Second Marriage Issues – Part 2

In last week’s blog post, I began a discussion about second marriage issues.  This week I will tell you about a specific second marriage problem in our office.  Husband and wife each had children from a first marriage and no children as a result of their marriage the second for both.  They did not enter into a prenuptial agreement.  Wife entered the marriage owning a home.  After the wedding, she added Husband’s name to the deed as well as her two children.  The home was titled husband and wife tenants by the entirety and then the two children as joint tenants with right of survivorship.  As between the married couple as one unit and Wife’s two children as another unit, ownership was also joint with right of survivorship.

The way the deed was titled is a critical piece of information when determining what happens to the property when an owner dies.  While many people would assume the last will and testament answers the question, that is only true if the property is what is called “probate property”, meaning controlled by the will.  There are, however, two types of property that pass other than by way of a will.  

One is contract property and the other is property that passes by operation of law.  Contract property is of a type in which there is a beneficiary designated upon the owner’s death, known as POD (payable on death) or TOD (transfer on death).  It does not matter what the will says.  The designated beneficiary will receive the property.

Property that passes by operation of law is anything that has a designation of joint with right of survivorship .  When one owner dies, by law the other owner(s) receive the deceased owner’s share.  Again, it does not matter what the will may say.  In the case of joint owners who are married, this type of ownership is called “tenants by the entirety”.

So, in the case of Husband and Wife’s home, they co-owned it by way of right of survivorship with Wife’s two children.  Husband and Wife collectively own 50%.  When one dies, the other becomes sole owner of that 50%.  The same applies to the other 50% owned collectively by Wife’s two children.  If one child dies the other becomes sole owner of that 50% share.

When Husband and Wife both die, then Wife’s children become owners of 100% of the home, each owning 50% as between them.  It would seem pretty straightforward if we presume that Husband and Wife remain in the home until both die and they outlive at least one of Wife’s children.  But, what if things don’t play out that way?  As you’ll see, that’s when disputes can arise and matters can get sticky.

Next week I’ll share with you what happened next.