Personal Finance: Ask the Experts

Get advice on money matters from The Bee's Claudia Buck and a panel of local experts

July 19, 2012
Boyfriend wants to leave half of vacation home to his son

Q: My boyfriend and I recently purchased a vacation home. For now, the title is held in joint tenancy because we could not come to an agreement as to what would be the fairest thing to do if one of us should die. We both have living trusts set up where each of our assets are transferred into upon death. The problem is that my boyfriend wants his son to inherit his half of the property after he dies.

I see potential problems in having to share ownership with his son. What if something happens to him and he needs money? Can he force me to sell the house or buy him out? I don't think it's fair to me that the son would be entitled to assets from the property just because he is kin. I would be the one paying the mortgage and keeping up with the maintenance. I am fine with leaving my half to my boyfriend, but he wants to revisit the lawyer in a few years and change the trusts so that his son has a stake in the house.

Can you offer any solutions so that both parties are satisfied? I should mention that the son is currently 17 years old and my boyfriend is 20 years my senior. Thank you for your time.

A: Co-ownership of real property can be a challenge. Currently you and your boyfriend own your vacation home as joint tenants. By statute in California, joint tenancy comes with an automatic right of survivorship. This means that upon the first joint tenant's death, his or her entire interest passes to the survivor, who would then add it to his or her living trust. The survivor's beneficiaries end up with all the property.

It's important that you and your boyfriend agree on how title will be held going forward, since either of you could independently record an instrument "breaking" the joint tenancy and changing your form of ownership from joint tenancy to tenants in common. A so-called "unilateral severance" of the joint tenancy will generally be effective to terminate the right of survivorship so long as there is no contrary written agreement of the joint tenants and the instrument is executed, acknowledged, and recorded in accordance with statutory requirements.

When people own property as tenants in common, each person controls who receives his or her interest at time of death. It sounds like your boyfriend is suggesting that you change the way you hold title to tenants in common with each of you owning your one-half interest in your trust. Unless otherwise agreed upon, each co-tenant is responsible for his or her share of expenses in proportion to his or her ownership interest; this rule applies whether or not the co-tenant purchased or inherited the interest. Thus, if your boyfriend's son inherited your boyfriend's interest in the vacation home, the son would be responsible for his share of the expenses. Further, one tenant in common cannot force another to buy out his or her interest, but he or she can sell his or her interest or go to court to force a partition of the property. If the partition action is successful, the property will either be physically split up or the court will force a sale of the property and divide the proceeds.

If you change title to tenants in common, you could create a Tenancy-In-Common Agreement (TIC Agreement). A TIC Agreement is a legal contract that sets forth the terms of ownership and any transfer restrictions. Among other things, it can include provisions relating to property management and expenses, maintenance, usage policies, and to whom each co-tenant can devise his or her interest at death. Further, TIC Agreements can contain provisions requiring that a co-tenant be given a right of first refusal before another co-tenant can sell or devise his or her interest. If you and your boyfriend decide to own your vacation home as tenants in common, a TIC Agreement could be an effective way for you to set forth terms regarding usage, expenses, and transfers that address both of your concerns.

Using this overview as background, I recommend that you talk this over with the lawyer who prepared your living trusts. There may be other factors that affect your decisions that haven't been raised here. The lawyer should also prepare the new deeds and related forms if you change the form of title.

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Meet Our Financial Experts

Claudia Buck

Claudia Buck is The Sacramento Bee's personal finance columnist. Read all her columns here. Contact her at cbuck@sacbee.com

Terri Carpenter

Terri Carpenter offers advice on job hunting, retraining and career counseling. Carpenter works at Sacramento Works Inc., the career and job training arm of the Sacramento Employment and Training Agency (SETA). With 15 years in the field, she has hands-on experience with everyone from first-time job seekers to career professionals seeking advice after a layoff or looking for a mid-career change. Ask her a question.

Carlena Tapella

Carlena Tapella is a partner in the law firm of Webb & Tapella Law Corp. in Sacramento. The firm specializes in estate planning and probate, such as estates, trusts, conservatorships and litigation. She is a past president of the Sacramento County Bar Association's Estate Planning & Probate Section. Ask her a question.

Kimberly Foss

Kimberly Foss, certified financial planner, is the founder of Empyrion Wealth Management in Roseville. With nearly 30 years in the financial industry, her clients include women in transition, small business owners, retirees and "pre-retirees." Ask her a question.

Jesse Weller

Gregory Burke, a CPA and tax expert with John Waddell & Co. in Sacramento since 1984, worked as an IRS tax auditor for six years. He’s a past chairman of the California Society of CPAs. Ask him a question.

Daniel Tahara

Daniel Tahara takes your questions about California taxes. Tahara, a spokesman for the state Franchise Tax Board, has 10 years of experience as a tax auditor. Ask him a question.



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