View Full Version : Two questions on DH inheritance
1) My DH is looking for a place to put his inheritance from his mother, who died last summer. It's about $100,000. He researched Ameritrade, ScottTrade, and Fidelity, and was wondering if there are any substantial differences among them. He's planning on putting $6000 into an IRA and the rest in non-tax deferred mutual funds.
2) He also inherited, with his brother, his mother's house. We never intended to have the house this long. We wanted to sell it in 2008, but of course, when the RE market crashed and we couldn't sell it for a year, we decided to rent it.
We had cashed out the equity in the house to pay with cash for the house she moved into next door. Then we were planning on selling and just paying off the mortgage. The mortgage is in her name and my name, because she didn't have enough income to put it in just hers and my DH's credit score is cr*p.
Now, I'm insisting that we put something in place to protect me, because I am now solely financially responsible for a $450,000 asset that I don't even own. My DH does not want me on the deed. I'm cool with that as long as I can get something in writing that diffuses my risk should anything happen.
Any advice on either/both of those questions?
... This is probably NOMB, but it's totally inappropriate for your DH to want you to carry unsecured risk for $450,000 of (his) debt - or whatever the total of the mortgage is. Maybe you should talk together with a financial planner who can balance things out, but it all sounds wrong to me ... he's accumulating wealth while you accumulate liability on it? BS.
Ahem. I now return you to the kinder, gentler kib. >8)
Hi Catherine -
I can help answer your first question. If you are planning on depositing that 100K into mutual funds and letting them sit until retirement I would highly recommend Vanguard. Their basic Index Funds have some of the lowest Expense Ratios in the industry. While the difference between .18% and 1.12% may not seem like a lot now, it is the accumulation/reinvestment value of the difference over many years that really adds up! The amount you are considering depositing may allow you to have the annual fee of $35 waived. They will probably have you(your husband) get a Clarion Signature on your paperwork to do the transfer which your bank/credit union should be able to provide. That is how it worked for us.
If you are looking for a brokerage house to move your money around alot, then I would not recommend Vanguard.
You could do some research on www.brokerage-review.com as a starting point to find a company that will best serve your needs.
Sorry I can't help with your second question but I do second kib's concerns.
Dhiana
Catherine
1) I use Ameritrade (or more accurately their investment program known as Amerivest) and I have been very happy with them. Can't give you an informed opinion on the other two.
2) I completely, utterly and vehemently agree with kib. If you sign a deed over but remain on the mortgage you still are liable for the mortgage debt except now you would be totally unsecured and would have no interest in the property itself. What kind of writing were you expecting that would "diffuse your risk"? The mortgage lender is not going to release you from the debt voluntarily. Your husband and the other heirs can't release you from the mortgage.
The only way you might be able to diffuse your risk would be for your husband and/or the other heirs to arrange a refinancing of the property. You would deed over the property simultaneously with the new mortgage (binding your husband and/or the other heirs) going into place and paying off the existing mortgage (which you are liable on) in full.
If you did a secured loan when you refinanced the home the mortgage lender can only go after the home and not your personal assets. So you could just let the home go into foreclosure. It will affect your credit rating. Be sure to check with an attorney to be sure I am correct. In a standard home mortgage the lender can only go after the home and there is no default balance for you to pay.
flowerseverywhere
1-4-11, 6:38pm
if it were me I would pay for the advice of a real estate attorney about the house.
Thanks for the advice. I'm rethinking possible solutions to this real estate mess. As I said, I thought I'd only be at risk for 3-4 months it would take to sell the house--and that was three years ago. We have an excellent tenant in there now, so while I could insist on selling it at any prince now (hoping they'd do it) in a way I don't mind sitting out the market for another year. RE didn't do very well last quarter, but other economic signs are looking up.
I think I'll see a lawyer with them, who is bound to have the same opinion that you guys did about my financial precariousness. He/she may have some creative solutions, and he/she may also be a good third party to tell my H and BIL why I should be on the deed.
Man, this whole thing turned out to be such a mess, and it ruined me financially, frankly (more to that story). And I'm 58 and don't have much catch-up time. But, I thank God that my business was robust last year, and hopefully will carry on for the next few!
Thanks again.
