My mother added me and my sister to her house deed, now I'm filing ch 7, problems?

[debee]

Your Mom may be able to renunciate the life estate and your remainder interest depending on how the docs are set up. She'd need to do it through a lawyer and then file the new deed with the county recorder. Then you can file your chapter 7.

This would not be an action on your part and wouldn't impact your bk filing the way a quit claim would. But it will depend on how she set it up.

[murphsmom]

Debee, that makes sense, however, my mom who is on a very limited income just paid about $500 a few months ago to add me and sister to the deed, as well as other estate/will planning issues. I simply can't imagine going to her now to ask her to pay more $ to terminate my interest, and pay the deed filing fees again, because I need to file bankruptcy, which she has NO idea about and will cause her major stress.

I will either need to get the courage up to approach her with this, or figure out a way to pay my bills. Hate the thought of consolidating those two payments, as I've been really in the mindset of getting OUT of debt, and into a cash style of living.

Totally thrown for a loop once again this morning...

[murphsmom]

Also, would her renunciating my life interest be in my best interest for my financial future? Just wondering what the best financial move is here.

[debee]

Not sure it's even an option. But if it is, and if she could remove you, there'd be no reason why she couldn't add you back again down the road.

[murphsmom]

I called the attorney that did her estate paperwork in the fall, and added us to the deed. He said no, she can't do that, it would have to come from me, removing myself from the deed. Then he said that he "really didn't know" if it was possible for her to do it, he doubted it.

So that's 2 attorneys telling me that there is no way around this issue without it causing undue stress and burden and possibly even worse to those that I love.

I just can't do it....

[debee]

Also, I don't know where your attorney came up with the idea that you would need to exempt 1/3 of the house's value as of today. That's not what I'm seeing as I read on this topic this morning.

Over time, ownership of the property transfers incrementally to the beneficiaries of the life estate in the form of percentage future interest, culminating with full transfer of the property to the beneficiaries upon the owner's death.

How to calculate a beneficiary's future interest in a life estate:

1. Determine the current age of the life estate owner.
2. Determine when the life estate was created (look to the date the deed which creates the life estate was first recorded).
3. Using the date (month/year) determined in Step 2, determine the applicable interest at the time the life estate was created under 26 U.S.C. § 7520. The table of interest rates can be found at http://www.irs.gov/businesses/small/...112482,00.html if the interest was created this year. Presently, the IRS has these tables going back to 1997 - to access previous years' interest rates, go to http://www.irs.gov/businesses/small/...204934,00.html.
4. Access IRS Publication 1457 and open up Table S, which you can get at http://www.irs.gov/pub/irs-tege/sec_1_table_s_2009.xls. Scroll down until you find the interest rate you determined in Step 3. Then locate the age you determined in Step 1. Slide over to the column for Life Estate, and find your percentage.
5. Multiply the fair market value of the property by the percentage determined in Step 4. Then, account for any partial interests or any other encumbrances (such as mortgages, judgment liens, or tax liens) to determine the value of the beneficiary's future interest.

[murphsmom]

Debee, thank you. I will discuss that table with him. However, I know myself, if there is ANY possible way whatsoever that the bk7 could somehow impact my mothers life, either now or in the future, I would never take the risk. If there is the slightest possible chance that it could affect her, then it's a no go for me.

[debee]

You're a good person.

I got that table from an attorney's website. He published it for other bankruptcy lawyers. I also read another legal article that discussed valuing life estates and they didn't explain their figures, but they were not simple divisions of interest based on the number of parties involved.

Your attorney has already advised you on this issue (by valuing your interest at a third) and if you get quite a different amount by following the steps outlined in my post above, then you might want to consider getting a second legal opinion.

Hopefully LadyInTheRed pops in on this thread as well. As Pandora already mentioned, LITR knows estate stuff better than anyone else on the forum.

[tobee43]

Talk to your attorney about having your MOM terminate your remainder interest.

good one!! i mean really, that should be able to get done.

but...and again is this property in trust??? or listed in a trust???

[despritfreya]

Talked to the attorney, and I'm just floored. He said that yes, most definitely the trustee can claim my 1/3 interest in the property with an approximate value of $25k. . . .

OK, I STOPPED READING THE POSTS WHEN I GOT TO THIS ONE so I apologize is this has already been mentioned.

Murpsmon,

You need to find another attorney, one who understands the difference between BARE legal title and EQUITABLE ownership.

1. You are on title for ESTATE PLANNING purposes ONLY. There is nothing wrong with that.
2. You and your sister have absolutely NO equitable interest in the property.
3. DO NOT remove your name as that raises additional questions.
4. Your BARE legal interest IS property of the estate HOWEVER it is subject to your mom's complete and 100% EQUITABLE interest therefore, it has ZERO, I REPEAT. . . ZERO value to the Trustee (unless she is on death's bed). You need to tell your attorney to read 11 USC 541(d) AND read the Legislative Statements which, in part state “Section 541(d). . . reiterates the general principal that where the debtor holds bare legal title without any equitable interest, that the estate acquires bare legal title without any equitable interest”.

Des.

[daylate]

Once again Des you appear to be a lifesaver-thank you for being part of this wonderful forum.

[debee]

I don't know.

