Q: My girlfriend and I bought a house together last winter. It was the first house either of us had ever bought. We each paid half of the down payment and we’re splitting the mortgage and tax payments equally.
Many months ago I read one of your columns where you talked about the different ways you can hold title to a house with somebody else. I didn’t think much of it at the time, but this past weekend I was trying to clean out some paperwork and came across a copy of our deed. We apparently purchased the property as joint tenants. As I remember, that means if one of us dies the other person gets the whole house.
We had never discussed this with our escrow officer or real estate agent, but we both have kids from previous marriages and we want them to get our interest if we die.
On the other hand, if one of us dies, we don’t want that person’s adult kids moving in with the survivor or selling the house out from under them. What, if anything, should we do?
A: This is a situation I’ve written about at least once each year in 20-plus years I’ve been writing this column. The reason is simple, there are more and more “blended” families where couples have the same issues and concerns you’re experiencing. The email questions like yours have gotten more and more voluminous over the years.
You are correct that, as joint tenants, the deceased’s one-half interest will pass to the other owner immediately upon death. At that point, the surviving owner can do with the property as he or she wishes.
To accomplish your goals, in the unfortunate event one of you passes away, you’ll need to take several steps.
First, you should sever your joint tenancy. There are a couple of ways to accomplish this, all of which are quite simple if both you are in agreement.
You will then hold the property as tenants in common, which simply means you each own 50 percent of the property and are free to do whatever you want with it upon your death.
Now the problem gets a little more complicated.
If you want to put restrictions on each other’s children it is best to accomplish this through estate planning documents such as a trust or will. You’ll need an attorney to draft the plan because there are a number of options available, some with significant tax issues.
One option is to leave to the surviving owner a life estate for the deceased’s half interest. A life estate would give the surviving owner title to the property in its entirety, but only until that person dies.
After the death of the second owner, the two 50 percent interests will again be split and each will pass to the respective heirs. That way the kids would have no present ownership interest until the second person dies.
This is just one scenario. There are many others.
And finally, you and your girlfriend need to enter into a tenants in common agreement. Longtime readers will know that I talk about these on a regular basis because I believe they are so important.
It’s amazing how many times two or more people invest hundreds of thousands of dollars in co-owned property with no written commitment regarding how the property will be handled.
Ultimately, somebody wants to sell, or thinks the owners can get more rent, or some other concern and a lawsuit results.
A good tenants in common agreement will address anticipated disputes before they happen and dictate what actions will be taken. Particularly, what to do if one owner wants to sell.
Once again, there are as many different ways to draw up such an agreement as there are people who buy houses. The important part is to anticipate the likely areas of dispute.
Especially between boyfriends and girlfriends, who may not be boyfriend and girlfriend forever, a tenants in common agreement is of paramount importance.
Tim Jones is a real estate attorney in Fairfield. If you have real estate questions you’d like to have answered in this column you can contact him at [email protected].