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Question:

We share a house with our daughter and son-in-law. They pay on the mortgage but the mortgage is in our name as we had better credit. In addition, the title to the house is in our revocable trust.  How does this affect the sale of the home and the distribution of the proceeds?

Response:

There’s the legal answer and the right answer, which aren’t necessarily the same. Legally, the house belongs to you and your spouse. Your daughter and son-in-law have no direct claim on it and the proceeds of any sale should go to you and your spouse. On the other hand, if you have an agreement with them about what will happen with the proceeds, they may have a contractual right to a share under the terms of your agreement. Further, whether or not there’s a formal agreement, you can do whatever you want with the proceeds, giving them what you think they should receive.

Given the apparent uncertainty of your situation, which is not unusual when different generations are cohabiting, I’d strongly recommend that you all sit down discuss what you think should happen and put your agreement in writing in order to avoid any disagreements in the future. Questions you should answer include:

1. How long do you plan to live together?
2. At what rate will your daughter and son-in-law’s interest in the property accrue?
3. How will you share any increase in value for the property (or loss, for that matter)?
4. What happens if one couple wants to move out and the other does not?
5. What happens if anyone, more likely you or your spouse, needs care?
6. If you have other children, how will your living arrangement affect their future inheritance?

My law firm has developed a workbook, The Cohab Workbook for Families, for working through these and other questions here. We hope you will find it to be useful.

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