Your Money : Money Talk : Your Idea of Fair May Differ From Probate Court’s and Your Sister’s

Q: Three years ago my mother wrote a rough draft of her will that she wanted my aunt to have notarized. Unfortunately Mom died before my aunt did so, but the rough draft still exists and is in my mother’s handwriting.

It is a small estate that contained a house and two cars. My brother and sister already own homes and I was the only one living in an apartment, so she left the house to me. My brother had no problem with turning over his one-third ownership of the house, but my sister is forcing me to buy her out. This doesn’t seem fair, seeing that my mom did have a will, it just was not notarized. Is there any way I can stop my sister from making a profit off my mother’s death?

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A: Handwritten wills are legal in some states, including California. They don’t have to be notarized, but they do have to be signed and usually dated as well. Assuming your mother signed and dated the will and that no other wills are in existence, the normal answer would be that you would only have to submit the will in probate court to have your mother’s wishes carried out. (Probate is the court process whereby the deceased person’s debts are paid and his or her property distributed.)

It’s not clear from your letter, however, how long ago your mother died or if her estate has already gone through probate. If someone dies intestate--that is, without a will--the state will determine how that person’s property is to be divided. Typically, someone in your situation would expect the court to give the house to you and your siblings in equal shares, assuming your mother was not married at the time of her death. If the estate has already been probated, getting the case reopened again could be quite difficult, if not impossible.

You might think your sister is being unfair, but cool the rhetoric about her trying to “make a profit” from your mother’s death. She might very well think your mother was unfair in leaving the house to you. Distributing an estate in unequal shares is almost guaranteed to cause bad feelings among heirs, which is one of the reasons the state requires a probated will or a living trust to authorize such arrangements. In your sister’s eyes, it may be that the state’s solution is a more just deal than her own mother would have given her.

What Cost a Paid-For Home?

Q: My husband is taking a new job shortly, and we will be moving to northern Virginia. We have the option of taking a full or partial lump-sum payment from his retirement account. Is it better to take part of our retirement to pay cash for a house and take a large tax “hit” now? Or to pay mortgage interest for 10 to 12 years (14 years at the most) until we retire and pay off our mortgage then?

The retirement account is worth about $520,000. We would take out about $400,000 to pay for a $250,000 house and the tax penalty, leaving us with about $120,000 in retirement funds. My husband is 51 and has a well-paying job; I am 41 and planning to work part time, so we have plenty of time and resources to rebuild our retirement account. We have a strong desire to have our mortgage paid off when we retire--this is a must.

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A: It doesn’t matter how strong your desire is; you shouldn’t use that retirement money to buy a house. Besides the hideous loss you would suffer from taxes and penalties, you would be losing--forever--the ability of that money to grow for you tax-deferred. That’s something you can’t get back, and at 41 and 51 you don’t have “plenty of time” to make up the loss. In your own words, you have 14 years at the most before you will retire. That’s not much time to rebuild a nest egg to take you through 30 or 40 years of retirement.

Left alone, the money you want to withdraw could grow to nearly $3 million in 20 years, assuming a 10% average annual return. If you’re really hellbent on being mortgage-free, get a 15-year loan and make a few extra payments.

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Liz Pulliam is a personal finance writer for The Times and a graduate of the certified financial planner training program at UC Irvine. She will answer questions submitted--or inspired--by readers on a variety of financial issues in this column. She regrets that she cannot respond personally to queries. Questions can be sent to her at liz.pulliam@latimes.com or mailed to her in care of Money Talk, Business Section, Los Angeles Times, Times Mirror Square, Los Angeles, CA 90053. For past Money Talk questions and answers, or to join a discussion about ways to save money, visit The Times’ Web site at https://www.latimes.com/moneytalk.