My mother wants her money back ...
My mother bought a house for $50K in 1982 and put $20K down. After a year I took over the mortgage payments and tax payments. We added me to the deed. During the next 15 years we got a second mortgage for $17K for her to renovate a bit. Mom didn't pay anything more, though she obviously took very good care of the house. In 1999, we sold the house for $82K. I took the money and bought a condo, just in my name, where my mother lives. I paid all of the expenses on buying & selling. Now she is thinking of what her grandchildren should inherit and wants her name on the title. Currently my sister and I are to inherit 50/50, but I suspect that my Mom would change the will to give something to the grandchildren.
Is there a way that I could add her to the title as a partial owner, i.e. <=30%? What potential problems can/do we have?
Just do a Quit Claim Deed from yourself to her stating that it is only for an undivided thirty percent interest. Bingo! She has 30% interest. Make sure it is tenants in common and not as joint tenants. That way her heirs have in interest in the property. Good luck! Say Hi to Mom!
KAZOR,
Let's say babsWolf does as you suggest.
Later, mom dies and the grandchildren inherit her share of the condo in accordance with the terms of mom's will. The grandchildren are impatient to cash out their inheritance, but babsWolf is not ready to sell and divide the proceeds.
The grandchildren could bring a partition lawsuit, forcing babsWolf to sell the property and distribute the proceeds to the individual owners.
A slightly better approach would be to create a living trust for mom, then deed mom's interest in the condo to the trust. As the grantor, mom could give babsWolf a life estate in the condo while naming the grandchildren as secondary beneficiaries.
babsWolf should consult professionals with specific expertise in taxes and estate planning before taking any action which may carry unwelcome consequences.
babsWolf:
DaveT has some good advice. I would steer away from the tenants in common because of the problems DaveT suggested (partition and probate). However, gifting a remainder interest to the children (that is what you are doing when your mother keeps a life estate) will likely create gift tax problems. Please, before doing anything, see an estate planning lawyer. The few dollars it will cost to set the transaction up properly will be peanuts compared to the IRS problems you can have later (the gift tax rate is 35%, so you don't want a taxable gift!).
The trust can also be set up so that the grandkids to not get title to the 30% of the house when then turn 18. It can be set up so that they will not get title until age 25, 30, 35, or whatever age you want. That is probably the better situation because if they have the right to demand a distribution from the trust, they can then force a sale on the house through a partition action.
Good luck,
Taxjunkie
Thanks all,
I will get in touch with an estate planning lawyer. We are already having "conflicts" over this, so I need to take care of it now.
best wishes,
babsWolf