Husband and wife NOT as joint tenants and some options

INTRODUCTION

I was presented a really interesting hypothetical recently. I thought it would make for a good blog post as there are a lot of intricate turns. It gets into issues of how to hold title, how to distribute assets between husbands and wives, and how small estate options work after death.

HYPOTHETICAL

In this case Harold and Wendy owned a property worth $125,000. More interestingly they actually owned 10% of a property worth about $1.25m.  Why is this more interesting? The loan on the property is about the same. H and W are now deceased and the rest of the owners on the property want to sell it to get out from under it. H committed suicide after committing fraud on a number of real estate deals.  W, was innocent in the transactions, and died a short time later penny-less. The title is held “Harold Doe and Wendy Doe husband and wife.”  It does not specify joint tenants or rights of survivorship. The rest of the owners need to clear title that is held in H and W’s names.

THE PROBLEM

I think the biggest problem here is getting the property transferred from H to W. That is, transferring from W is easy. The total is less than $150,000 so that can easily be accomplished by a probate code 13150 petition to succession of real property. That’s the easy part. Getting the property into W’s name is the hard part. Why was it not held as “joint tenants” or as “community property with the rights of survivorship” I do not know. Maybe the Realtor or title company are at fault. However, it is what it is now.

THE OPTIONS

The options I see for getting the property out of H’s name are as follows:

1) Disclaimer: If this had been done within 9 months of his death a disclaimer would have been a simple and inexpensive way to clear title to H’s 1/2 of the 10%. However, it’s been longer than 9 months so that won’t work here.

2) Spousal Property Petition: This is usually my go-to option if an asset is not held in joint tenancy or with rights of survivorship after one spouse dies. However, in this case they had a will which poured over to a trust. You can not use a SPP when there is a will pouring to a trust. So that option is off the table. If there was not a pour over will I would use this procedure as it avoids the need for an appraisal of H’s interest in the property.

3) Under $50,000 Affidavit: Yes, husband’s 1/2 is worth about $62,500 but maybe we could convince the Probate Referee to accept conventional discount valuation analysis and value his interest at $50,000 or less!? The only problem is we would need to get someone appointed as at least special administrator of W’s estate to carry out this procedure. That adds cost.

4) Under $150,000 Succession: If the Probate Referee doesn’t buy the discount valuation analysis then this would be the next best option. More expensive than the under $50,000 affidavit but this would be necessary if the Probate Referee doesn’t agree that the value of H’s interest is less than $50,000.

THE OTHER HALF OF THE PROBLEM

Once out of H’s name what’s best for W? I believe in the end it may be best to do a full probate for W. This would enable her estate to sign the under $50,000 affidavit or under $150,000 succession. It also will, overall, create the simplest solution.

CONCLUSION

Probate is generally to be avoided when it can. Costs are less and the case is resolved quicker when a full probate is avoided. However, in this case I believe doing a full probate for W, even though it’s not required, may be the more efficient way to transfer the asset and allow the partners to sell the property.

 

 

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Know thy probate options

I met with a new client today whose husband died recently. She said she went to a local attorney, who was very nice, and told her she would have to do a full probate to get the house out of her husband’s name and into her name.  The grieving widow, luckily, decided to do a little more research before hiring that attorney.

The problem is that this attorney didn’t know all the options or… worse.  Let’s just assume he didn’t know all the options. The problem is a lot of attorneys say they are “probate attorneys” because they have done a probate before. This does not make one a true probate attorney.  Doing one or two or even 20 probates does not make one an expert.

If you are looking to hire an attorney find someone that:

1) is a CERTIFIED SPECIALIST IN ESTATE PLANNING TRUST AND PROBATE LAW;

2) only knows about probate, trust and estate law on their website;

3) has been practicing for many years.

If you find anybody else you are shortchanging yourself.

In this case the client came to me and suggested that from her research a spousal property petition might be a more efficient way to go. In fact, normally that’s our go-to petition when one spouse dies. However, in this case they had a short term marriage and thus the house being in the deceased husband’s name (alone) will make a spousal property petition, or SPP, very difficult.

She told me the house was probably worth about $190,000.   I asked if there was any chance it would appraise for $150,000. She said YES!  So we are going to try to get it appraised for under $150,000 so that we can file a petition to determine succession to real property worth less than $150,000. In this case the decedent’s only child is in full agreement and thus the under $150k probate should work.

The options such as an SPP or an under $150k probate pay the attorney less than a full probate.  Sadly there are starving attorneys out there who make recommendations with their pocket book in mind before your well being.  Make sure you work with a California probate attorney who cares about his clients and wants to do the best thing for THE CLIENT!

I hope to work with you!  -John