Dear Len & Rosie,
My mother-in-law wants to quitclaim her house to my husband, but she doesn't want my name placed on the deed. I guess she is afraid that in a divorce I would take half of the house. We have two young children and another house in both my husband's and my name so I'm not really bothered by this development. Should I be? Should I request that my children be put on the deed? Is this possible?
You should not be upset by this. Blood is thicker than water, as they say, and remember that the home is your mother-in-law's property, and she has the right to do with it as she pleases. The overwhelming majority of parents giving property to their children do not cut their children's spouses in for a share.
By default, anything you or your husband acquire during your marriage is community property. The principal exception to this rule is that gifts and inheritances are separate property. If your mother-in-law turns her home over to your husband, it will belong to him and him alone. Once your husband owns the home, he can transmute it into community property. Whether or not to do this is his choice and you should respect whatever decision he makes, just as you would want him to respect the decisions you make with regards to your own inheritance.
The children should not be put on the deed to the home, mostly because it would make the home subject to reassessment under Proposition 13. Transfers of property between grandparents and grandchildren can avoid a property tax reassessment, but only if the intervening parents (you and your husband) are already deceased.
The only thing about this plan that may not be such a good idea is that it is probably a bad idea for your mother-in-law to give her home away while she is still alive. She will lose control of her home. The step-up in cost basis that would otherwise happen on her death will also be lost, so your husband would have to pay a great deal of capital gains tax if he were to ever sell the family home. But if he were to inherit the home after his mother's death, the cost basis would be the property's date-of-death value and your husband could sell the home upon his mother's death and pay no capital gains tax.
Here's the best part: When you tell this to your mother-in-law, she'll see you as a loyal wife trying to safe her husband money instead of a greedy daughter-in-law trying to get her mitts on what's not hers. Before your mother-in-law signs over her home, both she and your husband should understand all of the tax consequences to doing so.
Len & Rosie
Len Tillem and Rosie McNichol are elder law attorneys. Contact them at 846 Broadway, Sonoma, CA 95476, by phone at (707) 996-4505, or on the Internet at www.lentillem.com. Len also answers legal questions each weekday, 3-4PM on Newstalk910AM.