I used to be mistakenly added to the deed on my father-in-law’s home. What are the results for my household?
A few years ago we moved my father-in-law, who suffers from heart problems and early dementia, from his home in a large metropolitan area to our smaller community four hours away. He was able to sell his house there for a lot more than the house he bought in our community, but the closure of his former home was delayed so I eventually co-signed his mortgage, which he paid off about a week later.
About six months ago my wife and I refinanced our house and found that I was on the title of my father-in-law’s house with a 0% stake. We needed proof of insurance for his house and found that I was also on his insurance policy. The agent indicated that I should consider leaving it that way as it might help if he becomes incapacitated.
My father-in-law stated in his will that the house would be sold and the proceeds shared among his grandchildren, so I wonder if I might run into problems with the title or have any tax implications. Should I move away from the title and if so, how would I do that?
Thanks very much,
‘The Big Move’ is a MarketWatch column that covers the ins and outs of real estate, from finding a new home to applying for a mortgage.
Do you have a question about buying or selling a property? Would you like to know where your next move should be? Email Jacob Passy at TheBigMove@marketwatch.com.
Your father-in-law is very fortunate to have you as a son-in-law, and it is admirable that you stepped in – seemingly on very short notice – to make sure he was able to buy his house. However, it is clear that in the rush to finalize the deal, some misunderstandings emerged.
Before I make my recommendations, I would like to take a moment to clarify the difference between a house deed and the title. These terms are often used interchangeably in casual conversation when talking about buying or owning a home, but they are not exactly synonyms.
A deed is a physical, legal document that outlines who owns a property; The title, on the other hand, is the concept that the property is yours. The deed must be signed by the buyer and seller and serves as proof of your ownership of the house.
Indeed, it is possible to co-sign a mortgage without being listed on the title deed and it will appear that you intended to do so. Anyone who has bought a home knows the mountains of paperwork that they need to sign in order to close the deal. I suspect you accidentally signed the deed thinking it was part of the mortgage papers.
““A deed is a physical, legal document that defines who is the owner of a property; while the title is the concept that you own the property. ‘”
Whatever the case, what is done is done. The repercussions of this mishap will depend in large part on how the deed is phrased. There are different types of deeds. A common form is the joint tenancy with survivors’ rights – with this deed, the co-owners each have an equal share in the property. In the case of a joint tenancy, the share is divided among the remaining owners in the event of the death of an owner.
Since your share is 0%, I believe that your deed will likely have a “common rental structure”. This form of deed enables unequal ownership. Lenders often don’t allow this structure to exist because they want everyone on the mortgage to have an equal share of the loan to ensure their repayment, but perhaps your father-in-law’s lender has been more lenient given the circumstances.
Renting together is a popular strategy, and in some states the standard form of deed for unmarried people buying a home together. However, I can’t say I’ve heard of a scenario where one of the owners technically had a 0% stake.
In contrast to a joint tenancy, the inheritance process works differently in a joint tenancy. When an owner dies, his share goes to his heirs and not to his co-owner, as stated in the will. Simply put, your name on the deed does not prevent the house from going to your father-in-law’s heirs as he would like, although you may need to sign all of the papers to sell the house should the time come after he dies come.
“The way in which the deed is written determines how ownership of the property passes to the heirs.”
However, there are many reasons why you should consider parting with the deed. Since you are technically a written co-owner of the home, if you negligently make your payments, debtors could theoretically go on your share of the home’s value to get back the money they owed. But here, too, the 0% share makes this a bit unusual.
At least the current arrangement is unnecessarily complicated. Since your father-in-law has dementia, their children should arrange to appoint someone to act as their proxy or carer if they have not already done so. That person could then be hired to deal with insurance companies and manage their financial affairs instead of you.
Perhaps the easiest way to fix this problem is to go through the quitclaim process. This will vary from state to state, but generally involves completing the required paperwork, signing and recording it with the office responsible for keeping records of any documents your father-in-law lives in.
However, your family should consider whether it is worth investing the home in a living foundation. There are benefits to this as the home can bypass the inheritance process, which can be a long one. In addition, there are tax benefits as well as benefits with regard to supporting your father-in-law with the need for care.
Since the deed has been accidentally messed up before, you should all seek advice from an attorney who will guide you through the correct steps to resolve it and advise you on the best options for owning the property with your father’s future and your family’s legacy mind. I hope these next steps have been going more smoothly for you all along.
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