May 1, 2007

Unforeseeable trouble can arise when you put your kids on the title

By Robert P. Bergman
Special to the Times

When John and Louise bought their home in 1965, they took title in “joint tenancy,” because the deed from the title company came with the words already printed on it. The couple had two children, David, born in 1963 and Mary, born in 1967.

In 1990, John suffered a heart attack and died. Mary found out that the joint tenancy title meant she now owned the house. She went to a local title company and had them do the paperwork to put the property into her name.

Louise had heard about living trusts and how they could avoid probate, but she didn’t want to be bothered with the time and expense of seeing a lawyer to prepare an estate plan. She figured that the joint tenancy ownership she had with John worked pretty well, so she decided to go ahead and put her children on the title of her home as “joint tenants” with her. After all, her children were going to outlive her. This way, when she died, all they would have to do was go to a title company like she did, and the property would belong to them. Best of all, there were no lawyers involved.

In 1994, her son David separated from his wife and moved back into Louise’s home. She was happy to have her son back home, because she had been lonely since John died. David was handy, and at first he helped out by fixing things and paying for a share of the electric, water, and food bills. But then, after a few months, David quit his job, and stopped helping. He started drinking heavily, and soon all he did was sit around the house all day long drinking, until he went out to a local bar each night to drink some more. He never offered to help Louise at all anymore.

After several months of dealing with this, Louise had enough. “David, you need to move out and make your own way. I can’t support you like this anymore.”

“But I have nowhere else to live,” said David, “Don’t you love me?” Louise even got Mary to try to convince her brother to leave, but he wouldn’t listen to her either.

Louise didn’t know that to do. David was not a violent person. He had never threatened her at all. He was just unwilling to leave!

Louise remembered reading somewhere that, because David was not paying her any rent, she could probably get him moved out of her house very quickly with the help of a lawyer. So she went to a lawyer that specialized in evictions. He told her they could evict him.

However, when the lawyer found that David was on the title to Louise’s home, he had to inform her that David was an owner of the home, giving him the right to live there even if Louise wanted him to leave. Her only options were to get David to transfer his interest in the home back to Louise, or to file a court action to sell the home!

Louise was shocked to hear her options. She had never imagined in her worst nightmare that she would be in a situation like this. However, the worst was yet to come.

David had not filed his taxes for three years, and, unknown to Louise, he now had tax liens for over $100,000. When the IRS moved to enforce the tax lien against David, they went after his one-third interest ownership interest in Louise’s home. To save her home from being sold by the IRS to pay David’s back taxes, Louise had to use her savings to pay off the IRS.

Louise found out that her “easy” solution to avoid probate and pass her home on to her children created more problems than it solved. With proper estate planning, Louise could have avoided all of the serious problems she experienced.

Robert P. Bergman is a San Jose estate planning attorney and counselor who devotes his law practice exclusively to assisting individuals and couples planning for incapacity and the eventual transfer of their property to their heirs. He has regular seminars on the use of wills and trusts in estate planning. Visit his Web site at www.lawbob.com where you can learn more, register for an upcoming seminar, schedule a consultation, and read other articles on estate planning topics he has written. You can reach him by e-mail at rpb@lawbob.com or telephone at (408) 247-0444. All inquiries are confidential.

This column is intended to provide general information about estate planning ideas, concepts and laws, and is not to be relied upon as rendering legal advice about your particular situation. No attorney-client relationship is created by these articles. The laws concerning estate planning, wills, trusts, and estate taxes are very complex, often state-specific, and change on a regular basis. Consult with an experienced attorney before taking any action that would affect your personal or business matters.