'I'm very sad': My brother refinanced our mother's house and sold the contents. Can we claim a share of the proceeds?

By Quentin Fottrell

'I wrote him a check for $5,000 15 years ago because my mother would have died on the spot if she had been evicted from her home'

Dear Quentin,

My mom left her home to my youngest brother, to ensure that he would always have a place to live. In exchange, he was responsible for taking care of her as she aged. I spent six months of the year in my home state to help him. Mom passed away two years ago. He never filed her will for probate, lost her home to foreclosure - the house was paid for when she signed it over to him - and sold everything in her house without asking me or our other sibling if we wanted anything.

Are we entitled to anything from the sale of what was in the house? I wrote him a check for $5,000 15 years ago because my mother would have died on the spot if she had been evicted from her home. He's never offered or attempted to pay me back. I realize this issue is due to a bad decision on my mother's part, but there was no convincing her otherwise. I also realize that it was her home and she had the right to do with it as she pleased.

Thank you for your advice. I'm very sad that this house has been lost.

The Sister

The Moneyist on the Road: A Palm Springs house sold for $1.3 million in 2023 after zero days on the market. It previously sold for $611,000 in 2021. How is that possible?

Dear Sister,

Do-it-yourself estate planning rarely works - and unfortunately, your family has learned this to their cost.

Your mother may have attempted to avoid probate by giving her son her home with a transfer-on-death deed; either that, or she put her son on the deed of her house while she was still alive. The latter is a bad idea: In giving a child partial ownership of their parents' property, it leaves the house vulnerable to creditors and prevents the child from benefiting from a "step-up in basis" when the parent dies. (Signing a property over to a child entirely is a worse idea, as they could then sell the house out from under their parents and evict them from the home.)

A "step-up in basis" values a property at the current value, not the purchase price, after a person dies. That reduces heirs' capital-gains tax when they sell. If the house was originally purchased for $500,000 and sold for $1 million, your brother, if he was on the deed, would have to pay capital-gains tax on $500,000 if he decided to sell. Heirs who are not on a deed would only pay long-term capital gains on the appreciation post-inheritance. Not all older people and their children are aware of this when they make decisions about inheritance and real estate.

There is another, more pressing issue, at stake. Some states impose financial penalties if heirs fail to file probate in a timely manner. Your mother's estate continues to incur expenses as if she were still alive if it is not probated; essentially, it becomes legally impossible to pay your mother's bills and any debts she may have. In Texas, this can lead to a will becoming invalid after a certain period of time. You can petition the probate court to remove your brother as executor; alternatively, the probate court can appoint a new executor.

Criminal or civil charges

An executor who deliberately avoids probate or mismanages an estate could face criminal and civil charges. A less desirable course of action: You can take a civil action against your brother for not performing his duties as executor, if you can prove you and your sibling have suffered due to his actions. "This would be an option if the executor has stolen money or failed to protect the assets of the estate," according to the Sherer Law Offices, in Edwardsville, Ill. "There is always a chance you will be able to settle before ever seeing the inside of a courtroom."

Your mother left her house to a financially reckless son who, presumably, managed to refinance the house and spend the proceeds. The contents should have been treated as separate property and divided equally, but it would be extremely difficult to track down the proceeds given that he never started probate. You loaned him money, but without a loan agreement - and given his current financial situation and his apparent lack of consideration or responsibility - you can kiss that $5,000 goodbye. Try to see it as a gift.

It's too late for your family, but there are many other options that would have protected your mother's house from being refinanced or sold by one child and that might have enabled her to leave it to her other children or her grandchildren. She could have, for example, put the house in a revocable trust, which would also mean the house would not have to go through probate, often an onerous, time-consuming and expensive process. A trustee would be given instructions on what should happen to the house after her death or should she become incapacitated.

Your mother acted in good faith when she left your brother her house, and you acted in good faith when you loaned him $5,000. As your family has learned, there is a big difference between helping a loved one and enabling them. It's never a good idea to hand over the keys of the kingdom to a person who has not acted in a financially ethical manner. That's why it's important to choose trustees, people to whom you give power of attorney, healthcare proxies and, yes, executors and administrators with great care.

I'm sorry your family home is gone, but your story may help others avoid the same fate.

??You can email The Moneyist with any financial and ethical questions at qfottrell@marketwatch.com, and follow Quentin Fottrell on X, the platform formerly known as Twitter.

The Moneyist regrets he cannot reply to questions individually.

Previous columns by Quentin Fottrell:

'I was dumbfounded': My mother-in-law gave me a 'diamond' ring. A gemologist said it's fake. What should I do?

My daughter's father died in a horrible accident, but he was not on the birth certificate. How can I prove paternity to claim her inheritance?

'Death and money bring out the worst in people': My stepmother wants me to relinquish my rights to my late father's estate. How do I handle this gracefully?

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-Quentin Fottrell

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