Senior warns about pitfalls of property co-ownership
A 75-year-old man has warned seniors against making their children owners or joint owners of their property.
Winfield Todd said people might not be aware that this can prevent them doing what they wish with their property, and can cause family disputes.
The charity Age Concern and a lawyer who advises on property matters echoed the concerns and offered advice.
Mr Todd, from Warwick, explained that he owned his own home, and an elderly aunt offered to pay his mortgage off, which he accepted.
It later turned out that she had Alzheimer's Disease and that she needed the money she'd given him back.
Too old to get another mortgage in his own name, his ex-wife and his three children got a new mortgage for the property instead, with their names on it. He paid the money back to his aunt, and is allowed to live in the house while he is alive.
However, Mr Todd explained that he has become involved in a financial dispute with his children and ex, as he wanted to borrow further money against the house to pay for dental work.
Mr Todd said: "I would like to put a warning out there to people that if they have a house, do not put your children on your house. Make a will and if they don't treat you right, you can change your will. If you put them on your house, you can't change that."
He said he cannot afford to get legal advice and cannot afford to buy his children out of the property, which is worth an estimated $500,000.
“I'm out in the cold,” he said, adding that he is concerned over what will happen if he needs to borrow money against the property in future.
Responding to the concerns, Claudette Fleming, executive director of Age Concern, said: “The scenario is not unusual. In fact, the prevalence of such stories is why we conduct a half-day legal clinic in April of every year with the law firm MJM Ltd. The major clinic session focuses on wills and estate planning.
“Family conflicts can be most complicated, and usually everyone involved is very passionate about their experience of the conflict. However, the senior in this case is correct — having a will is a responsible thing for a homeowner of any age to undertake.
“Still, having a will can only do for you what it is properly and clearly documented to do under law. Wills do not necessarily mend family relationships or build goodwill among family members. Hence, when we advise that homeowners ensure they have wills, we also strongly recommend that wills be revisited from time to time because relationships and circumstances do change. We also advise that investing in quality relationships with family members is as equally a prudent decision as investing in a will, the two need to go hand in hand wherever possible.”
Hil de Frias, a director at MJM Ltd, said: “Unfortunately, this scenario is not new and I do think it will happen again in the future, although, by educating our seniors, the probability of these scenarios happening in the future will be greatly diminished.”
Mr de Frias offered advice for elderly homeowners who are thinking of making family members owners or part owners of their home (see sidebar).
Hil de Frias, a director at law firm MJM Ltd, offered advice for elderly homeowners thinking of making family members owners, or part owners, of their home.
He said: “Whilst obtaining legal advice can be expensive in the near-term, in the long run it should help seniors make more informed decisions in relation to the disposal and transfer of their real estate.”
He noted that banks in Bermuda have a general rule not to make loans to persons older than 65, as they are usually retired and without an income.
“It is principally for this reason that the banks often suggest to seniors that they would be willing to make a loan if others (ie younger working individuals) become joint borrowers. The unfortunate thing is that the banks not only suggest that others become joint debtors but they also suggest that those other persons become joint owners of the property that is to stand as security for the debt,” said Mr de Frias.
“I often wonder why banks make such suggestions because, whilst they can make a loan to various people, they only need to take security over the property itself from the current owner to be satisfied that they have proper security for the loan.
“I question why they suggest that all the debtors become joint owners of the property. In my view that is not necessary because the sole owner of the property could put up the property as security for the debt without having to convey an interest to the other debtors.”
Mr de Frias continued: “Unfortunately, it is often the case that seniors who require assistance in obtaining a loan feel they have no choice but to convey their real estate to the joint debtors in order to secure the loan. Whilst that is not necessarily a bad thing it can turn out to be a bad thing if the seniors are not properly advised on the implications of doing so. In my experience I have had seniors approach me to provide advice on these very same matters and I take great care to ensure that they properly understand the risks of conveying their property to joint debtors to secure the advance of a loan.”
Mr de Frias noted that joint owners of the property can refuse to allow any further borrowing against the property — and can even force the sale of it if they wish.
“What I often hear from clients and others is the expression, 'putting your children on the deeds'. What many fail to understand when they put their children on the deeds is that they are making their children immediate owners of an interest in the property, with all the consequent rights (and obligations) of an owner. Far too often I have been approached by seniors who have put their children on the deeds and they now wish to take them off the deeds. When I have explained to them that what they have effectively done is to convey an interest in the property to their children, which they cannot insist on having back whenever they feel like, they are horrified to hear this,” he said.
“Unfortunately, in some cases the legal profession has not done itself proud in failing to properly advise seniors on the legal implications and risks involved in conveying an interest to children. Conveying an interest in real estate to children is often a very useful estate planning tool but should not be entered into lightly; certainly not without the benefit of formal legal advice on the benefits and the risks.”
He said in order for seniors to protect themselves, they can take three steps.
“The first, obviously, is taking formal and proper legal advice. I know this sounds rich coming from a lawyer, but the cost of obtaining that advice pales in comparison to the cost, aggravation and losses a senior might incur as a result of not taking proper advice,” he said.
“The second is consider entering into additional agreements with children who may be added to the title to their property to record the terms of their being added to the property. For example, their being added to the property for particular purposes, and that they will not sell the property or convey their interest without the consent of the parent. This is often accomplished by a further deed (or deeds) and whilst it does add to the expense of conveying the property to children it does provide additional protection for the parent.
“Thirdly, carefully consider who should go on the title to your property and thereby become joint owner. If a senior has doubts about whether he wishes to make a child or relative a permanent joint owner of the property they should not proceed with the conveyance. Once done it is extremely difficult, if not impossible, to undo.”