1) My DH is looking for a place to put his inheritance from his mother, who died last summer. It's about $100,000. He researched Ameritrade, ScottTrade, and Fidelity, and was wondering if there are any substantial differences among them. He's planning on putting $6000 into an IRA and the rest in non-tax deferred mutual funds.
2) He also inherited, with his brother, his mother's house. We never intended to have the house this long. We wanted to sell it in 2008, but of course, when the RE market crashed and we couldn't sell it for a year, we decided to rent it.
We had cashed out the equity in the house to pay with cash for the house she moved into next door. Then we were planning on selling and just paying off the mortgage. The mortgage is in her name and my name, because she didn't have enough income to put it in just hers and my DH's credit score is cr*p.
Now, I'm insisting that we put something in place to protect me, because I am now solely financially responsible for a $450,000 asset that I don't even own. My DH does not want me on the deed. I'm cool with that as long as I can get something in writing that diffuses my risk should anything happen.
Any advice on either/both of those questions?
1) Go with Vanguard, much more diverse set of funds than Ameritrade. FYI; I have accounts with both.
2) The only way to resolve is to sell the property. Question; are you upside down with respect to the sale value of the home versus your mortgage balance?
Ed
If you did a secured loan when you refinanced the home the mortgage lender can only go after the home and not your personal assets. So you could just let the home go into foreclosure. It will affect your credit rating. Be sure to check with an attorney to be sure I am correct. In a standard home mortgage the lender can only go after the home and there is no default balance for you to pay.
freein05.-
I'm glad that you (and I believe pretty much everyone else) are urging Catherine to consult with an attorney in her home state. I must point out that what you stated in your posting is incorrect in most states. The majority of states in the US are recourse states meaning that after taking the property at foreclosure the lender also gets (or can get) a deficiency judgment against the borrower for the difference between what the property sold for and what the balance was on the mortgage after interest, late fees, attorneys fees and court costs. If the lender chooses to write off the deficiency they file a 1099 with the IRS for the amount they write off and the borrower then ends up looking at a substantial tax liability.
Catherine,
I inherited some investments from my mother from various companies: Vanguard, BNY Mellon, Prudential, and Federated. I'm in the process of changing the ownership over from my parents' names to my sister's and mine. By far, Vanguard has had the best customer service. Their estate department representatives have been very professional with a LOT of follow through, and I have dealt with the same individual each time I have contacted them. The funds in each company have all performed well, but Vanguard's customer service has gone above and beyond. That's worth something in and of itself, in my opinion.
Thanks, again!
Ed: No, thank God I'm not upside down on the house with the mortgage: Mortgage is $370,000 and house is worth between $420-450+. You're right, selling it is the best plan. We had it on the market for over a year and because it has a shared driveway and the kitchen and bathrooms are far from updated, we couldn't get a good offer (we actually got TWO good offers in 2008, but my MIL/BIL wouldn't accept them at the time--now BIL is kicking himself).
So I have no intention of letting the house go to foreclosure, esp since I have a really good tenant in it.
I'll definitely check into Vanguard!
Thanks, again!
Ed: No, thank God I'm not upside down on the house with the mortgage: Mortgage is $370,000 and house is worth between $420-450+. You're right, selling it is the best plan. We had it on the market for over a year and because it has a shared driveway and the kitchen and bathrooms are far from updated, we couldn't get a good offer (we actually got TWO good offers in 2008, but my MIL/BIL wouldn't accept them at the time--now BIL is kicking himself).
So I have no intention of letting the house go to foreclosure, esp since I have a really good tenant in it.
I'll definitely check into Vanguard!
One other question; was the house just in your name and your MIL as joint tenants w/ right of survivorship?
Ed
Catherine
Also, just so you know, Kiplingers magazine does a pretty thorough review of online brokers. They just released their 2011 recommendations.
http://www.kiplinger.com/magazine/archives/the-best-of-the-online-brokers-for-2011.html
Ed, only the mortgage was both in MIL and my name. When I told her that my name should be on the deed as well, she hemmed and hawed (I don't really think she understood the implications. Me, wimp that I am, didn't want to force the issue because it seemed to bother her a little--plus I really didn't picture myself being in this position for very long).
