How bad is owning half a house?
December 28, 2011 12:18 PM Subscribe
What's the legal liability ramifications of owning half a house? (I already have a lawyer. I wanted a second/English opinion.)
A couple years ago, my mom died. My sister and I are the only heirs and there was no will. In her state, this meant we had to split everything 50/50, apparently, with real estate being split as a separate thing from liquid assets. A family friend happens to be a lawyer (and judge) in that state and agreed to help us with the probate pro bono.
My sister lived with her, but the house was only in my mom's name and thus also had to be split. The house is in terrible condition. Appraised in the low 5 digits type bad condition.
Assuming my sister wouldn't want to live there, I said sure, we could each own half of it until we could sell it. Then it turned out she wanted to stay. Not being willing to own half a terrible house out-of-state in perpetuity, and after some argument, I finally got her to agree she would buy my half from me.
Now comes the really stupid part. A year ago, when the estate still hadn't cleared, I agreed with my sister that she could pay me my half in monthly installments for about 3 years starting when the estate cleared. (All this via email, btw.) Now it's a year later, the estate just cleared, and my wife, who is the financial brains in my family, is unhappy with that arrangement (which has only just been made clear to her--again, I'm very stupid). Her problems are fourfold, with an extra problem at the end:
1) It just doesn't make sense that my sister would have the "same money twice" for any length of time. I.e. both halves of the house PLUS an amount of money equal to half a house. Basically, we are loaning her many thousands of dollars that we could be, for instance, sending to our mortgage.
2) We may have legal liabilities. For instance, what if this terrible house falls on someone's head? Do we need insurance for that? Or what if the house burns down? Is our agreement null and void?
3) Taxes. Because I work over a state border from my house, we already have inter-state income tax to deal with. Will we also have inter-state property tax?
4) Tuition. 3 years from now, my oldest child will be 16. If my sister's payments slip at all (see 5, below), this could stretch into the time when it could impact our tuition assistance assessment. "You owned 1.5 houses 9 months ago? DENIED!"
5) This is one I haven't even mentioned to my wife: If/when my sister misses a payment, then what? (And while I was writing all this: If the house did burn down, say, and my sister declared bankruptcy, am I out of luck?)
There are probably multiple ways one could structure such a deal to eliminate/reduce these problems. At one point, the lawyer said something about a promissory note and a lien. Does that mean I have no legal problem and maybe no real-estate tax problem? Or tuition? Is there something built in to promissory notes that more-or-less renders the "recovery from a non-paying sister" a non-problem?
I think that ends the question portion. Now to the preventing obvious solutions part:
When I suggested to my sister that she just send me my full check right away, she said that would leave her with insufficient savings as a buffer, plus no cash for repairs. I've suggested two solutions to her: 1) Take the payments she would have sent me and put them into her savings. 2) Get a mortgage. Either of those is basically identical to the "me loaning her the money against my will" solution from her POV, but very different from my POV. She refuses to do these things and said I was being selfish because SHE "had plans for that money too". (See "same money twice" above.)
So I guess there's one more question, which is this: Do I have to accept her dribbling my money out to me or not? I doubt I can force her to buy my half the house and I also doubt I could dictate a payment plan. Or am I wrong about either of those? Could I sell my half to someone else and let them deal with her?
Oh and the relationship with my sister is far less important to me than the relationship with my wife, especially since one of them is being unreasonable and the other isn't.
A couple years ago, my mom died. My sister and I are the only heirs and there was no will. In her state, this meant we had to split everything 50/50, apparently, with real estate being split as a separate thing from liquid assets. A family friend happens to be a lawyer (and judge) in that state and agreed to help us with the probate pro bono.
My sister lived with her, but the house was only in my mom's name and thus also had to be split. The house is in terrible condition. Appraised in the low 5 digits type bad condition.
Assuming my sister wouldn't want to live there, I said sure, we could each own half of it until we could sell it. Then it turned out she wanted to stay. Not being willing to own half a terrible house out-of-state in perpetuity, and after some argument, I finally got her to agree she would buy my half from me.
Now comes the really stupid part. A year ago, when the estate still hadn't cleared, I agreed with my sister that she could pay me my half in monthly installments for about 3 years starting when the estate cleared. (All this via email, btw.) Now it's a year later, the estate just cleared, and my wife, who is the financial brains in my family, is unhappy with that arrangement (which has only just been made clear to her--again, I'm very stupid). Her problems are fourfold, with an extra problem at the end:
1) It just doesn't make sense that my sister would have the "same money twice" for any length of time. I.e. both halves of the house PLUS an amount of money equal to half a house. Basically, we are loaning her many thousands of dollars that we could be, for instance, sending to our mortgage.
