How can I leave money to my son but not his wife?

Dear Len & Rosie,

My mother is thinking about giving most of her money away within the next year or two to her two children and many grandchildren. She has about $100,000, and does not own a home. Mother is especially concerned that my brother’s wife not get any of it. (don’t ask). If she gives a gift of money to her son is that considered separate property or community property? 

Nancy

Dear Nancy,

The default rule is that everything a husband and wife acquires during their marriage is community property. Fortunately, a gift or inheritance is separate property. But that’s only half the battle. Your brother has to be careful to keep his separate property separate. He should keep the money in accounts that do not have his wife’s name on title.

Your brother may even want to put the money into accounts at completely different financial institutions where he and his wife keep their money today. With the popularity of online banking, it could be possible for your brother’s wife to access his separate property accounts through the Internet, just because they have already arranged for online access to their other accounts.

Also, your brother must never, ever, ever, put any money into his separate property accounts that comes from a community property source, such as his paycheck. That’s called commingling and will likely result in some of your brother’s pre-inheritance gift being counted as community property if he and his wife divorce. If he commingles community and separate property within the same account, the burden of proof would be on him to show what portion of the account should be his and his alone.

You may have to protect your brother from himself. He may not be strong enough to withstand his wife, so he could put her name on the accounts anyway. Your mother can prevent this from happening by putting your brother’s share of her gifted money into a an irrevocable trust. That way, the money can be spent on your brother and he won’t be able to give it to his wife.

If your mother gives away more than $14,000 to any one person this year, she must file a gift tax return with her income tax returns next year. But her unified credit protects the first $5,430,000 of her assets from gift and estate tax, so she will not have to pay any gift tax to the IRS.

But your mother should be concerned about Medi-Cal. She may be giving her money away because she is worried that she will wind up in a nursing home and have to spend her life savings on her care. If so, she should be very cautious. Giving away her savings in a lump sum gift would make her ineligible for Medi-Cal nursing home benefits for almost two years. If your mother is trying to qualify herself for Medi-Cal benefits if she needs nursing home care in the future, she should first talk to an Elder Law attorney who practices Medi-Cal planning.

Len & Rosie 

Contract to Make a Will

Dear Len & Rosie,

My adopted father built his own home on property in 1964. My mother and I contributed substantial labor towards building up the home, road and ranch. My dad always said, “This will all be yours one day. You aren’t just working for me, you’re working for yourself.”

My mom passed away ten years ago and since then my dad got into a relationship with one of her best friends as his significant live-in lover. My dad feels that he owes her something for living with him and caring for the place for the past nine years.

Dad says he wants her to be able to live there after he dies for as long as she wants to or unless she remarries. I have no problem with this plan but as far as I know he has not made a will to this effect. He is dragging his feet on legal paperwork.

I am afraid that when he dies, she will claim some sort of squatter’s rights and try to take the place away from me or run up extreme maintenance costs that I can’t cover, forcing me to sell the home. What can I do to guarantee that I will get the house and land as I was promised all these years?

Richard

Dear Richard,

There’s no such thing as common law marriage in California. She’s not his wife, no matter how long they live together, unless they get married for real.

The fact that you were adopted by your father means that you are his son for all legal purposes. If your father dies without a will or trust, then everything in his estate (that is, everything titled in his name alone without a beneficiary) will be inherited equally by your father’s children. If you are the only child, it all goes to you. The only way your father’s live-in girlfriend can normally inherit, is if your father adds her to his accounts or the deed to his home, or if he makes a will or trust leaving something to her.

However, the girlfriend could claim that there was a “contract to make a will,” that is, she could claim your father promised to leave her property in exchange for her moving in and taking care of him. You could do the same yourself, based on your father’s promise that “One day, all this would be yours.” As always, the hard part isn’t having a case, it’s proving your case in court.

The smart thing for you to do is to urge your father to create an estate plan. He ought to have a revocable trust to avoid probate. He can make you the trustee after he dies, and leave his girlfriend the right to live in his home until she dies or gets married. He needs to see an estate planning attorney. If he does not, then all of his assurances to both you and his girlfriend could become nothing other than empty promises and a difficult lawsuit.

Len & Rosie