What happens to your property when you outlive your spouse?

Dear Len & Rosie,

I own a home and the deed is in my name only. My wife and I have been married for 23 years and she is a Japanese citizen. If I die, will my wife be able to get the home even though her name is not on the deed? Should I put her name on the deed?

Bob

Dear Bob,

What ever you do, don’t leave things alone, because if you die without a will or a trust, and your wife isn’t on title to the home with you, then you’re inaction is going to make things very difficult for her after your death. You need an estate plan.

If you die first, and you don’t have at least a will, then your wife will inherit all of the community property and either one-half of your separate property, if you have no children or only one child. If you have more than one child, your widow shall inherit only one-third of your separate property, together with the community property. The rest will wind up in the hands of your children or more distant relatives.

Only the portion of the home that you already bought and paid for prior to getting married is your separate property. The portion of the principal balance of your home loan that you paid off during the twenty-three years of your marriage is community property, half owned by your wife, even though her name isn’t on the deed to your home. But that’s not good enough to ensure that she’ll inherit the home on your death, because your children or other family members may argue with your wife as to how much of your home is community property. You’re asking for trouble, especially if they don’t like your wife.

At the very least you need to make a will that leaves your home to your wife upon your death. If you want her to avoid having to file a spousal property petition, you should either create a revocable trust with your wife, or you can add her name to the title of your home.

There are two ways of doing this. More commonly, married couples own their homes in joint tenancy, but it’s better that the home be titled “husband and wife as community property with right of survivorship”. That way, the home will avoid probate upon the first death, but it will also be counted as community property for tax purposes. Upon the first death, the cost basis of 100% of the home (not just the dead spouse’s half) will be stepped up to its date-of-death value. This would allow your wife to sell the home if she wants to after your death while avoiding a great deal of capital gains tax.

However, the best thing that the two of you could do is to create a revocable trust to avoid probate on the second death as well as the first, but if you choose to go with wills and holding title to the home in both of your names, do not forget that both of you need to create durable general powers of attorney and advance health care directives so that you may make important decisions for one another if either of you should become incapacitated.

Len & Rosie

intestate succession and what it means

Dear Len & Rosie,

I have a friend named who is in her 70’s. Her husband passed away three months ago. She and her husband got married recently, but had lived together for 30 years. He owned the house in his name alone. Unfortunately there was no will. She had lived with him in this house since about 1978. He has a daughter from a previous marriage who is trying to take the house. Additionally, she’s been told that since they were married for less than five years she’s not entitled to his Social Security. Is there anything I can do so that she can keep the house? I just can’t believe his daughter is entitled to take something that was never hers.

Debbie

Dear Debbie,

Your friend’s husband died without a will. That means his home and everything else in his estate shall pass by intestate succession - the word “intestate” means “no testament” as in “Last Will & Testament.” Intestate succession is the default estate plan created by the California Legislature. It’s their best guess as to how most people would want their assets distributed when they die. It’s a shame our government declined to disinherit wicked daughters from prior relationships.

In this case, your friend inherits all of the community property, but there probably isn’t any, as her husband was probably already retired when they got married. She will also inherit either one-half of his separate property, if her husband had only the one daughter, or one-third of the separate property if he had more than one child. So at best she’ll own half the home.

The only way your friend would be entitled to more than that is if she could prove that her husband promised to leave her everything, or at least the home, and that there’s a written contract or she acted to her own detriment in reliance of her husband’s promises. Please understand that this is a Hail Mary Pass and isn’t likely to succeed unless she has a lot of evidence in her favor.

Your friend’s husband could have avoided this problem by making a will, and he could have even done it for free by downloading the California Statutory Will form from the State Bar web page at www.calbar.ca.gov.  If he had wanted to protect his daughter too, he could have created a trust that gave his wife the right to live in the home until her death. But it’s too late for that. The best your friend can do now is to make a deal with her husband’s daughter. Maybe she’ll be willing to forgo selling the home now in return for inheriting the entire property upon her step-mother’s death.

As for Social Security, the rule is that you have to be married for one year for a surviving spouse to collect a pension off of the deceased spouse’s earning record.  If your friend’s husband died before their first anniversary, there’s nothing that can be done.

We hate to be the bearers of such bad tidings but we do so in the hope that readers of this column will take note. Getting married or divorced is always a reason to consult with an estate planning attorney to make sure that your affairs are in order. If your friend and her husband had done so, she wouldn’t be in such a trouble today.

Len & Rosie