2) We may have legal liabilities. For instance, what if this terrible house falls on someone's head? Do we need insurance for that? Or what if the house burns down? Is our agreement null and void?
3) Taxes. Because I work over a state border from my house, we already have inter-state income tax to deal with. Will we also have inter-state property tax?
4) Tuition. 3 years from now, my oldest child will be 16. If my sister's payments slip at all (see 5, below), this could stretch into the time when it could impact our tuition assistance assessment. "You owned 1.5 houses 9 months ago? DENIED!"
5) This is one I haven't even mentioned to my wife: If/when my sister misses a payment, then what? (And while I was writing all this: If the house did burn down, say, and my sister declared bankruptcy, am I out of luck?)
There are probably multiple ways one could structure such a deal to eliminate/reduce these problems. At one point, the lawyer said something about a promissory note and a lien. Does that mean I have no legal problem and maybe no real-estate tax problem? Or tuition? Is there something built in to promissory notes that more-or-less renders the "recovery from a non-paying sister" a non-problem?
I think that ends the question portion. Now to the preventing obvious solutions part:
When I suggested to my sister that she just send me my full check right away, she said that would leave her with insufficient savings as a buffer, plus no cash for repairs. I've suggested two solutions to her: 1) Take the payments she would have sent me and put them into her savings. 2) Get a mortgage. Either of those is basically identical to the "me loaning her the money against my will" solution from her POV, but very different from my POV. She refuses to do these things and said I was being selfish because SHE "had plans for that money too". (See "same money twice" above.)
So I guess there's one more question, which is this: Do I have to accept her dribbling my money out to me or not? I doubt I can force her to buy my half the house and I also doubt I could dictate a payment plan. Or am I wrong about either of those? Could I sell my half to someone else and let them deal with her?
Oh and the relationship with my sister is far less important to me than the relationship with my wife, especially since one of them is being unreasonable and the other isn't.
IAAL. IANYL. TINLA.
If you can't understand your lawyer's explanation of your current situation, you need a different lawyer. You're right that there are multiple ways to structure a deal, and you have identified several of the issues that could (or will) arise.
This sort of thing crops up fairly regularly, and there are standard ways of dealing with all the issues, taking into consideration how much you trust the other party, how much you're willing to give up to reduce risk, and how concerned you are about preserving relationships vs. gettin' tha' cash mo-nay.
Please, see a lawyer and get this sorted out (even if you decide that "sorting it out" is simply to give your sister the house and wash your hands of it).
posted by spacewrench at 12:33 PM on December 28, 2011 [2 favorites]
If you can't understand your lawyer's explanation of your current situation, you need a different lawyer. You're right that there are multiple ways to structure a deal, and you have identified several of the issues that could (or will) arise.
This sort of thing crops up fairly regularly, and there are standard ways of dealing with all the issues, taking into consideration how much you trust the other party, how much you're willing to give up to reduce risk, and how concerned you are about preserving relationships vs. gettin' tha' cash mo-nay.
Please, see a lawyer and get this sorted out (even if you decide that "sorting it out" is simply to give your sister the house and wash your hands of it).
posted by spacewrench at 12:33 PM on December 28, 2011 [2 favorites]
Please, see a lawyer and get this sorted out (even if you decide that "sorting it out" is simply to give your sister the house and wash your hands of it).
I just went in to talk to my husband about this question and our similar situation, and this was the ultimate suggestion that came up. It's possible that your sister won't qualify for a mortgage (it's not so easy these days) and if she doesn't have the cash to pay and you don't want to wait to receive money via a payment plan, gifting the house to her so that you don't have to worry about the liability is always an option.
posted by PhoBWanKenobi at 12:37 PM on December 28, 2011 [1 favorite]
I just went in to talk to my husband about this question and our similar situation, and this was the ultimate suggestion that came up. It's possible that your sister won't qualify for a mortgage (it's not so easy these days) and if she doesn't have the cash to pay and you don't want to wait to receive money via a payment plan, gifting the house to her so that you don't have to worry about the liability is always an option.
posted by PhoBWanKenobi at 12:37 PM on December 28, 2011 [1 favorite]
Was your sister your mother's unpaid caregiver? Because if she provided daily care while you lived with your family elsewhere, I would just give her your share of the house. It doesn't sound like the house is worth very much at all, and this would end your liability.
