Parents, Children, Estates and House Titles produce a mess if not done properly. When your parents add you to their house title for estate planning purposes, you may not necessarily be granted full ownership of the home after death.
Q: My dad died quite some time ago and I have three siblings. We all get along but we all have different ideas on how to handle money. When my dad died, my mom became the sole owner of the home. She decided that she wanted me to own the home with her just in case. My mom put me on title to the place she and my dad owned for estate planning purposes. We held title as joint tenants with rights of survivorship.
Later on, when she talked to her estate attorney and they were working on her will, she decided she wanted me to own a greater share of the home so she deeded to me half of the interest in the home that she still had.
My mom passed away about a year ago, and I now want to sell the place but was told I don’t own all of it. What gives? I thought I would own all of it on her death. What should I do?
A: Adding kids to the title of their personal residences, whatever the reason, is fraught with problems. Mistakes happen, and these can have far-reaching consequences.
When you mom decided to put you on title, you and she had different choices as to how to own title to the home. When she put you on title as joint tenants, the joint tenancy gave you and her equal ownership of the home. You could sort of say that you each owned 50 percent in the home, but under the eyes of the law, you each owned all of the home.
How is that possible? Joint owners each own the entirety of the home, not their share. And, most importantly, when one owner dies, the other owner becomes the sole owner.
Another type of ownership of real estate is as tenants-in-common. In this situation, you could own one percent of the property and your mom could own 99 percent, or any number in between. However, you only have an ownership right to that piece of the property. Upon the death of one of the owners, the home transfers to whomever the owner designated in his or her will, and that could be you or your siblings, or a different heir altogether. If there is no will, then the home passes as family members as designated by state law.
You and your mom started as joint owners with rights of survivorship, which meant that when she died, you would inherit her share of the property. But when she “gave” you a greater ownership in the home, she terminated the joint ownership and created an ownership where you were tenants in common in the home.
You then became the owner of 75 percent of the home but lost the right to become the sole owner of the home upon the death of your mom. Now, you’ll have to probate the will and have the other 25 percent interest in the home transferred to you, if that’s the way your mom had it in the will. Assuming she didn’t designate you to own her interest in the home, you and your siblings will share the other 25 percent of the home, each of you owning 6.25 percent of that quarter ownership.
When it comes time to sell the home, you and your siblings will share in the proceeds from the sale. You will receive the cash from your 75 percent ownership plus cash equal to an additional 6.25 percent of the sale price. Upon your mother’s death, your ownership share increased to and you siblings became 18.75 percent owners in the home.
If her intent was to have you own the entire home after her death, there were many ways to handle your situation that would have been better. Obviously it’s too late now, but your mom could have set up a living trust. With that living trust, she could have designated you as the successor owner of the home and if she wanted you to own 50 percent initially, she could have done that. Later when she wanted you to own 75 percent, that could have easily been transferred to you while the trust would have still designated you as the sole owner of the remaining interest in the home.
We write frequently about this issue, but parents continue to make this mistake. Hopefully, you’ll avoid it with your own children someday. Good luck.