains and Interspousal Transfer Deed
The answer to the first question probably depends upon how you "acquire ownership" - there may be a huge difference between paying big bucks or giving up very valuable assets, on the one hand, and receiving ownership as a gift. It may also be a factor how title is currently held - community property or whatever.
As to the second question, I'd only observe that tax treatment of property transfers done to carry out a divorce decree or privately-negotiated property settlement in a divorce generally have more generous (favorable) tax consequences.
Finally, inheritance tax issues are greatly complicated by differing results based upon factors such as total estate value, gifts before death, year of death, and the most recent whim of Congress, that a useful answer can only be obtained by personal consultation with an expert in this field, which could be a lawyer specializing in estate planning or a CPA or even a certified financial planner, but even with the best of help it will depend upon a certain amount of guesswork, more if you are relatively young.
Overall, I'd suggest that you see a professional person about your situation, since the dollar amounts and the possible swings between a good-advice outcome and a mediocre-advice outcome can outweigh the cost of good avice by a factor of ten to maybe 100, depending upon your numbers. Perhaps you can find the right combination of talents in one person, who will both handle your divorce and your financial plan. Focus on someone in the same county where the dissolution of marriage would be filed, and/or where the property is.