posted by crankylex at 12:41 PM on December 28, 2011 [13 favorites]
posted by crankylex at 12:41 PM on December 28, 2011 [13 favorites]
The house is worth 25K and your interest is half? 12.5K? Just give it to her. Outright give it to her. Save yourself the insurance, the headache, the repair bills and the demise of your relationship with your sister and just sign it over to her with your lawyer's help.
posted by DarlingBri at 12:55 PM on December 28, 2011 [10 favorites]
posted by DarlingBri at 12:55 PM on December 28, 2011 [10 favorites]
Basically, we are loaning her many thousands of dollars that we could be, for instance, sending to our mortgage.
Well, not really, unless the reason for the house's dilapidation is that the walls are made of pasted-together dollar bills. While I'll nth the suggestion to find a lawyer to act in your interests, I think that you perhaps need to stop thinking of your half-share of the house as "many thousands of dollars" and start thinking of it as a piece of property for which you are currently partly responsible, and for which you'd clearly prefer not to be responsible.
In short: half a house is not freely convertible into "an amount of money that is half a house's appraised value." If you don't want it to be converted into "an amount of money that may be less than half a house's value, plus an amount of grief with your wife, your sister, the people who live near the house, and the tax man", then signing it over may be the best long-term choice.
posted by holgate at 12:58 PM on December 28, 2011 [3 favorites]
Well, not really, unless the reason for the house's dilapidation is that the walls are made of pasted-together dollar bills. While I'll nth the suggestion to find a lawyer to act in your interests, I think that you perhaps need to stop thinking of your half-share of the house as "many thousands of dollars" and start thinking of it as a piece of property for which you are currently partly responsible, and for which you'd clearly prefer not to be responsible.
In short: half a house is not freely convertible into "an amount of money that is half a house's appraised value." If you don't want it to be converted into "an amount of money that may be less than half a house's value, plus an amount of grief with your wife, your sister, the people who live near the house, and the tax man", then signing it over may be the best long-term choice.
posted by holgate at 12:58 PM on December 28, 2011 [3 favorites]
Your sister isn't being unreasonable at all - she's acting in accord with the agreement you two made, in writing. Your wife may not like what you did but that doesn't undo it.
If you don't understand what your lawyer is telling you, ask for further explanation, and if you don't like what your lawyer is telling you, no one here is going to be able to change that advice or make it better. You really, really need your attorney and insurance agent (and probably accountant) to go through those questions in detail, ideally in an environment where you can ask follow up questions.
posted by mrs. taters at 1:05 PM on December 28, 2011 [4 favorites]
If you don't understand what your lawyer is telling you, ask for further explanation, and if you don't like what your lawyer is telling you, no one here is going to be able to change that advice or make it better. You really, really need your attorney and insurance agent (and probably accountant) to go through those questions in detail, ideally in an environment where you can ask follow up questions.
posted by mrs. taters at 1:05 PM on December 28, 2011 [4 favorites]
My cousin was a probate lawyer for many years, and I used to work in his office for a while when he was getting out of that business. I will never forget something he told me: "when somebody dies, you would think that family would pull together. If there is an inheritance, they don't. There is something about grief and money that turns people into monsters."
It's not a lot of money, in the grand scheme of things. Especially if your sister was taking care of your mother. However likely it is that your sister will fail to complete the payments, it is exactly that likely that you will also lose your relationship with your sister: either you'll be (rightly) upset, or she'll be (rightly) ashamed, or both. There is a lot of wisdom in the proverbs about lending money to friends and family.
My advice would be, make her a gift of the place. Take your name off the deed (this also gets you off the hook for insurance and so forth) and tell her it's hers. If she wants to pay you for it, treat the money as an unexpected gift, and let her know that you're not expecting it.
But this is me, coming from my own place with regard to my relationships with my siblings. You might be in a different place. In which case, you should talk to your own lawyer, NOT the lawyer who probated the estate.
posted by gauche at 1:38 PM on December 28, 2011 [2 favorites]
It's not a lot of money, in the grand scheme of things. Especially if your sister was taking care of your mother. However likely it is that your sister will fail to complete the payments, it is exactly that likely that you will also lose your relationship with your sister: either you'll be (rightly) upset, or she'll be (rightly) ashamed, or both. There is a lot of wisdom in the proverbs about lending money to friends and family.