So, no, I never had any rights, except for the right to pay the bills...
Weston, thanks for the link! I'll check it out.
Hi Catherine,
Just want to make sure - the house is in New Jersey, right? Since New Jersey has Real Estate lawyers (you need them when selling homes) I would use some of that inheritance to get the RE figured out. It will definitely cost you, but it will be worth it. Plus, if you go with a online mutual funds you will probably be losing money, rather than gaining in the beginning. It would also make sense to figure out your other expenses and debts before doing the investing.
According to YMOYL - one of the best ways to invest in money (after paying off your debts) is to do bonds. 30 year bonds. Right now they are at 4.25% interest. I doubt you will be able to get in on the January selling, but I would strongly suggest checking it out for February.
But honestly, if the interest/mortgage is higher than 4.25% for the house, I would suggest putting part of that money to upgrading the house so that it could be sold.
Right now, if you could even possibly earn higher interest in mutual funds, you still have to pay for a lawyer to change the mortgage, pay for an investment person, and pay for a Realtor to sell the property. At that rate, you will not have much left over to invest.
Just want to give you other options and think a little outside of the box.
Ed, only the mortgage was both in MIL and my name. When I told her that my name should be on the deed as well, she hemmed and hawed (I don't really think she understood the implications. Me, wimp that I am, didn't want to force the issue because it seemed to bother her a little--plus I really didn't picture myself being in this position for very long).
So, no, I never had any rights, except for the right to pay the bills...
Weston, thanks for the link! I'll check it out.
I would get some advice from your legal counsel on how to protect yourself; know it costs some $, but well worth it. Dealt with my father-in-laws estate on this type of matter. Good luck.
Ed
Your name's on the deed? You own it, *by definition*. Take the steps you need to take. Talk with a real-estate attorney about the situation; get referrals to CPAs (do you have one already from your existing business?). You might consider getting term life insurance on yourself, to repay the mortgage, with premiums being paid by the rental income. Rental real estate is business, treat it as such -- done wisely, you could well catch up more quickly than you expect. Your local Chamber of Commerce will have businessfolks who cater to dealing with rental real estate and its issues.
Your name's on the deed? You own it, *by definition*. Take the steps you need to take. Talk with a real-estate attorney about the situation; get referrals to CPAs (do you have one already from your existing business?). You might consider getting term life insurance on yourself, to repay the mortgage, with premiums being paid by the rental income. Rental real estate is business, treat it as such -- done wisely, you could well catch up more quickly than you expect. Your local Chamber of Commerce will have businessfolks who cater to dealing with rental real estate and its issues.
jrb3:
Unfortunately from her posts; it appears that her is not on the deed. I presume that she co-signed the promissory note.
Ed
jrb3:
Unfortunately from her posts; it appears that her is not on the deed. I presume that she co-signed the promissory note.
Ed
You are correct, Ed. The deed was never changed when I cosigned on the mortgage. The name on the deed was always, and still is, only in my MIL's name, but that will change when my husband and his brother go to the lawyer to change it.
I really don't care about ownership in the house per se. I know that this was my husband's and BIL's inheritance--not mine. I'm cool with that. I'm not cool with holding the bag financially for something I don't own... Never expected this predicament, because we were going to cash out the house, pay in cash for the house my MIL moved to next door, and immediately sell her house. But then RE market crashed (and don't even get me started on how BIL sabotaged the sale of the house in many ways).
So, you are also right in that the best thing to do would be sell it asap. If it were possible for my BIL and husband to get a new mortgage in their name, that would also be great, but that's pretty impossible--both have very low incomes. So, we will probably put the house on the market in the spring, but in the meantime, when the transference of the deed is happening, I didn't know if I should push to have my name put on the deed, or if the lawyer could draw up some kind of document covering what would happen in worst-case scenarios. Or maybe my name could go on the deed, but stipulate some kind of partial ownership that would just cover my risk. That's what I thinking, anyway.
You are correct, Ed. The deed was never changed when I cosigned on the mortgage. The name on the deed was always, and still is, only in my MIL's name, but that will change when my husband and his brother go to the lawyer to change it.
