What happens to your property when you outlive your spouse?

Dear Len & Rosie,

I own a home and the deed is in my name only. My wife and I have been married for 23 years and she is a Japanese citizen. If I die, will my wife be able to get the home even though her name is not on the deed? Should I put her name on the deed?

Bob

Dear Bob,

What ever you do, don’t leave things alone, because if you die without a will or a trust, and your wife isn’t on title to the home with you, then you’re inaction is going to make things very difficult for her after your death. You need an estate plan.

If you die first, and you don’t have at least a will, then your wife will inherit all of the community property and either one-half of your separate property, if you have no children or only one child. If you have more than one child, your widow shall inherit only one-third of your separate property, together with the community property. The rest will wind up in the hands of your children or more distant relatives.

Only the portion of the home that you already bought and paid for prior to getting married is your separate property. The portion of the principal balance of your home loan that you paid off during the twenty-three years of your marriage is community property, half owned by your wife, even though her name isn’t on the deed to your home. But that’s not good enough to ensure that she’ll inherit the home on your death, because your children or other family members may argue with your wife as to how much of your home is community property. You’re asking for trouble, especially if they don’t like your wife.

At the very least you need to make a will that leaves your home to your wife upon your death. If you want her to avoid having to file a spousal property petition, you should either create a revocable trust with your wife, or you can add her name to the title of your home.

There are two ways of doing this. More commonly, married couples own their homes in joint tenancy, but it’s better that the home be titled “husband and wife as community property with right of survivorship”. That way, the home will avoid probate upon the first death, but it will also be counted as community property for tax purposes. Upon the first death, the cost basis of 100% of the home (not just the dead spouse’s half) will be stepped up to its date-of-death value. This would allow your wife to sell the home if she wants to after your death while avoiding a great deal of capital gains tax.

However, the best thing that the two of you could do is to create a revocable trust to avoid probate on the second death as well as the first, but if you choose to go with wills and holding title to the home in both of your names, do not forget that both of you need to create durable general powers of attorney and advance health care directives so that you may make important decisions for one another if either of you should become incapacitated.

Len & Rosie

Father passed away before divorce was finalized.

Dear Len & Rosie,

My father recently passed away without a will. As far as I understand, my mother and he never finalized their divorce because the settlement agreement had not been filed, even though they filed for divorce in 1989.

My father’s wishes were that my mother would receive half of the home and my brother, sister and I were to share the remaining half interest. My mother has now retained a probate attorney and we are not sure what her intentions are.

In addition, my paternal grandmother willed some property to us three children and my mother is now trying to claim that property even though my grandmother specifically stated in her will that my mother was to be excluded and if she contested the will, she was to receive $1. Do you recommend that I retain my own probate attorney?

Janene

Dear Janene,

There are two separate cases here: Your father’s estate and your grandmother’s estate. With respect to your father, you have problems. If the divorce had been finalized then your mother would have been automatically disinherited from your father’s will, if he had one, and would not inherit any portion of the estate by intestate succession, if he had no will.

But since your parents were not divorced upon your father’s death, your mother is still the surviving spouse. The fact that they have been separated for two decades doesn’t change this. She gets to inherit whatever your father left her in his will. If he died intestate (without a will), your mother shall inherit all of your father’s community property and one-third of his separate property, because he was survived by more than one child.

As for your grandmother’s estate, your rights depend on the exact terms of your grandmother’s will, which we have not had the opportunity to review. If your grandmother left everything to your father, and then died before him, there’s a good chance that all or a portion of your grandmother’s estate shall pass into your father’s estate to be distributed to your mother in addition to your father’s children. But if your grandmother’s will left you something specifically, rather than you inheriting through your father, your father’s death and your mother’s claims should not affect your own inheritance.

You should probably sit down with a trusts and estates attorney and review both the estates of both your father and grandmother because the particular facts in your situation are important and will affect your rights. But you should know that it’s your father’s own fault that his wife may inherit so much. His wishes won’t count unless they were incorporated into an estate plan that he didn’t get around to creating while he had twenty years to complete. Don’t blame your mother for your father’s inaction.

Len & Rosie