My advice would be, make her a gift of the place. Take your name off the deed (this also gets you off the hook for insurance and so forth) and tell her it's hers. If she wants to pay you for it, treat the money as an unexpected gift, and let her know that you're not expecting it.
But this is me, coming from my own place with regard to my relationships with my siblings. You might be in a different place. In which case, you should talk to your own lawyer, NOT the lawyer who probated the estate.
posted by gauche at 1:38 PM on December 28, 2011 [2 favorites]
' half a house is not freely convertible into "an amount of money that is half a house's appraised value." '
This needs extra emphasis.
I'm sorry for your loss and your situation.
posted by notned at 1:50 PM on December 28, 2011 [3 favorites]
This needs extra emphasis.
I'm sorry for your loss and your situation.
posted by notned at 1:50 PM on December 28, 2011 [3 favorites]
Lawyer here, confirming the suggestion (not advice) to let her have it entirely. You can be a White Knight.
All of the things your lawyer has mentioned would be very good ideas for a house with a good value. But a POS house is no asset.
You are, it appears, a tenant in common with her. A quit-claim deed in her favor would put it entirely in her name.
posted by yclipse at 1:56 PM on December 28, 2011
All of the things your lawyer has mentioned would be very good ideas for a house with a good value. But a POS house is no asset.
You are, it appears, a tenant in common with her. A quit-claim deed in her favor would put it entirely in her name.
posted by yclipse at 1:56 PM on December 28, 2011
I'm pleased that I was not the first person to immediately think, "Just sign the whole place over to her and wash your hands of it." You're probably incredibly irritated with her right now and want to stick it to her, but being the bigger person is going to reap dividends one day that are far beyond what a couple thousand bucks are right now or trickled over three years. A falling-apart house and all the liabilities that includes are not going to be worth it to you, especially with your oldest starting college in just three or four years.
Your wife must love you very much for your tone to be so even in this question. Once you're rid of the house, make her a nice dinner or something. Those of us with brains that don't handle finances well are lucky to have folks like your wife who love us.
posted by juniperesque at 2:16 PM on December 28, 2011 [1 favorite]
Your wife must love you very much for your tone to be so even in this question. Once you're rid of the house, make her a nice dinner or something. Those of us with brains that don't handle finances well are lucky to have folks like your wife who love us.
posted by juniperesque at 2:16 PM on December 28, 2011 [1 favorite]
Hey, I'm sure we all could use some extra money, and your mom clearly wanted an even split between you, so I can appreciate you desire to work something out. But if as you say the house is only worth "in the low five digits" then I think it could straight up be to you financial benefit to hand over. Not only will it save your relationship with your sister, and keep your daughter eligible for any financial aid she's entitled to, you also won't be getting any phone calls over the next three years asking you to fork over to get you half-boiler repaired or your half-roof fixed or your half-tree cut down. If the house is in as bad a shape as you say, I think you'll save yourself a lot of time and trouble getting out of it now.
posted by Diablevert at 2:22 PM on December 28, 2011 [4 favorites]
posted by Diablevert at 2:22 PM on December 28, 2011 [4 favorites]
i think one person in this situation is being unreasonable and i don't think it's your sister or wife. you agreed to something in writing and now much later you want to change it because your wife has a better idea. well, this seems like a great life lesson - don't make financial decisions without your wife in the future. this situation is already set so you can't go back and retroactively apply that lesson.
posted by nadawi at 2:29 PM on December 28, 2011 [8 favorites]
posted by nadawi at 2:29 PM on December 28, 2011 [8 favorites]
Unless the house is sitting on some valuable real estate, I too think that you should let her have the house. Because of the condition of the house, it sounds like it is more liability than asset. You might be doing yourself a favor more than her- it sounds like an albatross.
I would make her this offer: she gives you 1/4 of the appraised value in cash right now, and the house is hers. It isn't "fair" because it doesn't exactly balance out to 50:50, but having it over with is worth plenty. In other words, don't be greedy (or let yourself be talked into acting greedily), especially with what amounts to free money. If you want to change the deal, you pretty much have to give something up to do it.
If you must keep the monthly payment arrangement, I would suggest setting it up legally as a mortgage. She is the title holder, and you hold a mortgage lien against the title. That way, you aren't the owner of the property should anything bad happen to the property, nor are you on the hook for unpaid bills or taxes.
posted by gjc at 4:20 PM on December 28, 2011 [1 favorite]
I would make her this offer: she gives you 1/4 of the appraised value in cash right now, and the house is hers. It isn't "fair" because it doesn't exactly balance out to 50:50, but having it over with is worth plenty. In other words, don't be greedy (or let yourself be talked into acting greedily), especially with what amounts to free money. If you want to change the deal, you pretty much have to give something up to do it.
