Attorney Thomas B. Burton discusses the real question regarding real estate and probate: "Mother Died Without Will. How to Handle House with Life Estate? Brother Wants More Than Half."
In this Real Attorney Reacts Series, Attorney Burton analyzes this real question under Wisconsin law and discusses how a life estate works on a house after the death of the life estate holder. Attorney Burton also discusses the real psychological and emotional toll that can arise from the joint ownership of real estate and dealing with such issues after someone passes away without a will through the probate court process.
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Welcome back, I'm attorney Thomas Burton. I'm an estate planning and asset protection attorney here in Wisconsin and we're continuing with our Real Attorney React series where I analyze real reader questions related to Estate Planning and Asset Protection under Wisconsin law and today's question comes once again from a recent article of The Moneyist, December 2nd submitted. So just a few days ago and the writer says the following, "I lost my mom two months ago and I'm still in the fog. My brother and his family moved into her home. They want more than half". So I'm going to read you some of the question and see the issues I see here and this again has to do with a house, real estate and an inherited property with no will. So you may be seeing a theme in some of these that can lead to family disagreement.
The writer says, "My mom, brother and I bought a single family house for $60,000 in 1979. Mom put down $20,000 and paid 22% of the mortgage. My brother paid 45% of the mortgage and I paid 33%. We paid it off in 1988. I married and moved out in 1992 but paid the monthly maintenance until 1994. That year my brother, his wife and daughter moved in, a year later he had a son".
So first off I'm going to note, I don't know how they decided to do this with three people owning a home but I've said this in other videos, I caution against owning property jointly because it can lead to problems down the road. The only person I would suggest you want to own property with is someone you're legally married to and as you know even that sometimes doesn't turn out well. "In 2016, after her health care, my mom changed the deed from joint tenant to life estate. She passed away this year. During the 26 years that my mom, my brother and his family lived there, I contributed 33% of house maintenance. New windows, roof, boiler, oil tank, garage door, electric panel, painting, concrete fixes as well as house insurance" and they get a little into the weeds here, on the percentages but basically he was paying maintenance. "I did not contribute to real estate taxes in lieu of not living there, when my mom died without a will, my brother figured out that if mom's part of the house was distributed by half, he would end up with 54% and I with 46% of the value of the house which is obviously worth several multiples of what we paid for. His math seems correct and I was happy to agree to that. I just heard that my sister-in-law and her two children feel that I have 'played' my brother and that it seems fishy. I didn't push to sell the house long ago. I never thought that it was my place to ask my mom or brother to sell the house. I thought they would just tell me. I lost my mom two months ago. I'm still in a fog. They want to save on interest and are not sure if they would qualify for a mortgage as they co-signed on their son's student loan, a little over a $100,000 still left and also have a car loan to pay. My brother has had many health issues and he's still being treated for cancer. I would appreciate your clarity in this situation. My sister-in-law feels my brother share of the house should be greater than 54%. Does his math seem right or should it be more? May I please have your thoughts and do you think the division of the house is fair? I want to keep the peace". Signed - trying to do the right thing.
So that's the submission to The Moneyist columnist, again at MarketWatch, who is a personal finance writer not an attorney and I'm providing analysis under Wisconsin law here where I'm licensed. Basically though I think once again you can see the dangers of jointly owning real estate and especially because they did it through the deed with these uneven percentages. You know mom paying 22% of the mortgage, brother paid 45% and I paid 33%. I mean it seems like they had it worked out in their heads amongst them but honestly, anything other than a clean 50-50 or one-third one-third is going to get confusing later when you go to sell the property and I still don't recommend it. Now, he noted that the mom changed it to a life estate in 2016. A life estate is a special type of deed, whereby the owner retains an interest to live in the property for the rest of their life but then there's 'Remainderman' - it's called, the people, the remainder interests inherit the property when they're gone and I see the term 'life estate' thrown around but I often feel people don't understand it fully because if you are the person creating the life estate, your interest in the property goes down every year you live there but you still own an interest in the property and it's calculated according to the life expectancy tables, that the IRS uses for people your age. So if you have a life estate and you go to sell the property and I'm talking about you as the senior adult, in your 80s, you're still entitled to receive a portion of that sale but it will be smaller than the portion might have been when you were in your 70s, for instance. So he says mom made it a life estate but that makes it seem like perhaps maybe she was the only one on the deed, in the beginning. He doesn't mention that and I'm guessing that's what happened but I'm not sure but again, overall a lot of issues here with just having a property where you're all contributing money. Now I'll give you quickly The Moneyist response and then my thoughts. He says dear 'Trying', you will never be able to keep the peace. You only ever need to be at peace with your own decision that is true for both this situation and for life. Your brother and his wife moved into your mother's home. His children grew up there. It was their home at least it felt like their home. However, they were living in a property owned by you, your brother and your late mother and that I think is the essence of the legal answer here. When they say it's fishy that you didn't sell the house long ago, what they really mean is they're annoyed. They did not buy you all the house a long time ago but it increased in multiples of its original value. So that’s The Moneyist take on why they're upset. "They could have owned it, all of it for a fraction of the price and they should have thought of that then and they would have done so had they realized they'd be in a position to own all of the home, instead of just over 50%".
