Dear Moneyist,
About two years ago, I received inheritance from my father. He had not spoken to me in 40 years and I had no idea I would be included. I had a house with a small mortgage left to pay off and had been saving as best I could for retirement in California with a less-than-stellar job. The inheritance changed everything.
My parents were Lutherans and had gone through the Great Depression. We had raised all our own food — my father was the son of a farmer, not a farmer himself — and we made our own clothes. This upbringing served me well and I was able to survive and be a single mother to my two sons.
When the wife of my younger son found out about the inheritance, she thought I should help them. I was not against it. I received enough money from my father and I am a frugal person. They have two teenaged sons and because she has never worked in the whole of their marriage it was difficult for them to even think about buying a house.
I flew to Nevada from my home in California, where I fully funded a joint bank account with my son, and he used that to purchase a house in his name only. But then I realized that I would have to be accountable to the IRS to prove that this was a loan, not a gift. I took that to mean that if for some reason he couldn’t pay or didn’t pay.
I thought about it, looked into IRS questions, and decided that I would just gift them the house. I still have over $1 million left between my dad’s inheritance and the money I saved. My house in the San Francisco Bay Area is valued on Zillow Z, -3.45% for over $800,000 and will be paid off in the next couple of years.
My daughter-in-law made no contact after the house was bought (July 2018) until January 2019 when she sent an email, saying my son was a monster, my other son was a creep, and I was just a sinner that had produced bad sons. My son said she wants a divorce and wants to split the proceeds from the sale of the house.
This was not what I wanted to do with my father’s money. She’s never even paid bills before so I don’t imagine it would last her for very long. Her other idea was my son could move out and she would continue to live in the house and have my son support her and the boys.
The house was titled in his name only. In January, my son and I signed a quit claim transferring the title to me; 100% of the purchase price came from me and I have the bank records to prove it. They have been together for a long time, but only married for about 5 years. My son wants to take care of his boys and, strangely enough, his wife.
His wife thinks they should wrap their marriage up this summer. My son has not told her about the property transfer. She wasn’t interested in any of the details and didn’t put her name on the title when she had the chance. It goes along with her idea that she is the benefactor of this family, rather than a contributor.
My question is whether I’ll have trouble over this in the future. All the discussions about the house were between me and my son. I figured I had until April 2019 when I filed my 2018 taxes to characterize the transaction. We went through a number of options: Family loan, gift, and then me retaining possession of the property.
I just wanted to share my good fortune with my son and his family. My boys and I went through some hard times and housing insecurity was always looming over our heads. Somehow, we made it and I just wanted to make life easier for them. It seems unbelievable that she just wants to funnel it to herself, not her family.
Grandma Trying To Make A Difference
Dear Grandma,
You tried to do the right thing, and I understand that you love your family.
Take heart. Whatever happens you will have achieved that. All things considered, your grandchildren will, I assume, eventually inherit this home from their parents when they die, and your investment will have been worth it. Fortunately, you were wise not to put the house in both your son and daughter-in-law’s name. Housing insecurity is one of the most difficult things for any family to deal with, and you helped to bring more financial stability to the lives of your grandchildren.
Housing insecurity keeps low-income families locked in an endless cycle of poverty, and has so many other emotional and financial ramifications. “Research shows that eviction can have enduring effects on families’ ability to obtain basic necessities (for example, food, clothing and medicine) and can cause depression among mothers, and a strong body of evidence links inadequate housing and homelessness to child abuse and neglect,” according to the Urban Institute.
This will also help your grandchildren in the long run. Stable housing also prevents students who don’t have wealthy parents from graduating from college, and can lead to absenteeism and low test scores. It is one of the most stressful things to deal with in life. Some 36% of survey respondents at four-year schools said they faced housing insecurity, including struggling to pay their full rent or utility bills. At community colleges, roughly 46% of students were housing insecure.
Nevada is a community property state, and anything your son acquires during the marriage is marital property. If your son owned his own home outright and renovated it using money from their own funds, it would turn that home into community property. In this case, the home was a gift from you. In Nevada, it is separate property if it was “acquired during the marriage as a gift, by inheritance, or as an award of damages for personal injury,” according to the Las Vegas Defense Group.
Make sure you consult a lawyer when you are dealing with such large sums of money in future. It’s nice that your son wants to take care of the mother of his children. You have raised him well.
Also see: My fiancé’s father is custodian of his IRA — how can I get him to relinquish control?
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