An attorney asked me for my opinion about his debtor client who was put on the legal title to his parents’ house. His mother and father added the client, their only son, to their homestead deed as a joint tenant with rights of survivorship for estate planning purposes. When both parents die the title automatically passes to the surviving son. (Title would vest in the son anyway under Florida’s homestead laws without the son being on title.). The parents paid off the mortgage. The son never paid any money toward the purchase or maintenance of the parent’s house. The son does not live in the house with his parents. One of the son’s creditors got a civil judgment against him. The attorney wants to know if the son’s creditors can levy upon the son’s interest in the house and force a sale of the home.
I’ve advised many times in this blog that parents should not add their children to their property titles because a judgment against the child could jeopardize the parents’ assets. This is another example of that risk. However, in this case I think the parents’ house is safe. Because the son has invested no money in the house nor given his parents any consideration for putting his name on the title the son has no equitable interest in the house. He has what is called “bare legal title.” The son has no right to money received from the sale or financing of the house, and his creditors can gain no greater rights than the son holds in the property. I think a judge would recognize that the son is on the title as an estate planning device and that the parents did not intend a present gift of any interest in or rights to the house. The creditors cannot get what the debtor does not have- I think the house is safe.
But, there are many ways this type of planning can turn out badly. There certainly is no guarantee a judge will rule the same way I interpret this transaction. As a practical matter the parents have put their homestead at risk. This family engaged in amateur estate planning without legal advice. Penny wise, pound foolish.