A Broken Family Affair: Probate Homestead Leads to Melodrama

The characters in this particular drama are “probate homestead,” “life estate,” and remaindermen.  Audience Warning:  many people will find this story disturbing.

A “probate homestead” refers to the right of the surviving spouse to possess, occupy and use the marital homestead after the other spouse dies.  The right supersedes any other right of stepchildren, beneficiaries under a will, and general estate creditors.  This right exists even if the spouses were in the middle of a divorce, the house was entirely in the name of the deceased spouse, or the marriage was common-law instead of ceremonial.  The right does not cease when the surviving spouse remarries.   The right cannot be assigned, has no separate value, and terminates when the surviving spouse dies.

That is powerful stuff.

Not all of this comes completely free.  The surviving spouse has the obligation to pay for the upkeep of the property (including normal repairs), property taxes, interest on any mortgage, and utilities.

A “life estate” is slightly different.  It gives a person, called a “life tenant,” the right to possess, occupy and use real property, but it can be assigned to someone else and has an actual monetary value.  Unlike a probate estate, it can be created through a deed or contract.  Sometimes a surviving spouse can have both a life estate and a probate estate – the life estate can arise when a married decedent with children from another marriage dies without a will.  In that case, the surviving spouse has a 1/3 life estate in the decedent’s interest in the homestead.

The life tenant has to pay for upkeep, taxes, mortgage interest and utilities and has the duty not to injure the property.

Enter the remaindermen.  These poor souls own, but cannot occupy, possess or use, the house as long as it is subject to the life estate or probate homestead.  They have a duty to pay the mortgage principal and property insurance.  They can sell their remainder interest.

Now for the storyboard.  John and Ann are married and live in the house John purchased before marriage.  John has 3 children from a prior marriage and no will – John dies.

Result:  Ann, as the surviving spouse, has a probate homestead and, as an heir, a 1/3 life estate.  John’s 3 children, as heirs, are the remaindermen and own the house, and also have a 2/3 life estate in the house.

Real life effect:  Ann and her step-kids are financially and emotionally intertwined for the rest of Ann’s life.  Ann gets to live in the house.   John’s kids get to drive by and worry about whether she is properly maintaining it.  They also have to come up with the money to pay the mortgage and insurance on property they cannot lease and may not get to occupy for a decade or two.  Ann has to pay the mortgage interest and will not get any money for improvements she makes.

On second thought, that is not a drama:  it is a horror story.

Virginia, a 1982 SMU law school graduate, has advised clients for over 35 years.  For more information, visit hammerle.com, and for newsletter sign-up, email legaltalktexas@hammerle.com.  This column does not constitute legal advice.