Another DIY estate plan gone wrong
April 1, 2019
I recently read an interesting case; it happened in British Columbia, but it could just as easily have happened in any U.S. state.
The father owned his home. He put his daughter on the title as half owner, with right of survivorship, so that she would inherit it on his death. Later, though, he got remarried, and he decided he wanted to change that to make his new wife the joint owner.
There was one little problem. When you make someone a joint owner, you can’t change that unless the joint owner agrees. In this case, his daughter did not agree, she refused to sign away her interest in the property. So, the father did what he probably thought was the next best thing: he transferred his half of the property, to himself and his wife, jointly with right of survivorship.
So now you had a property that was owned, half by the daughter, and half by the married couple. Under B.C. law, the transfer of his interest to the couple, invalidated the earlier survivorship rights. In other words, the daughter was no longer entitled to receive the whole property on her father’s death. But the wife was entitled to receive the half interest (of the couple) on her husband’s death.
And that is what happened: the man died. His widow now owned half of that property, and the daughter owned the other half. It will come as no surprise to anyone who has experience with blended family situations, that they both lawyered up.
And they ended up in court, because they couldn’t agree on what would happen with the property. The daughter wanted to sell the property and split the proceeds. The widow wanted to continue to live there. Since they couldn’t work it out, the daughter sued to force sale of the property. They had a remarkably nasty trial, after which the judge ordered the property sold and the proceeds divided. Although I suspect that a lot of the proceeds actually went to pay the trial lawyers.
Would the result have been the same if the circumstances were moved a bit north, to Alaska? Mostly yes, in fact it might have been worse. Because Alaska does not have joint ownership of real estate with right of survivorship (except between a married couple) the property would have been owned three ways: half by the daughter, one-fourth by the widow, and one-fourth by the probate estate of the husband. They would have had the same nasty court case, but added on the cost of probate for the husband’s share of the property.
It is pretty obvious to me that the father/husband in this case was doing his own estate planning without a lawyer. If he had consulted a lawyer, he would have known that this wouldn’t work. Here in Alaska, in the same circumstances, I would have recommended he put his daughter on a transfer-on-death deed instead of giving her a half interest during his lifetime. That way he would have been able to change it later, when circumstances changed, without having to get his daughter to approve the change.
Here’s another interesting case, in fact it’s a composite of several cases I have handled: Boyfriend and Girlfriend decided to buy a house together, but they didn’t get married. Since Alaska doesn’t allow joint owners with right of survivorship, they were now on the title as “common owners”. Boyfriend then died unexpectedly, with no will.
Boyfriend’s next-of-kin was his father. Girlfriend did not have any legal right to handle the estate, since she was not a relative and there was no will. Father was appointed as executor, and he needed to pay bills; after all Boyfriend had credit card debt and medical bills, and then there were the normal costs of probate. So Father wanted to sell the house. There was nothing else valuable in the estate, and these bills had to be paid.
But Girlfriend didn’t want to sell the house. She owned half of it, so realistically it couldn’t be sold without her consent. After all, who is going to buy an undivided half interest in a piece of property? So Father had to go to court to force the sale. He won the case, but now a big chunk of the sale proceeds went to attorney fees.
The lesson of both of these cases is that nobody should co-own a parcel of real estate without proper planning. In a business context (for instance when the Boise Boys from HGTV buy a fixer-upper together), that’s handled by a business lawyer. In a family context, it’s done with the advice and assistance of an estate planning lawyer. But either way, don’t try to do anything involving title without the right kind of advice.
Kenneth Kirk is an Anchorage estate planning lawyer. Nothing in this article should be taken as legal advice for a specific situation; for specific advice you should consult a professional who can take all the facts into account. Unless, of course, you want the trial lawyers to get part of your estate.