Do You Need A Prenuptial Deed?

Written by Posted On Wednesday, 18 February 2015 07:58

Question: I am divorced with two children and plan on getting married again soon. My fiancee and I want to buy a house together. We have discussed the disposition of the house upon our respective deaths, and have agreed that on her death, I will get complete title to the property, but on my death, my half interest will go to my children.

Is this possible? If so, how do we title the house? If not, can it be done by Will.

Answer: Yes, it is possible by deed. But you should also have separate Last Wills and Testaments as well as a carefully drafted pre-nuptial agreement..

Let's first review some basic information about the various kinds of deeds.

Sole Owner: this is the most basic way that title can be held. One person is the sole owner of the property. Upon the owner's death, probate proceeding in the jurisdiction where the deceased is domiciled must be instituted. The property will either be given according to the Last Will and Testament or by way of the laws of Intestacy. Every state (and the District of Columbia) has laws which spell out who will inherit property in the event there is no Will. For example, a spouse has top priority, then children, etc. However, it is always desirable that every homeowner have a Will.

Tenants in Common: under this arrangement, two people own a percentage interest in the property. Although the most common practice is for each owner to have a 50 percent interest, this is not a legal requirement. For example, if two people buy a house, and one puts up a larger share of the money, the split can reflect the investment in the property.

Since each person owns a portion of the property, upon death, that interest will be handled in the same manner as with a Sole Ownership. If there is a Will, the terms of that document control. If there is no Will, the law of Intestacy will apply. Once again, probate proceedings must be instituted.

Joint Tenants: here, the parties jointly own the property. Upon the death of one party, the surviving owner automatically becomes the full title owner. No probate is required. Although there are a few states in this county that permit an uneven percentage ownership in a joint tenancy arrangement, the great majority of states require that such title be held on an equal 50-50 basis.

While it is not absolutely necessary, it is recommended that if persons hold title as joint tenants, the deed should read: X and Y, as joint tenants with rights of survivorship.

There is an interesting -- and relatively unknown -- fact about joint tenancies. Either joint tenant can unilaterally sever the relationship, merely by preparing and recording a deed, which will have the effect of changing the relationship into a tenant in common arrangement.

Tenancy by the entireties: this is reserved exclusively for husbands and wives. In the event of the death of one spouse, the surviving spouse becomes the owner of the entire property and probate is not necessary. Unlike joint tenancies, however, a tenancy by the entireties cannot be unilaterally changed. Only divorce or mutual agreement can create a change. If property is held as tenants by the entireties, and there is a divorce, the property automatically (by operation of law) becomes a tenant in common situation.

Now, let's get back to your question.

You want the deed to your property to reflect that upon the death of your wife, you will become the sole owner of the property, but on your death, your half interest will go to your children.

The first thing that both of you should do is prepare Last Wills and Testaments. Each of you should have your own attorney assist in the preparation of these documents. You want to make sure that down the road, no one can claim that they did not understand the transaction and were coerced into signing certain documents. These Wills should spell out the intention regarding the property disposition.

As for how the deed should be titled, this is a difficult question. If the property is held as joint tenants, then upon the husband's death, the wife will become the sole owner. She may or may not want to honor the wishes of her deceased husband and will not convey any portion of the property to his children.

If you hold title as tenants in common, upon the death of the husband, his Will can spell out his desires. But in many States, a wife has a statutory right to claim what is known as an Election against the Will, and this may also defeat the husband's intention.

Here's the way I would prepare the Deed to the property:

Wife and Husband as tenants by the entirety as to one half of the property, held as tenants in common with the two children (and they must be named) as to the remaining half. Subject, however, to a life estate in the Wife for so long as she lives.

If the children are minors, title must be vested in a Custodian under the Uniform Transfer to Minors Act.

Let's play this out and see if it works. The children will at all time own half of the house. If your wife predeceases you, by operation of law you will own the other half. Your Will should give instructions as to the disposition of your house.

On the other hand, should you die first, your wife (again by operation of law) will own half of the house. Because you have given her a life estate, she should be able to live there as long as she wants.

This is obviously only the basic legal structure. You will have to resolve such issues as who pays the mortgage, real estate taxes and other house-related expenses during the time that the Wife has the right to live in the Property.

You also have to agree on the role of the Children, both during the period when you are alive and after your death. Are they legally obligated to make any payments toward the upkeep and maintenance of the property? What rights, if any, do they have to live in the property after you die?

This is not a simple matter and you are strongly advised to seek separate legal counsel to assist you. You should also prepare a pre-nuptial agreement before you get your marriage license.

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Benny L Kass

Author of the weekly Housing Counsel column with The Washington Post for nearly 30 years, Benny Kass is the senior partner with the Washington, DC law firm of KASS LEGAL GROUP, PLLC and a specialist in such real estate legal areas as commercial and residential financing, closings, foreclosures and workouts.

Mr. Kass is a Charter Member of the College of Community Association Attorneys, and has written extensively about community association issues. In addition, he is a life member of the National Conference of Commissioners on Uniform State Laws. In this capacity, he has been involved in the development of almost all of the Commission’s real estate laws, including the Uniform Common Interest Ownership Act which has been adopted in many states.

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