I really don't care about ownership in the house per se. I know that this was my husband's and BIL's inheritance--not mine. I'm cool with that. I'm not cool with holding the bag financially for something I don't own... Never expected this predicament, because we were going to cash out the house, pay in cash for the house my MIL moved to next door, and immediately sell her house. But then RE market crashed (and don't even get me started on how BIL sabotaged the sale of the house in many ways).
So, you are also right in that the best thing to do would be sell it asap. If it were possible for my BIL and husband to get a new mortgage in their name, that would also be great, but that's pretty impossible--both have very low incomes. So, we will probably put the house on the market in the spring, but in the meantime, when the transference of the deed is happening, I didn't know if I should push to have my name put on the deed, or if the lawyer could draw up some kind of document covering what would happen in worst-case scenarios. Or maybe my name could go on the deed, but stipulate some kind of partial ownership that would just cover my risk. That's what I thinking, anyway.
A couple of things come to mind:
You refer again to "some kind of document" as opposed to a deed. Keep in mind that any such document would not be binding in any way upon the lender unless they are a party/signatory to that document. You also need to check with the lawyer to make sure that any new deed or other instrument does not trigger the "due on sale clause" that is standard in pretty much every mortgage.
When my father passed away I had a couple of difficult items to arrange. My local broker gave up early and I finally turned to Fidelity. I was on the phone a few times a week for a month or two with the Fidelity folks. In one of the phone conversations, the Fidelity fellow who was helping said, don't worry, I'm not giving up on this and I will get you through it no matter what. I have had excellent customer service with them since. My experience with Vangard has been only ok and I like their low management fees, but have more confidence in Fidelity should anything out of the ordinary arise.
I'm not much help on your other question, but in my situations, a good CPA has been extremely helpful.
Hmm...something stinks here! The brothers are going to see a lawyer to change the deed to their names, so why can't they add you too? If it was not for you, they would not have this asset in the first place because the MIL didn't make enough money!
I would definitely stand up and ask for my name on the deed, heck, you are totally liable for the mortgage if things go sour and your tenant leaves!!
Thanks, Citrine. Yes, I am definitely leaning towards just insisting on getting my name on the deed, especially hearing the feedback from you guys. I'm hoping that we will be able to sell it relatively soon, but with a good tenant, I fell that at least they're building equity for us so until we get out of this real estate slump, I wouldn't mind trying to hang in there one more year.
Roger, thanks for the Fidelity recommendation.
FWIW my own experience with the customer service side of Scottrade and Ameritrade has been that Scottrade was dreadful and Ameritrade excellent.
rodeosweetheart
3-9-11, 1:32pm
Well, my advice will sound really harsh, but I would go to visit a divorce lawyer, on the grounds that your husband seems to be financially abusive. I would consider the cosigned mortgage loan to be a loan against the estate, and I would ask to be repaid withsole ownership of house, and whatever money of mine had been swallowed up by the house, to be taken from the inheritances of the sons--by having you fork out your own cash and sign the loan, I would argue that husband was already treating the inheritance as marital property. I would ask my lawyer to get me whatever inheritance would make right the money I had put in the house. And i would ask for a divorce, as I cannot understand staying with someone who would put you in this position and not want your name of the deed. That seems really, really bad.
But hey, that's why we are all different, what may work for you would not work for me, and vice versa.
I, however, would run from this guy, and I would try to get my money back, and i would try to get him from taking my future earnings. Then I would rebuild my life.
San Onofre Guy
3-9-11, 2:18pm
I don't know how long you have been married, but the debt is community property but the inheritance, his half of the house and $100,000 is separate property of your husbands. The kicker is that the debt is the responsibility of both you and your husband. Is the debt collateralized by the house or the house that you live in? Given the high property taxes in New Jersey, I doubt that the rental income makes for a good investment on a mortgage encumbered home.
My suggestion is to sell the house even if it sells for the value of the note, "allow" husband to have $100,000 in his own account and go back to a more simple life.
Having issues associated with what is mine and what is his and what is ours is challenging.
I am in a second marriage in which I brought a tremendous amount of assets into the marriage and my spouse brought debt. The house is mine as well as my investment account, but we treat financial issues as a partnership. There is no such thing as hers mine and ours other than those two specific items and we don't use investment account for living expenses as it is for my children's education. My wife will not be added to the investment account nor will her name be added to the deed essentially out of simplicity. When we sell and move after retirement, our next house will have her name on the deed, but by then in the unlikely event of a split I would have to support her, but assest are now and will be then enough to support two households.
