Who owns this house? (For purposes of living trust)

jenswrensJuly 17, 2009

I'm in the process of setting up a living trust for my aging, ill mother. She and my father are divorced. Her house was purchased after the divorce by my father for her. The deed of trust (mortgage?) is in my father's name, and he pays the monthly note. There is a quit claim deed putting the property in my mother's name. So when I look the property up on the public record, she is listed as the "owner."

For the purposes of transferring the property into the trust, does my father need to be involved at all since the mortgage is in his name? Or does the quit claim deed count and the property is really hers? I guess I'm asking which needs to be transferred into the trust - the mortgage or just the deed or both?

Her estate is relatively simple so I'd like to do this without going through an attorney, if possible. But I'm a little confused now about this weird setup with the house. Any advice is appreciated.

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The issue is not so much with the ownership of the property (the max your dad might need to do is sign off on something with the mortgage lender), but with the restrictions (and penalties) on the transfer of the home into a trust *if* there is any chance your mother may be spending time in a nursing home on Medicare in the next five years. Is she (are you) creating this trust to avoid the Medicare spend-down?

State-to-state rules vary greatly, I suggest you contact an attorney.

    Bookmark   July 17, 2009 at 11:07PM
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Why on earth would you want to set up a trust for an ill and aging mother?

Trusts for single women are more trouble than they're worth. I've been thru two situations of single women (aunts) that have set up trusts, and I'd never want to go thru that again.

The estate still goes thru the IRS if not probate. The IRS still takes 55% if the estate is large enough.

Usually, the most valuable thing in a person's estate is the house, and it's already in her name.

If she has bank accounts, just put someone else on as co-owner. If she has investment accounts, put someone on as co-owner.

Trusts sound like a good deal, but they're a pain in the ass. A will does just as good with estates under 5M.

    Bookmark   July 18, 2009 at 12:29AM
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Chemocurl zn5b/6a Indiana

Boy this is a sticky one, and I too suggest consulting a lawyer. Though her name is on the house, all she owns at this time, is the equity.

I think your father may have set himself up for disaster, if something happens to your mother and other family members decide to live in or rent the house. He could be paying for the house long after she is no longer there.

I would think his name should be put on the house, since he is the one responsible for the mortgage, regardless of who is living there. Was it his intention of the house then being passed down to the child/children, once your mother was no longer in it? Was it his intention that the house be sold when she was no longer in it, and the equity either be hers or the children's/heirs in the event of her passing?

What are your Dad's future intentions as far as the house once she is no longer there? It is nice that he has provided her with a home for whatever years it has been.

Sue...confused too

    Bookmark   July 18, 2009 at 8:31AM
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if something happens to your mother and other family members decide to live in or rent the house. He could be paying for the house long after she is no longer there.

I agree Sue. This is one thing that concerns me. I have a sibling who is very irresponsible, has no job, has been leeching off my father for most of her adult life and loves this house because it has a pool. I can certainly envision her moving in and letting Daddy just keep on paying the mortgage forever, which would create huge uproar between all 4 of mom's children. In essence, she'd get a "free" house out of the deal. Two of the children (me and my brother) live out of state, so even if she suggested we keep the house as a "gathering place" or some such which I could also envision her doing, it would still benefit only her - Daddy would be stuck, and the rest of us would have lost any proceeds we could have gained from selling the house.

I've told my mother she should stipulate that the house must be sold after her death, even if it is to one of the children. IOW, if any of us wants the house, we would have to buy it from the estate. I'm not sure the best way to set this up. Do you? I'll probably end up contacting an attorney, but if you have any suggestions in the meantime, I'd love to hear it.

kterlep - I have no idea about any medicare spend down or what that even is. It is unlikely my mother will go into a nursing home - she wants to die at home and has been adamant about that. Although whatever you're talking about is probably something I should look into. We're setting up the trust to avoid probate.

gina - can you give me more specifics about why you think a trust is a PITA? What specifically was "trouble" for you? Putting co-owners on the account is not an option right now.

    Bookmark   July 18, 2009 at 9:25AM
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Maybe this is what everyone already understands, but I just did a little searching on "Quit Claims" where the grantor (your father) signed away his interest in the house to the grantee (your mother). So, from what I gather, it's the deed in your mother's name which is the key document.

