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Deed is shared but not the expenses

Lynn Brenner | Family Finance

April 27, 2008

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My mom has a retained life estate in her home, with me and my sister on the deed as owners. My mom does not feel she should be paying ALL the expenses on "our home," which include the taxes, insurance and repair and maintenance costs. Who exactly is financially responsible for all these expenses in this situation? Also, when my mom dies, I want the house to be sold, and my sister won't agree to that. Does this become a lengthy court battle?

D.B. via e-mail

No need for that. You and your sister should be able to resolve the issue amicably down the road. A more pressing concern is explaining to your mother that she is responsible for all the expenses on her house.

Let's start by clarifying your situation for other readers. Your mother transferred the house to you and your sister, but kept lifetime occupancy rights for herself. (In legal jargon, this is a transfer with retained life estate.) All three of you are on the deed. Your mother owns a present interest in the house. You and your sister own a future, or "remainder," interest.

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The main reason for a parent to do such a transfer is to make sure that her children will inherit her house even if she eventually applies for Medicaid to cover the cost of nursing home care. Under current law, if your mother is the sole owner of the house, Medicaid could put a lien on it and sell it after her death to recoup benefits paid for her care. That can't happen if you're on the deed, too.

For the parent, one attraction of this type of transfer is that it preserves her control over her house. Your mother doesn't have to let you or your sister move in with her, for example, or take your advice about redecorating. If she wishes, she can rent the house to a tenant and keep all the rental income. The only thing she can't do is reclaim the future interest she gave you.

She also retains all her financial obligations with regard to the house. "The person who owns the life estate is responsible for maintaining the property and paying the taxes," said Stephen J. Silverberg, an East Meadow estate lawyer. Indeed, he added, if your mother doesn't keep the house in reasonable repair, you and your sister could sue her in Surrogate's Court - and if you get a judgment, foreclose on her.

As for the future, if you and your sister continue to disagree about selling the house, she can buy out your interest after your mother's death. "One 50 percent owner should have no trouble getting a 50 percent mortgage to buy out the other," said Silverberg.

My fiance and his brother were left their parents' home. His brother does not pay his half of the mortgage and utilities. Is there anything my fiance can do to get him out? He just refuses to get a job to pay his share of bills!

T.A. via e-mail

Yes. He can bring a partition action in State Supreme Court. The judge will appoint a referee to sell the house and split the proceeds between them.

"A partition action is simple, and there's almost no defense against it," Silverberg said. But there are costs involved. The court-appointed referee will charge a fee for his or her services. So will the lawyers who act for your fiance and his brother. (To find a lawyer, call the local bar associations and ask for referrals to litigators who handle real estate matters. For the bar association in Nassau, call 516-747-4832; in Suffolk, 631-234-5577. In New York City, call 212-626-7373.)

Your fiance should tell his brother it's better for both of them to avoid those costs by putting the house on the market themselves or arranging for one of them to buy out the other.

Send questions to Family Finance, Business Desk, Newsday, 235 Pinelawn Rd., Melville, NY 11747-4250, or e-mail to Bfamfin@aol.com. Include your age, income and a list of major assets. Letters and e-mails can't be answered personally.