The Legal Impact of Death on Property Co-owned with Children
- Posted on: Feb 27 2023
The real estate market remains touchy. Inflation has made it much more difficult for young people to purchase property. That’s why many mothers and fathers will co-sign on a mortgage since their child would be ineligible.
While a nice gesture, co-owning property can prove complicated – especially after the death of one of the parties. This is why it’s so important to plan carefully; the last thing you want to do is trigger a Probate court to act.
Joint Tenancy Ownership in California
Sometimes parents and their children decide on joint tenancy ownership of a California property. For joint tenancy, when one party dies, the property would default to the other owner. Still, there are many things to take into consideration. For instance, if the child is married, and their spouse is contributing to the property but the child dies., the property would pass to that child’s parents, leaving the spouse without recourse. However, in such a case, the deceased child’s parents could choose to give the property back to their son- or daughter-in-law. But in order to do so, they would need to have capacity.
- If one or both of the parents were incapacitated, they would not be able to sign the legal documents to pass the property back over to the spouse.
- If the parents decided to quitclaim the property to their son- or daughter-in-law, doing so could initiate a due-on-sale clause within the mortgage that would hasten when the total balance of the mortgage is due.
- If the parents wished to quitclaim the property to the son- or daughter-in-law, they would be required to report this as a gift, assuming that the value of the interest is over $32,000). Put simply, they would have to file a gift tax return.
- A gift tax return would reduce the parents’ federal estate and gift tax exemption, meaning that they would have a reduction in the amount that they would be legally able to pass on to other people during their lifetimes or after their death.
What if You’ve Already Purchased Property with Your Child?
If you’ve already purchased a property with your child, there are a few things that you may want to consider.
You may wish to vest your ownership interest in the property to your revocable trust with wording that bequests your interest back to your child or to them and their spouse in the event of your death.
Your son or daughter should consider holding the title of their portion of the house in a revocable trust as community property or a separate property interest if the trust is held jointly with their spouse. Doing so will create a step-up basis for that person’s interest when there is a death, help to avoid probate court, and help to ensure that property interest goes to the desired party.
Real estate property is likely the most expensive property that you will hold in your lifetime. Therefore, failing to ensure that the arrangement of your ownership is to your best interest can result in serious issues that could cost a lot of time and money.
The Law Offices of Brian L. Fox, APLC Help those Who Wish to Jointly Own Property
If you or your loved one live in California and would like to jointly own property, it’s in your best interest to consult with a qualified California estate-planning attorney who can help.
At the Law Offices of Brian L. Fox, APLC, we know how important it is to protect your property and those whom you love so much. We will help you to establish a comprehensive estate plan that meets your needs and to fight against anyone who tries to work against them. To learn more or to schedule a free consultation, contact us today!
Posted in: Estate Planning