And a person planning for an estate or a living trust uses the deed to transfer ownership of the property into a trust.

And the division of assets, including the house, would be dictated by your mother's will in conjunction with any trust she might enter in to. Assets intended to be, say, divided equally among siblings would probably preclude one getting a free house - unless the others were compensated equally with other assets.

As an aside, given the choice of dealing with someone who just had an outdated will and someone with a trust, I'll take the trust hands down! I've dealt with both - the will and probate took almost two years to fully discharge. The two trusts, although about 7 years apart, each took a half hour in the lawyer's office to get underway.

Of course the IRS is involved with a trust - assets earn income so you pay taxes. Or if your estate is over 3.5 million in 2009, I think.

In my case, my brother wasn't interested in the family home, whereas I was. The house was held outside the trusts and when my mother died, her warranty deed was signed over to me. My brother was compensated for the fair market value of the home with stocks, bonds, cash - whatever type of asset he wanted in exchange.

    Bookmark   July 18, 2009 at 11:31AM
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Due to the way the capital gains law is structured, you should try to avoid listing a joint owner (non-spousal) of RE assets that have appreciated. I don't believe they get the critical full "step-up" basis that an inherited asset would receive.

For those with larger estates, it's crucial to pay attention to the changing limits on Federal Estate Taxes. The limit is $3.5M in 2009. In 2010 there is NO limit (your state of domicile may still have estate taxes due, however).

If Congress does nothing the Federal Estate Tax limit reverts to $1M in 2011. Although there is talk they will keep the 2009 limits, NOTHING has been actually decided.

I've been the executor of a will and the trustee of a Trust. There is no contest - a trust is easier to close than a will. That said, I mean a **properly done trust** - not a boilerplate document created on the cheap by someone who couldn't be bothered to ask the necessary questions before creating the trust.

Our MIL's trust, and our own RLT, was created by an excellent attorney for $2500 flat fee (apiece). This included over seven hours of pre-trust meetings to establish what each trust needed to be, creating not only the two trusts but also the necessary additional documents: pourover wills, financial power of attorney, durable healthcare power of attorney. The attorney also filed the trusts and RE deeds in court to transfer the largest assets to the trusts (we were responsible for transferring the bank checking/savings and brokerage accounts).

Neither us nor my MIL have what I'd consider complex financial situations. Nonetheless, the attorney took a great deal of time to clarify goals and customize each trust so that we're fully confident they reflect our individual preferences.

I apologize for drifting OT, but for us, a trust will make settling our estate infinitely easier for our heirs.

    Bookmark   July 18, 2009 at 3:05PM
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Chemocurl zn5b/6a Indiana

How would you mother feel about putting the house now into the 4 children's names...or the 4 children and your Father since he will be responsible for the mortgage until it is either paid off, or the house is sold and paid off?

I've told my mother she should stipulate that the house must be sold after her death, even if it is to one of the children. IOW, if any of us wants the house, we would have to buy it from the estate.
The existing Mortgage CO would have first lien, and would have to be paid off, and the new buyer/owner would then have to have their own financing. That would work.

It is sad when an adult (child) does not learn to stand on their own 2 feet and continue to leech whatever they can from their parents.


    Bookmark   July 18, 2009 at 3:13PM
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I would NOT put the house into the names of the four children or even leave it to them jointly, especially when there is one who has a track record of financial irresponsibility. After the mother passes, the four siblings (or their survivors) would either have to agree on the disposition of the house, either sell it or buy each other out, or it could end up in a family feud and/or lawsuits.

    Bookmark   July 19, 2009 at 8:36AM
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Whether the house passes to the children via a trust or a will it will receive a new assessment of worth at the time the owner dies. If the children are given the property now, the original value stands, and when they sell they may have a whopping capital gain.

    Bookmark   July 19, 2009 at 5:27PM
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I don't know about the mortgage part, but an estate planner showed us how to buy our Mom's house at the present day value without any money changing hands. He has a lawyer look over all this kind of work to be sure it is legal. The value has gone up in value $20,000. since we bought it, but divided between the 4 of us it won't be much.

    Bookmark   July 21, 2009 at 10:50PM
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