Springfield Business Journal Articles

Sarah Delano Pavlik

Real Property Questions

Q:    I have recently remarried, and my husband and I are buying a home together.  How do I make sure my interest in the home passes to my children after we both pass away:

A:    The first step is titling the property correctly when you buy it.  If you are purchasing the home with your money and you put your husband's name on the title, you have made a gift to him, usually of one-half of the property, which will belong to him at death or divorce.  If you are buying the home together and you do not intend to own it equally, the deed should provide that, for example, you own two-thirds and he owns one-third.

    If you own the home as "joint tenants with rights of survivorship" or as "tenants by the entirety," ownership of the home will automatically pass to the survivor when the first spouse dies.  If you were to die first, your husband would own the entire home and he could leave it to anyone he wanted at his death.  Therefore, you should own your interest in the home as "tenants in common" with your husband or have your interest held in trust.  Your will or trust agreement will then control what happens to your interest in the home when you die.

    You can also control what happens to your interest in the property when your husband dies (assuming you die first) by giving him a life estate or leaving the property to him in trust.  A trust is more complex to establish but can address many issues that a life estate cannot.  For example, a trust can provide that your husband's rights to the home end if he can no longer live in the home, such as if he needs to be in an assisted living facility or nursing home.

Q:    I am buying my home contract for deed.  I have heard the law in this area has changed.  Does the new law apply to my contract?

A:    A contract for deed is a seller financed sale.  The buyer occupies the home and makes payments (usually monthly) to the owner for a number of years.  When the debt is paid in full, the seller transfers the property to the buyer.  If the buyer stops making the payments, the owner reclaims the property.  The buyer could be left with nothing if he could no longer make the payments even if he had been paying for years.

    In order to address this inequity and other issues, the law governing contracts for deed changed significantly on January 1, 2018, when the Installment Sales Contract Act became effective.  If your contract for deed was signed before January 1, 2018, the new Act does not apply to your contract.

    Some of the new requirements in the Act are: (1) the seller must record the contract within ten days of the sale; (2) the buyer has the right to have a third-party property inspection and receive notice of any building code violations affecting the property; (3) the buyer has 90 days to "cure" a default under the contract, i.e., the buyer has 90 days to bring payments current; and (4) if the buyer does default, he can recover the value of the payments made to the seller (less interest charges), allowing the buyer to build equity in the property as with a traditional mortgage.

    If you sell property using contracts for deed and have not updated your contracts to comply with the Installment Sales Contract Act, you need to do so immediately.

 

This article is for informational and educational purposes only and does not constitute legal advice.

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