Question: My mother passed away last year and my dad, without my knowledge, added my name to their house deed. It is fully paid off and there’s no mortgage. He said that if my husband and I divorce, he doesn’t want my husband to receive any part of the house. I do not agree with my dad’s reasoning. My husband and I have helped my parents financially for years by paying the property taxes on the house and paying for improvements. I don’t think it’s fair that if I die before my dad or husband, my husband gets nothing in exchange for his love and support for my parents all these years. Can I create a Will and leave my half of the home to my husband?
Loraine’s Answer: If I had been your father’s estate planning attorney and he had asked me if he should put your name on his house, my answer would have been “no, no, NO!” This is a bad idea for several reasons.
- If you own an interest in your father’s home and you get divorced, your spouse can now potentially involve your father’s home in your divorce (the complete opposite result of your father’s stated intention).
- If you get sued and a judgment is issued against you or if you have creditor problems in the future, your creditors can try to come after your interest in your father’s home.
- By adding your name to the title of his home, your father made a gift to you. Depending on the value of your interest in the house, the gift was likely taxable, which means your father likely will need to file a gift tax return and report the gift to the IRS. It’s not likely that he needs to pay any taxes, but the legal reporting requirement exists.
- His gift means that you will likely pay more capital gains taxes if the property is ever sold than you would have if you’d received the entire house from your father after his death, as an inheritance. This is because your income tax basis in the interest he gave you will be based on your father’s income tax basis in the property as of the date he made the gift, not on the value of the property as of the date of his eventual death. If you received the entire property after your father’s death as a beneficiary under his estate plan or as an heir, if he had no Will when he died, your income tax basis would have been the fair market value of the property as of the date he died.
- Finally, if your father ends up needing Medicaid benefits at some point for his own care, then his gift to you may make those benefits more difficult for him to receive in a timely manner. Medicaid imposes transfer penalties that delay an applicant’s eligibility for Medicaid benefits if the applicant has given away assets within the five years before he applied.
As for your question about whether you can make a Will that transfers your interest in your father’s home to your spouse at your death, the answer depends on how the deed is written. If your father transferred the title to you and himself and included language that makes it clear that you and he own the property as joint tenants with rights of survivorship, then your father may automatically receive your interest in the property at your death if he survives you (and you may automatically receive his interest in the property at your father’s death if you survive him). You may not be able to control what happens to your share of the property with a Will if your father survives you and you and he own the property as joint tenants.
However, if the deed states that you and your father own the property as tenants in common, you could make a Will that states that your share goes to your spouse at your death even if your father survives you. If either you or your father dies without a Will, state intestacy law will determine what happens to that person’s interest in the property. Your spouse could end up with all or some of your interests, depending on intestacy laws, whether your spouse survives you, and whether or not you have any children or other descendants who survive you.
So, to answer your question: Check the deed under which your father added your name to the title. If it created a right of survivorship, then you might still be able to have your interest in the property pass to your spouse if you die before your father and your spouse survives you, but it won’t be as simple as just making a Will. If the deed under which your father added your name to the title does not create a right of survivorship between you and him, however, then you can make a Will and leave your interest in the property to whomever you wish, whether your father likes it or not.
As for your father, if his intent in putting your name on the property was to prevent your husband from being able to get a share of the property if you and he divorced or if you died, he went about things all wrong. A better approach would have been not to put your name on the property while he was living, and to set up his estate planning so that you would have eventually received the property in a trust, instead of outright. The trust could have provided you with access to the property after your father’s death, but also provided you with some significant protection against your husband in a divorce, and could even have kept you from leaving any interest in the house to your husband at your death even after your father’s own death. He could have provided for this trust to be created either in his own Will or, perhaps better yet, in a revocable trust that could also have allowed the property to pass to a new trust for your benefit without even the need for a probate process after your father’s death. By failing to consult a decent estate planning attorney, your father ended up doing something that contradicted his intent and put him at risk of ending up with your husband becoming a co-owner on his house.
Key Estate Planning Takeaways: When questions arise about a trustee’s rights or powers, it’s best to hire an experienced estate planning attorney to review the language contained in the trust.
This “Q&A with Loraine” blog series is inspired by answers from Morgan + DiSalvo Partner Loraine DiSalvo to actual user questions posted by individuals on www.avvo.com. This blog is a more in-depth response than is permitted on their site. To view the original question and Loraine’s abbreviated response, click here.