I was just reading a NY case on this subject where the the debtors also had a remainder interest (which is what OP has) and they listed it in the schedules and then exempted it as homestead. Unlike OP, the actually lived on the property.

The trustee objected and filed a letter indicating the appearance of assets.

The court was given the job of deciding whether the asset (which was a remainder interest same as OP) was exempt. In the end, for various reasons not least of which was the fact that the debtors lived in the house, they were allowed to exempt their interest.

Their remainder interest was an asset. After all, there is no need to object to an exemption or go to court over an asset that isn't available to the trustee in the first place.

http://protect.theinfo.org/pacer/ecf.nyeb/122110816271.pdf

And what's with the trustee in the case Pandora posted?

ETA: I thought the trustee has the option of selling the property and buying out the other remaindermen (if there are any) and the life estate holder. The real question then becomes is it worth it for the trustee, or will he elect to abandon the asset.

ETA again: Another thing I've read is that some debtors buy out (pay the trustee) in order to retain their remainder interest.

[despritfreya]

I don't know. I was just reading a NY case on this subject where the the debtors also had a remainder interest. . .

Unfortunately the facts of the case you posted are not applicable to the issue at hand. The debtors were claiming a legal and an equitable interest in the NY property. As stated in their brief:

"The Debtors are typical middle-class Americans who reside in Levittown. As indicated in the attached Debtor’s affidavit, the Debtor-Husband, who is 47 years old, has continuously lived in the subject house since he was seven years old, a period of forty years, except for a few years around the time he got married. He currently lives in the house with his 82 year-old mother, as well as the Debtor-Wife, their four children, ages two, five, seven and nine. The Debtors have exercised all aspects of ownership to the subject premises including burying three of their family cats. . .in the backyard over the years. . .the Debtors disclosed that they live in and occupy the Premises, and provide a monthly rent to the life tenant, who also resides at the Premises. The Debtors actually pay the Debtor-Husband’s mother the sum of $600 per month rent which is supported by their schedules. The Trustee has neither disputed the Debtors’ residency at the Premises at the time of the filing, nor that the Debtors continue to reside there pursuant to oral lease. . ."

Based upon the above they were claiming a homestead exemption.

This is much different from OP who has no connection with the property but for being put on title. OP has bare legal title and, as such, a Trustee would have bare legal title which, due to mom's 100% equitable interest, has no value.

I cannot tell you how many times I have dealt with the exact issue. So long as a Debtor can prove they are not the true owner of the property there is no issue.

Des.

[debee]

I don't know.

In the NY case from the post above, the trustee was arguing against the debtors right to protect their remainder interest (the asset) with the homestead exemption because he believed that they did not meet the ownership requirements according to NYCPLR Section 5206(a), Section 522(d) of the Bankruptcy Code, and Section 282 of New York Debtor and Creditor Law in spite of the fact that they lived in the house. He was trying to get the asset out from under the exemption.

His argument was that they were merely "renters". The court disagreed. This did not change the fact or nature of the underlying asset. It only made it possible for the debtors to protect it.

OP will not be able to meet the ownership requirements of NYCPLR Section 5206(2) because OP does not live in the house and cannot claim her remainder asset under the homestead exemption.

OP has a stake in the property now. The value of her remainder in the life estate can be measured, calculated and exempted because ownership of the property transfers incrementally to the beneficiaries of the life estate in the form of percentage future interest, culminating with full transfer of the property to the beneficiaries upon the owner's death.

What's your take on the case from Pandora's post where the NY trustee put the debtor's remainder interest in his Mother's house up for auction?

[despritfreya]

@debee,

See:

In re Dwyer, 250 B.R. 472 (Bankr.R.I., 2000)
In re Torez, 63 B.R. 751 (9th Cir. BAP 1986) aff’d 827 F.2d 1299 (9th Cir. 1987)

There are many others. . .

And more importantly:

United States v. Whiting Pools, Inc. 462 U.S. 198, 205 F8 (1983)


"8. Section 541(a)(1) speaks in terms of the debtor's "interests . . . in property," rather than property in which the debtor has an interest, but this choice of language was not meant to limit the expansive scope of the section. The legislative history indicates that Congress intended to exclude from the estate property of others in which the debtor had some minor interest such as a lien or bare legal title. See 124 Cong.Rec. 32399, 32417 (1978) (remarks of Rep. Edwards); id., at 33999, 34016-34017 (remarks of Sen. DeConcini); cf. § 541(d) (property in which debtor holds legal but not equitable title, such as a mortgage in which debtor retained legal title to service or to supervise servicing of mortgage, becomes part of estate only to extent of legal title); 124 Cong.Rec. 33999 (1978) (remarks of Sen. DeConcini) (§ 541(d) "reiterates the general principle that where the debtor holds bare legal title without any equitable interest, . . . the estate acquires bare legal title without any equitable interest in the property"). Similar statements to the effect that § 541(a)(1) does not expand the rights of the debtor in the hands of the estate were made in the context of describing the principle that the estate succeeds to no more or greater causes of action against third parties than those held by the debtor. See H.R.Rep. No. 95-595, pp. 367-368 (1977). These statements do not limit the ability of a trustee to regain possession of property in which the debtor had equitable as well as legal title."


From Whiting Pools we get all of the other cases and, as far as I can tell, very settled law - so long as one can prove no equitable interest.

Des.