The Pitfalls of not Getting Proper Legal Advice

Dear Len & Rosie,

My mother was widowed last July and is names as executor in my father’s will. They owned together a community property account with a brokerage firm, which requires a certified court appointment indicating my mother’s authority to act on behalf of the estate. This plus other documents will split the account into her account and an estate account which can then be transferred back to her account. This seems like a lot of work to simply remove a name on an account.

Sandy

Dear Sandy,

The reason why it’s not so easy to remove your father’s name from the brokerage account lies in the manner in which the account was titled. Assets titled in community property do not automatically pass to the surviving spouse like assets titled in joint tenancy or as “community property with right of survivorship”. Your father’s half of this account belongs to his probate estate and must pass under the terms of his will.

There are three means of getting your father’s name off of the account. If your father’s estate is worth less than $150,000, then your mother, assuming he left everything to her, can collect the account with a small estate declaration under California Probate Code section 13101. Assets in joint tenancy or with pay on death beneficiaries or in a trust don’t count against the $150,000.  Nor do vehicles registered with the DMV.

If your father’s estate is worth more than $150,000 and he left everything to your mother in his will, then your mother can petition the court for a Spousal Property Order. This will require a court petition and a hearing, but a spousal property order is easier, cheaper, and faster than going through probate. She could get the account in her name as quickly as a month after her first visit to the lawyer.

If your father’s will left his estate to someone other than your mother, and the estate is worth more than $100,000, then your mother, as the executor named in the will, should petition the court to probate her husband’s estate. She will have access to the money once she is appointed as executor and is granted “Letters Testamentary” by the judge, but she won’t be able to distribute the account to your father’s heirs until probate is closed, which takes on average 9-15 months after the probate petition to administer the estate is filed with the court.

Your parents could have avoided the difficulties your mother is having today by getting the proper legal advice. They could have created a revocable trust that would avoid having to go to court on the second death as well as the first, or they could have simply titled their accounts as joint tenants or as community property with right of survivorship. When your mother meets with a trusts and estates attorney to take care of her husband’s estate, she should also take the time to create an estate plan to save her children time and money after her death.

Len & Rosie

California's Community Property System

Dear Len & Rosie,

My husband bought a home 25 years ago with his first wife. They were divorced 2 years later. I moved in 20 years ago, and we were married 15 years ago. He never put my name on the title because it’s on Prop 13. He was concerned it would change the taxes.

The home loan payments are made out of our joint checking account, and I have put my own earnings into the house. The house will be paid off in 3 years. I am concerned about what would happen to me if he were to die or we were to divorce. He has 3 children from his first marriage. Would the California property law apply or would the property go to his children? He says we will get it changed and put my name on the title. It never seems to get done. 

Sandee

Dear Sandee,

Let’s run down the list of excuses your husband has made to shine you on and keep the property in his name. We’ll add a few to the list that you may have already heard. Property taxes, Homestead, “But, Honey, the bank will call the loan”, “I bought it before we got married”, and our personal favorite, “It’s mine, mine, mine.” None of these are true.

The home will not get reassessed if he adds you to the title, because transfers between spouses and registered domestic partners enjoy an unlimited reassessment exclusion under Proposition 13. Homestead applies to creditors in bankruptcy, not to spouses. And the bank will not call the loan because they don’t care as long as the borrower remains on title and they still get paid.

What it all comes down to is that he thinks the home is his because he bought it before you were married. He is only half right. Under California’s community property system, everything either spouse earns during marriage is community property and everything acquired with community property is community property. Even though the deed says the home belongs to your husband alone, there is a community property interest in the home that is half yours.

The community owns whatever portion of the purchase price of the home that is paid off with community property. Interest payments do not count, only payments towards principal. Let’s say the down payment and the principal portion of the loan payments your husband made prior to your wedding paid off one-third of the purchase price of the home. That means only one-third of the home is actually your husband’s separate property. The rest belong to you and your husband as community property, and half of that is yours.

The bad news is that you do not get any credit for contributions you made while you were living together for five years prior to the marriage. Unless you had an agreement that you would get equity for your pre-marital payments they are considered to be rent.

Unless he is finally willing to sign a deed giving you your share, there is nothing you can do unless you file for divorce or make a claim against his estate when he dies. Whatever you do, do not sign any “Interspousal Quitclaim Deeds” that could result in a loss of your community property rights.

Sit down and remind him that after fifteen years of marriage, you are probably a “keeper”. If he wants to keep it that way, he will need to act with a little common sense and generosity and show his appreciation for all you have done for him.

Len & Rosie