The Perils of Co-Owning a Home as an Unmarried Couple
By Patricia Louise Nelson
Many very smart, well-meaning people accidentally get themselves into complicated legal situations without understanding all of their options or the complications. An example of this is when a very committed unmarried couple purchases real property together. This can be done as tenants in common, where each partner owns half of the real property, including controlling it after that person dies. Alternatively, it can be done with rights of survivorship, where if one of the partners dies, the other one owns the real estate just by filing a copy of the deceased partner’s death certificate in the county real property records.
For many unmarried couples, the right of survivorship option works well if one of them dies and their primary intent is to protect and provide for the survivor. The complexity arises upon the death of the second partner. Let us add some facts to this scenario. Let’s assume both partners contributed equally to the cost of purchasing their home. Let’s further assume that each partner has his or her own children, who are not also the children of the other partner.
On the death of one partner, the surviving partner gets the house by right of survivorship. This result is often what the partners both want. Often the partners anticipate that their children will benefit equally after they have both died. On the death of the second partner, however, his or her children get the value of the house, unless the partners have something in writing that changes that outcome. The children of the first partner who died first receive nothing.
Another complexity that can arise with co-ownership of a home is how to handle unexpected (or expected) expenses related to the house. Who will pay the mortgage (if any)? Taxes? Insurance? Upkeep and maintenance? What if the property has a large, unexpected expense like the cost of a new roof? These questions should be considered in advance and addressed in writing.
If the partners want to address these issues and divide the value of the house among both of their children, they need to have an agreement in place in writing. This writing can be a tenants in common agreement, a real estate co-ownership agreement, or a revocable living trust. The first two are simply contracts by which the original co-owners agree on how to handle distribution of the net proceeds on sale and expenses related to the real property. This sort of agreement can still leave the property at risk of probate on the death of the second owner. A revocable living trust, on the other hand, takes care of the distribution of the net proceeds on sale, addresses unexpected expenses, and avoids probate.
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