Q: My grandmother has a house, when she purchased the house she put it in her name and 2 of her childrens name.

A: There are a variety of planning tools someone can use to name beneficiaries while keeping power to freely change those designations. Perhaps, if your grandmother got good advice, the deed is a life estate deed with full powers still vested in the planner. If so, she could change it freely by a new deed. Unfortunately there is little that can be done if someone made a decision they now regret if they didn't keep power to make changes. Of course if all current owners agree to a change a new deed can be done (though presumably that is not available).

When someone chooses to add others to the property as co-owners they effectively give away some of their interest (for example adding 2 other people as co-owners means the original owner effectively gives away 2/3 of their property). A deed cannot simply be changed because the person who made it later changes their mind. Changing the deed to split in sixths (with 1/6 split further) will require the cooperation of all people who are currently co-owners of the property. This kind of situation illustrates the concerns with adding children as joint owners while the original owner is living.

Either a life estate deed with full powers or deed to a revocable living trust would have let the planner freely change their mind up until they die (or become incompetent). If there is any chance your grandmother did one of these preferred means of transferring property outside of probate there may still be a chance to modify. Otherwise there is nothing that can be done with the 2/3 interest already deeded unless those 2 children agree.

Please keep in mind that if your grandmother does seek legal advice on modifying her planning an attorney would want to talk to her directly.

While not legal advice, nor a substitute for the planner sitting down with an attorney who can review the deed and offer the planner advice on estate planning / modifying existing planning documents, I hope this helps offer some general relevant information.

A: One option is to re-deed the house into her sole name. That would require the cooperation of the two children on the deed with her. Draft her will to distribute the house as she intends. By doing this, all her children would benefit by inheriting the house with a stepped-up tax basis equal to the FMV of the house at the time of her death. A stepped up tax basis would eliminate any capital gains tax due on the sale of the home.

Alternatively, do nothing, and hope the two children on the deed honor their mother’s wishes and split the proceeds of sale equally.

Assuming the house is titled as joint tenants with right of survival, then if nothing changes the two children on the deed will be the sole owners of the house upon your mother’s death. They may choose to keep the house for themselves, and not split the sale proceeds or do so unequally. However, because they are on the deed at the time of their mother’s death, they will have a tax basis in the house equal to its original purchase price. Any sale proceeds above that amount will be subject to capital gains tax (20%).

If by chance the title of the house is “tenants in common” then upon your mother’s death the two children would each own 1/3 of the house and the other third would belong to your mother’s estate. The estate would then distribute that one third in accordance with your mother’s will.

If your mother dies without a will, property in her estate would distribute in the same manner you described (equally among the children, with the deceased child’s share being divided among the deceased child’s children). But unless the two children on the deed transfer their interest back to your mother, they will own the house, or 2/3 of it, depending on how it’s titled.