Death, debt and divorce—one of which is inevitable, the other two having great probability in our lives. I have learned during my 35 years in the real estate business that these are three of the most important issues that must be addressed when folks are buying or especially selling real estate.
All three need to be planned for but, unfortunately, many people just don’t. Maybe the majority of us live in denial that these events could never happen to us. I knew of one fellow who denied that he was dying with almost his last breath. He never did address the issues that were of importance to his family.
What does death have to do with real estate? When one owns or contemplates owning real estate, the disposition of that real estate should be considered. Most of the time it is simply sold and one moves on to their next property. But if one of the owners was to die, the situation changes.
In Texas, you have the choice of leaving your property to the entity of your choice or if you die intestate (without a will) the Great State of Texas will decide for you who gets your property! This is where it gets tricky and why I ask real estate sellers (nicely, of course), “Has there been any deaths associated with this property?” Many times I will know that a spouse has recently passed away which precipitated the sale of the property. Then I ask if there was a will and was it probated.
Time and again the individual will answer “no.” Studies show that only about 55% of Americans have wills. I sold a home years ago that was owned by the proverbially little old lady. She had sold her previous home after her spouse of many years had died. She then married a widower and used the proceeds from that sale of her old home, some $50,000, as a down payment on hers and her new husband’s home.
Shortly thereafter, the new husband passed way without a will. He had three children from his first marriage. Since he died intestate (without a will), Texas laws decree that half of the equity in this home pass to his children and his new wife retains her original half. So upon the sale, his three children will divide their half of the equity, namely $25,000. Wait you say, that money belonged to our little old lady.
You’re right but “did” is the operative word. With her husband passing away with no will, his half of the house goes to his direct descendants which, in this case, are his children from a previous marriage. Interestingly, the father and the three children were all estranged. The kids did not even know he had remarried or died! That didn’t keep
them from spending the money, though. Just a little planning on her part would have avoided the scenario and saved her equity.
If you would like a referral to an excellent, local, estate planning attorney, email me at tom[email protected] and I will send you that information.