At age 58 if you don't have a secure partnership with your spouse and don't trust each other than you better hurry up and develop one or decide to split as life is too short to waste it with someone you don't trust.
I don't know how long you have been married, but the debt is community property but the inheritance, his half of the house and $100,000 is separate property of your husbands...
.
San Onofre Guy
Where do you get this from???? As you indicate in your posting Catherine is in N.J. What NJ statute or case law even contemplates community property? N.J. (like the overwhelming majority of US states) is an equitable distribution state.
The last two posts (rodeosweetheart/san ofre guy) are prescient.. I am, as of last week, living separately from him for a while--for a couple of reasons, and the main reason is not the financial one.
Thanks for your advice--san ofre guy, it's not that I don't "trust" him, it's more like he's clueless about finances in general, and he has a history of "what's mine is mine and what's yours is mine" unfortunately. He does, however, grant me about $40k once we sell the house, because I have documented on a spreadsheet every penny I spent on the house when his mother/brother were unwilling to contribute and were sabotaging any effort to sell it. If I absolutely insisted on being on the deed, I really don't think he'd object, which, given our current circumstances, I am going to do.
I just want to be rid of this debt one way or another. I don't want to necessarily get rid of the husband, but we'll see what happens....
BTW Weston--I have actually consulted a divorce attorney, and it's true that assets as well as debts are community property (50/50) but inheritances are all his. The lawyer even suggested that if we divorced, I'd have to pay him alimony. So technically, after supporting his business, paying his business loans, supporting his mother/brother when they were straddling two homes, taking the risk for his moving down here, paying all our living expenses, ruining myself financially because of the aforementioned--he would wind up at least with 4 times my net worth.
T
BTW Weston--I have actually consulted a divorce attorney, and it's true that assets as well as debts are community property (50/50) but inheritances are all his. The lawyer even suggested that if we divorced, I'd have to pay him alimony. So technically, after supporting his business, paying his business loans, supporting his mother/brother when they were straddling two homes, taking the risk for his moving down here, paying all our living expenses, ruining myself financially because of the aforementioned--he would wind up at least with 4 times my net worth.
Catherine
If the attorney you consulted with in any way led you to believe that NJ is a community property state please get a second opinion.
The New Jersey statutes ( 2A:34-23 and 2A:34-23.1) are quite clear regarding the equitable distribution of marital assets and debts and what factors go into a determination of those distributions.
San Onofre Guy
Where do you get this from???? As you indicate in your posting Catherine is in N.J. What NJ statute or case law even contemplates community property? N.J. (like the overwhelming majority of US states) is an equitable distribution state.
San O Guy - who is from Calif - is talking about how it is in Calif - a community property state. However, I believe all states follow federal precidence in terms of inheritence's and that it is the sole property of the heirs irregardless of their marital status. UNLESS, that inheritence changes form into something else - say they sold the house and put the assets into something that would normally (in Calif) be considered community property like another house. In Calif, if one spouse wants to own seperate property or assets, the other spouse needs to sign a form relinquishing any rights to that property or assets even if that property or assets are only in one spouses name. Same with debt.
San O Guy - who is from Calif - is talking about how it is in Calif - a community property state. However, I believe all states follow federal precidence in terms of inheritence's and that it is the sole property of the heirs irregardless of their marital status. UNLESS, that inheritence changes form into something else - say they sold the house and put the assets into something that would normally (in Calif) be considered community property like another house. In Calif, if one spouse wants to own seperate property or assets, the other spouse needs to sign a form relinquishing any rights to that property or assets even if that property or assets are only in one spouses name. Same with debt.
You're correct Spartana.
California is one of only 10 states that is based upon community property rather than equitable distribution. I have no problem with San O making the error. What concerns me is that the lawyer Catherine went to apparently somehow grossly miscommunicated to her that the assets and debts are community property. They are not.
Thanks, all. I'll definitely get a second opinion if it gets to that (I'm sincerely hoping it doesn't).
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