What do you do when one of the children in the family needs to keep living in the house after the parents pass away? It happens sometimes. A family will come in and say, "Maria is living with us. We have seven kids and Maria is one of them. She takes care of us, prepares our food and goes to the grocery store. She has been lovely and very helpful, but she has fallen on hard times."
The questions to ask
I often ask the clients what happens after both parents pass away. Does Maria, or Johnny, or whichever sibling it is, get to stay in the house? You have to be very careful, because the other six children may not like that. They may want to sell Mom and Dad's house and divide the money, or rent it out and divide the monthly rent. Does the child living there get to stay forever?
An example plan
In a recent case the client said, "I don't want them to stay there forever, but I also don't want to kick them out." We came up with a plan that let Maria stay and live in the home for six months after both parents passed away. We figured that would give her time to work out what would happen, find an apartment and move out, or make other arrangements. The house was worth $500,000 and the other children were interested in selling it and dividing the money.
We also said the house needed to be sold within a certain period of time. Otherwise the trustee has no real guidance. In some cases we leave it up to the trustee. In other families it is good to set a time limit, saying that Maria needs to move out by a certain date and the house must be sold within six months, a year or whatever fits.
Spell it out
These issues need to be discussed whenever real property involves a family residence. Do we sell it, rent it, or let somebody live in it? In some families it is very important to discuss this in the estate planning consultation. More important, the estate planning documents, the living trust, the will or whatever applies, should say in great detail what is going to happen.
It is better to have more instructions than to leave it to chance, or to the trustee making things up as they go along. That matters most when more than two or three children are involved, and that is where you want distinct, good guidelines for the trustee to follow.
Please call 661-414-7100 for help with your estate plan.