It's a classic case of 'coulda shoulda woulda'. "Who are they going to hold accountable for their own inaction, lack of foresight themselves, not on your nelly", he says. "Why on earth would they do something as obvious as that when they can blame you instead?"
Okay, so that's his thoughts on this. "If you sign over this house now to keep the peace and or secure the friendship and love and loyalty of your brother and family, you will only end up presenting them and resenting yourself. It won't change who they are and they will likely find another reason to hold other people responsible for opportunities they did or did not take in their own lives. You can't solve that problem by signing over your inheritance to your brother and his family. So don't try".
So overall I think this is good advice. If there's family issues, you know, capitulating on this thing isn't going to solve it and legally the brother is entitled to his interest. He contributed to the property. This isn't, it isn't even just like a property they inherited from mom at that, sounds like he's been contributing from the get-go. So the columnist says, "you upheld your end of the agreement. They probably save far more money by living there without having to pay a full mortgage rent. Your brother calculated how much you both contributed and he came up with a 54-46 split. Ignore any reported comments from your in-laws and tell whoever told you those comments that you'd rather hear from them directly or not at all".
That's also good advice. If you're dealing with, in this case the two brothers, I'd try to deal directly with your brother and not get the in-laws involved in the middle. "If they express this to you directly, tell them what I told you, take responsibility for your own actions. To nickel and dime over percentages at this point is a fool's errand. Your brother's split is an estimate. The legal answer is 50-50. The domestic solution is 54-46. I don't believe they should chip away at your legal inheritance".
Okay, so that's the gist of his answer and I think he's correct that if the two brothers are on the title legally, now they're 50 50 owners after mom passed away but if the writer doesn't think that, 54-46 split his brother came up with is pretty close or accurate. That sounds about right to me. Now like I said, they started off with this uneven percentage and paying uneven amounts of the expenses and real estate taxes and stuff and that's what I want to point out to other viewers. I would not recommend doing, I don't recommend jointly owning real estate and I don't recommend if you're going to jointly own it, doing it just through the deed and then in addition, paying these uneven amounts towards the upkeep, maintenance and taxes. If you're going to do jointly owned real estate, I recommend, you own it inside of an LLC with an operating agreement clearly laying out the ownership percentages and with the expenses and maintenance, flowing according to ownership percentages and if you're going to change those expenses and maintenance, then either change the rules inside the operating agreement or change the actual ownership percentages but doing it this way, without anything in writing, can get very messy and even if you want to make it different, who pays what, later tracking it gets difficult, if you don't have this all put out in writing, in an agreement like an LLC operating agreement.
And the final note I wanted to just point out, from this example is about the life estate. That the mother had this life estate but then passed away. So her life estate would get removed upon death and according to what it sounds like I haven't seen the deed, it would pass to the two sons in this instance.
So overall, another warning sign about the dangers of jointly owned real estate and you can see how owning real estate with someone else even family or maybe I should say especially family, can lead to problems after someone passes away and again in this case unfortunately, the mother had no will. So that didn't lay anything out or a trust which could have passed the property non-probate. So in addition to these issues, they're going to have to deal with probate for her estate.
So I hope you've enjoyed this episode and learning what we can all learn from walking through these unfortunate situations for other families. I do think it's good this person reached out for advice to The Moneyist columnist. It's always good to get a second perspective on things before you create a long, lasting perhaps animosity with family members.
So thanks for tuning in and we'll see you next time.
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