Q: My wife passed away about a month ago. We jointly owned a house outright, without a mortgage.
I’m trying to take my wife’s name off of the paperwork and replace it with my kids’ name just in case anything happens to me. That way, if something happens to me, they’ll have access to the property.
My wife and I never wrote a will and the courthouses are giving me the run-around and seems like no one really has answers on how to go about changing the deed into their names. Do you have any advice for me?
A: My condolences on the loss of your beloved wife. I’m sure your world is turned upside down right now. Let’s start at the beginning.
First, I don’t think putting your children’s name on the title to your property is the smart thing to do financially. There are other ways to ensure that your property passes to them directly, without going through probate — which is what you’re doing now.
You are seeing first-hand what a mess it is when someone dies intestate, that is, without a will. Your first move should be to find a qualified estate attorney who can prepare a simple will for you, and who can put your property into a trust that names your children as the beneficiaries. When you die, the house will pass automatically to your children, bypassing the courts.
A simple will (provided you own less than $2 million in assets) and trust should cost you around $1,000 to $2,000. In some markets you may pay even less, but make sure you read over the documents and understand what is being done with your properties. But then your children will get your house outright after your death — which we all hope will be many years in the future.
You should also ask the estate attorney if your children automatically own one-quarter of the house since your wife died. In many states, when a spouse dies without writing a will, the husband inherits half the estate, and the children split the remaining half. If there are no children, the spouse’s parents get the other half. It’s possible that your children collectively already own a portion of the house.
The problem with simply adding putting your children on title to the property is that you’re essentially giving them half the house. Giving your children the house now means you may owe gift tax on the transfer. You will need to file a gift letter with the IRS.
You also will have problems refinancing and selling the home down the line, especially if your children are minors and are not old enough to own the home. You would have to set up a trust to hold their share of the home and have some adult sign documents on their behalf. Once again you would have to end up working with someone to structure the transaction.
In addition, when you die, the gift could cut into the profits they would earn on the property. When you give a piece of a house, the kids receive the gift at your cost basis, or what you and your wife paid for the property. If they inherit it, they receive the house at the current market value on the day it transfers. If they turn around and sell it, they’d pay no tax. But with a gift, there would be tax to pay.
Working with an estate attorney may help you plow through the court system and clear up your wife’s estate much more quickly and less painfully. If you do not know an estate attorney, please contact your local bar association for a referral.
April 4, 2006.