HOUSING EXPENSES: mom doesn't want to pay her share

Q: 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? -- DB via email 

A: No need for that. You and your sister should be able to resolve the issue amicably down the road. Meantime, you have a more pressing concern: 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 she kept lifetime occupancy rights for herself. (In legal jargon, this is called 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.  

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 New York 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 the 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 the living room. 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," says Stephen J. Silverberg, an East Meadow New York estate lawyer.  

Indeed, he adds, 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 don’t agree about selling the house, she can buy out your interest after your mother's death. "One 50% owner should have no trouble getting a 50% mortgage to buy out the other," says Silverberg.

Please send your questions to Lynn@LynnBrennersFamilyFinance.com.  I'm sorry I can't respond personally to every email. Questions are only addressed online.(c) Lynn Brenner, All Rights Reserved

Comments

[jazzygirl58]

What if the sister refuses to buy out OR sell? Then, you will have a court battle, right?

[lynn brenner]

Lynn responds: Right -- but the threat of legal action may be enough.

The action itself is simple and straightforward. The sister who wants to sell would bring a partition action in State Supreme Court. There's really no defense against this. The judge appoints a referee to sell the house and split the proceeds between the sisters.

But of course, the court-appointed referee will charge a fee for his or her services. So will the lawyers who represent the sisters in court.

Bottom line: 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.