If you must keep the monthly payment arrangement, I would suggest setting it up legally as a mortgage. She is the title holder, and you hold a mortgage lien against the title. That way, you aren't the owner of the property should anything bad happen to the property, nor are you on the hook for unpaid bills or taxes.
posted by gjc at 4:20 PM on December 28, 2011 [1 favorite]
Your sister is sticking to a deal that you made with her, in writing. I understand why you're upset, but I don't think she's being unreasonable here. If we're really in that either/or situation you posit (she or your wife is being unreasonable), I guess it's your wife, although, again, I understand where you're coming from and in my book that means your wife isn't necessarily being unreasonable, either.
If your lawyer isn't being clear with you, you either need to talk to your lawyer again or find a new one.
But here's the thing. Your sister is hurting financially and is not financially stable. Your share is, what, $10,000? Given your concerns about having an ownership share in the property, I would be very tempted to either just give it to her or to sell it to her for a lump sum payment of less than $10,000. Can she afford $5,000? $3,000? Just work something out. Your wife needs to understand the downsides to the current situation that you are worried about, as well as the fact that you did make this deal with your sister... it sucks that you don't like the deal now, but sometimes that happens.
posted by J. Wilson at 5:51 PM on December 28, 2011 [3 favorites]
If your lawyer isn't being clear with you, you either need to talk to your lawyer again or find a new one.
But here's the thing. Your sister is hurting financially and is not financially stable. Your share is, what, $10,000? Given your concerns about having an ownership share in the property, I would be very tempted to either just give it to her or to sell it to her for a lump sum payment of less than $10,000. Can she afford $5,000? $3,000? Just work something out. Your wife needs to understand the downsides to the current situation that you are worried about, as well as the fact that you did make this deal with your sister... it sucks that you don't like the deal now, but sometimes that happens.
posted by J. Wilson at 5:51 PM on December 28, 2011 [3 favorites]
I agreed with my sister that she could pay me my half in monthly installments for about 3 years starting when the estate cleared
My sister lived with her
Did your sister take care of your Mom? Is so, consider the lost interest to be a moral debt. Even better, give her your half of the house. If she has no kids, you could stipulate that she leave some of her assets to your kids. There may be no assets let at the end of her life, but it would give you some sense of getting value.
You should insist that your sister maintain insurance for liability and property. What if the house falls down, hurts no one, but is uninsured?
taxes. Get a professional opinion.
Your logic about your sister getting the value twice is quite flawed. She gets 1/2 a house. She pays for the other 1/2 in installments. The 'deal' she's getting is not paying interest, and not having to jump through hoops to get a mortgage.
Unless you have bigger money problems than you've indicated, stick to the agreement you made, or, even better, give her your interest in the house.
posted by theora55 at 1:35 PM on December 29, 2011 [1 favorite]
My sister lived with her
Did your sister take care of your Mom? Is so, consider the lost interest to be a moral debt. Even better, give her your half of the house. If she has no kids, you could stipulate that she leave some of her assets to your kids. There may be no assets let at the end of her life, but it would give you some sense of getting value.
You should insist that your sister maintain insurance for liability and property. What if the house falls down, hurts no one, but is uninsured?
taxes. Get a professional opinion.
Your logic about your sister getting the value twice is quite flawed. She gets 1/2 a house. She pays for the other 1/2 in installments. The 'deal' she's getting is not paying interest, and not having to jump through hoops to get a mortgage.
Unless you have bigger money problems than you've indicated, stick to the agreement you made, or, even better, give her your interest in the house.
posted by theora55 at 1:35 PM on December 29, 2011 [1 favorite]
This thread is closed to new comments.
I empathize with your wife. I'm in a similar situation with my husband, who owns half a house he doesn't live in with his brother. However, if he agreed (again, in writing) to a financial arrangement for the purchase of it, I'd accept that. It's his family and his money. And your sister isn't being all that unreasonable--she's lived in this house presumably for years, and you went in assuming that she'd want to move out of it. That doesn't seem fair.
I can't really speak to the legal aspects, and hopefully someone else will, but it doesn't sound to me like your sister is being unreasonable. It sounds like you agreed to something and are now trying to change the terms of the agreement without giving your sister time to figure out other options.
posted by PhoBWanKenobi at 12:28 PM on December 28, 2011 [3 favorites]