Protecting the “Granny Flat”
How Do I Protect My Right to Continue Living in My Son and Daughter-in-Law’s House if Something Were to Happen to My Son?
By Pierro, Connor, & Strauss, LLC.
QUESTION:
My son and daughter-in-law bought a house with a “granny flat” attached. I gifted them the money for the down payment and in return, I can live in the granny flat until my passing. My daughter-in-law and I do not always get along. How can I protect my right to live on the property should anything happen to my son?
ANSWER:
Good question!
Ideally, you should have talked to an attorney before gifting the money, as now your daughter-in-law might not be willing to sign legal documents to protect your rights, and you may not be able to force her to do so. It may also be much more difficult – a few years back I had a client who bought an apartment for her son and daughter-in-law, who promptly took out a significant mortgage against it.
There are several possible solutions, each with its own advantages and drawbacks. The easiest solution is for you to sign a use and occupancy agreement with your son and daughter-in-law, giving you the right to live in the house for as long as one or both of them owns it. The agreement could spell out any other obligations, such as whether or not you have to pay rent, how to divide utilities, etc. However, this will not protect you if your son and daughter-in-law were to sell the house – the agreement only lasts as long as they own the place.
To ensure you get your money back if they ever sell the house, you could have them sign a promissory note and mortgage. The Promissory Note could say that their obligation to pay you back ends at your death. On top of that, if you’re concerned that your son and daughter-in-law may take out another mortgage, you could have your mortgage ‘perfected’ by filing papers with the county clerk. This would mean that any new lender (or buyer) is on notice that you need to be paid off first. It would also make it a lot more difficult if your son and daughter-in-law would ever want to refinance.
The most secure option is for your son and daughter-in-law to deed you a legal life estate. That gives you an ownership interest in, and therefore the right to live in, the property only for as long as you remain alive. This provides an unbreakable guarantee that you will have the right to live in the house, but comes with potential drawbacks which go beyond the scope of this article, including the fact that your daughter-in-law could sue you for not adequately maintaining the granny-flat!
The question, therefore, isn’t which solution provides the best protection, but which solution is right for you and your family, based on your circumstances and relationships. To explore your estate and asset protection options, call Pierro, Connor & Strauss at (518) 459-2100 to schedule a free consultation.
