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I bought my son a house, and now his wife is divorcing him and wants half of it

MarketWatch logo MarketWatch 4 days ago Quentin Fottrell

Editor's note: The opinions in this article are the author’s, as published by our content partner, and do not necessarily represent the views of MSN or Microsoft.

Dear Moneyist:

About two years ago, I received inheritance from my father. He had not spoken to me in 40 years, and I had no idea I would be included. I had a house with a small mortgage left to pay off and had been saving as best I could for retirement in California with a less-than-stellar job. The inheritance changed everything.

My parents were Lutherans and had gone through the Great Depression. We had raised all our own food — my father was the son of a farmer, not a farmer himself — and we made our own clothes. This upbringing served me well and I was able to survive and be a single mother to my two sons.

When the wife of my younger son found out about the inheritance, she thought I should help them. I was not against it. I received enough money from my father and I am a frugal person. They have two teenage sons, and because she has never worked in the whole of their marriage, it was difficult for them to even think about buying a house.

I flew to Nevada from my home in California, where I fully funded a joint bank account with my son, and he used that to purchase a house in his name only. But then I realized that I would have to be accountable to the IRS to prove that this was a loan, not a gift. I took that to mean that if for some reason he couldn’t pay or didn’t pay.

I thought about it, looked into IRS questions, and decided that I would just gift them the house. I still have over $1 million left between my dad’s inheritance and the money I saved. My house in the San Francisco Bay Area is valued on Zillow for over $800,000 and will be paid off in the next couple of years.

My daughter-in-law made no contact after the house was bought (July 2018) until January 2019, when sent an email saying my son was a monster, my other son was a creep, and I was just a sinner that had produced bad sons. My son said she wants a divorce and wants to split the proceeds from the sale of the house.

This was not what I wanted to do with my father’s money. She’s never even paid bills before so I don’t imagine it would last her for very long. Her other idea was my son could move out and she would continue to live in the house and have my son support her and the boys.

Related video: The money now backing 1 in 5 home purchases (provided by CBS News)

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The house was titled in his name only. In January, my son and I signed a quit claim transferring the title to me; 100% of the purchase price came from me and I have the bank records to prove it. They have been together for a long time, but only married for about 5 years. My son wants to take care of his boys and, strangely enough, his wife.

His wife thinks they should wrap their marriage up this summer. My son has not told her about the property transfer. She wasn’t interested in any of the details and didn’t put her name on the title when she had the chance. It goes along with her idea that she is the benefactor of this family, rather than a contributor.

My question is whether I’ll have trouble over this in the future. All the discussions about the house were between me and my son. I figured I had until April 2019 when I filed my 2018 taxes to characterize the transaction. We went through a number of options: Family loan, gift, and then me retaining possession of the property.

I just wanted to share my good fortune with my son and his family. My boys and I went through some hard times and housing insecurity was always looming over our heads. Somehow, we made it and I just wanted to make life easier for them. It seems unbelievable that she just wants to funnel it to herself, not her family.

Grandma Trying To Make A Difference

Dear Grandma:

You tried to do the right thing, and I understand that you love your family. You wanted to help your son and daughter-in-law and their family. Take heart. Whatever happens you will have achieved that. All things considered, your grandchildren will, I assume, eventually inherit this home from their parents when they die, and your investment will have been worth it. You did a nice thing. Housing insecurity is one of the most difficult things for any family to deal with, and you helped to alleviate that with this inheritance.

Housing insecurity keeps low-income families locked in an endless cycle of poverty, and has so many other emotional and financial ramifications. “Research shows that eviction can have enduring effects on families’ ability to obtain basic necessities (for example, food, clothing and medicine) and can cause depression among mothers, and a strong body of evidence links inadequate housing and homelessness to child abuse and neglect,” according to the Urban Institute.

This will also help your grandchildren in the long run. Stable housing also prevents students who don’t have wealthy parents from graduating from college, and can lead to absenteeism and low test scores. It is one of the most stressful things to deal with in life. Approximately 36% of survey respondents at four-year schools said they faced housing insecurity within the last year, including struggling to pay their full rent or utility bills. At community colleges, roughly 46% of students were housing insecure.

Also see:I’m 65, my mortgage is paid off and I have $370,000 in savings, so why I am still worried about money?

If you thought I was telling you all of this to soften the blow, you were right. Nevada is a community property state, and anything your son acquires during the marriage is marital property. If your son owned his own home outright and renovated it using money from their own funds, it would turn that home into community property. Word of warning: Your daughter-in-law may not be aware of this change of title, but if she or her lawyer were made aware of this, it could backfire terribly during the divorce proceedings. Judges don’t take kindly to such orchestral maneuvers.

The upside is you and your son right to do the right thing by your respective families. From what you say, you have raised him well.

Quentin Fottrell is MarketWatch's personal-finance editor and The Moneyist columnist for MarketWatch. You can follow him on Twitter @quantanamo. Do you have questions about inheritance, tipping, weddings, family feuds, friends or any tricky issues relating to manners and money? Send them to MarketWatch’s Moneyist and please include the state where you live (no full names will be used). 

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