Q: My wife and I owned our house as joint tenants with rights of survivorship. When she died, I became the sole owner, and the deed was changed to reflect this.
Last year, my daughter insisted that I put one of my children’s names on the deed also, in case of my death. I put her name on it since she is the executor of my estate when I die.
My will specifies that â€œall of my tangible and intangible property of whatsoever kind is bequeathed to my four children in equal shares.â€ Hereâ€™s the problem: This daughter, whose name is on the title, wants to live in the house with her husband and two children when I die.
What method must she use to compensate the other three siblings to rightfully receive their share of my estate without selling the house outright since I want one of them to continue to live there?
A: Your intentions may be admirable, but if what you write is true, you have probably conferred upon your daughter future sole ownership in the property. She now co-owns the property with you and depending on how you hold title, she will either inherit all of the property or half plus a one-fourth share of the other half.
I’m sure this is not what you intended, and while your daughter may be entirely trustworthy, you should fix this situation immediately. Not only could there be problems dividing the property after you are gone (her share of the property will not be subject to disposition via your wishes) but you may have created an estate tax/gift tax situation for yourself now, and for her down the line.
Letâ€™s look at the immediate tax implications of putting her name on title: you may have inadvertently gifted her half the property to your daughter. This could cause a taxable situation in which gift taxes are owed. I encourage you to call your accountant or tax preparer immediately to see what, if anything, you owe to the government.
You may be able to undo this gift and instead create a trust in which the house is the sole asset. When you die, the beneficiaries of the trust (your four children or their heirs if they die before you do) would then inherit the house in equal shares.
At that time, depending on what the property is worth, your daughter can make an offer to her siblings for their shares of the property and buy them out. This would be the fairest thing to do.
Also, even though you want one of your children to live in the house after youâ€™re gone, life may take your children in different directions. Dividing up the ownership equally, and then allowing any interested parties to make an offer for the other shares, is a good fix.
As you have left it now, your daughter gets the house and there’s nothing left for your other children. I hope you rectify your mistake and set your estate and affairs in order. Consult an estate attorney for further information.