Advice? Pitfalls to avoid? Just inherited 50% of a house (but the other person has a "life estate"

[RetiredHappy]

Looking at this from a different (but similar) angle, the OP has inherited 50% of a house that is also owned and occupied by what one could consider a squatter. Only worse. They have the same ownership in the property but 100% legal rights to occupy, and while they are contractually responsible to maintain the house, they aren't contractually obligated to maintain the house.

What a mess.

There is nothing to indicate that the co-owner is a squatter as the person has the right to live there as a co-owner and under life estate.

 

[Kings over Queens]

There is nothing to indicate that the co-owner is a squatter as the person has the right to live there as a co-owner and under life estate.

Of course, not technically. This might be worse, because there are legal remedies to remove a squatter.

 

[cathy63]

One lesson for the rest of us: Do not put our heirs in a position like this.

OP's "position" is that someday he or his heirs will own a home. Most people would think that's better than nothing, which is the alternative.

The deceased could have left 100% of the house to their co-owner and that person would have left it to his own heirs, cutting out OP's family. That's the usual complaint that goes something like "parent remarried and left everything to the step-parent who's now leaving it to their own children from a prior marriage".

A life estate is not nearly as negative as many people here are painting it to be.

 

[Surewhitey]

Interesting legal exchange of ideas. I'd hate to be the OP.

I walked away from my bro swooping in for the 10 acres of pop's when he passed. Also didn't want mom to put me on her home as it's just a liability. Both values were ~$60k...

Keeping my life simple and less stress.

 

[Kings over Queens]

A life estate is not nearly as negative as many people here are painting it to be.

In the right circumstance, sure. To me this doesn't feel like the right circumstance.

Now perhaps there is more to it and details that we aren't privy to at this point. My concern, for whatever concern I'm entitled have over a circumstance that doesn't involve me, is that the OP is POTENTIALLY exposed to liability through the ownership of the home, but not have the ability to make repairs or take other corrective action, or, he may not be motivated without some form of participation or contribution from the occupant through the life estate.

All this for $50,000, that he may never see given the age of the occupant.

My view, he got the short end of the stick.

 

[RetiredHappy]

My view, he got the short end of the stick.

Or not. If the deceased had simply left the home in entirety to the other party, OP would not even be in the picture.

On the other hand, if OP passes away before the other party, OP's heirs will inherit nothing.

It is definitely a strange and undesirable situation to be in.

 

[JoeWras]

This strange situation reminds me a bit of the opening scenes in the movie Rain Man. But "at least he got the rose bushes."

 

[copyright1997reloaded]

It's funny seeing posts suggesting the OP walk away from an asset worth 50K (well less because of the PV of the life estate). Having said that, I'd walk away. . Life is too short than to deal with *-holes when not needed.

 

[Lewis Clark]

OP's "position" is that someday he or his heirs will own a home. Most people would think that's better than nothing, which is the alternative.

The deceased could have left 100% of the house to their co-owner and that person would have left it to his own heirs, cutting out OP's family. That's the usual complaint that goes something like "parent remarried and left everything to the step-parent who's now leaving it to their own children from a prior marriage".

A life estate is not nearly as negative as many people here are painting it to be.

Perhaps it is better than nothing. This won't be known until he or his heirs take possession of the home.

On the other hand, the shared ownership is with a person who has made threats of violence against the OP, and the OP has a bad relationship with the shared owner, who is also bad with money. Even if the eventual home ownership turns out to be a positive outcome, it is likely to be a stressful period of shared ownership.

That's a lot of potential angst for half of about $100,000. I wouldn't do that to people I care about ... but that is just me.

Edited to add: in my eyes, the problem is not shared ownership itself, but shared ownership with that particular individual.

 

[RetiredHappy]

Perhaps it is better than nothing. This won't be known until he or his heirs take possession of the home.

On the other hand, the shared ownership is with a person who has made threats of violence against the OP, and the OP has a bad relationship with the shared owner, who is also bad with money. Even if the eventual home ownership turns out to be a positive outcome, it is likely to be a stressful period of shared ownership.

That's a lot of potential angst for half of about $100,000. I wouldn't do that to people I care about ... but that is just me.

If OP dies before the shared owner, OP and his heirs won't get a dime from the home.

 

[Kings over Queens]

If OP dies before the shared owner, OP and his heirs won't get a dime from the home.

I'm not sure the point you are trying to make.

A lot of things that you slough off as "if's" must go right for the OP to benefit in this situation. At the moment he's got 50% ownership in a house occupied by a guy whose threatened him and no legal means to have him removed from the house. I'd love to see another option for him but absent that, it seems his only out is to give the guy his 50% and be done with it, because the guy whose benefiting from the life estate has no reason or motivation to buy him out.

If the OP dies first his heirs get nothing, yet, the OP must endure the angst of whatever may happen while he's still alive. Sounds promising, huh?

 

[RetiredHappy]

I'm not sure the point you are trying to make.

A lot of things that you slough off as "if's" must go right for the OP to benefit in this situation. At the moment he's got 50% ownership in a house occupied by a guy whose threatened him and no legal means to have him removed from the house. I'd love to see another option for him but absent that, it seems his only out is to give the guy his 50% and be done with it, because the guy whose benefiting from the life estate has no reason or motivation to buy him out.

If the OP dies first his heirs get nothing, yet, the OP must endure the angst of whatever may happen while he's still alive. Sounds promising, huh?

Pretty much my point in post number 2. If $50K is not alot of money to OP, just quit claim his portion to this shared owner. Otherwise, just ignore the inheritance because it may be many decades before the shared owner moves out or dies.

 

[engineernerd]

My advice... find out your deadline for disclaiming this part of your inheritance, then consult a good lawyer about the upsides and downsides, in time to make your decision.

I'm sitting here imagining your other owner lives in the house long enough to turn it into a Superfund site (meth lab?), then dies and leaves you 100% owner. Could you walk away at that point? Ask the lawyer.

 

[MC Rider]

Meth lab? Worse case scenarios, but it would be good to consult a real estate lawyer.

 

[Hermes]

One lesson for the rest of us: Do not put our heirs in a position like this.

100%

 

[Workinprogress]

When you meet with your lawyer ask if it's possible to donate your 50% to a patient charity. Preferably a charity that does not mind the wait and maybe take the tax write-off. Just a thought, if they take Cars and boats why not life estates?

I am liking this one. Can you get a tax benefit from the donation?

 

[Franklin]

well if it has value (and most here think it does) and (you want to exit this from your life) then donating it to the church or "Kids for cars" may be the way to go. Ask your CPA or attorney or just google donating a 50% owned property subject to a life estate and at least explore. Id bet the receiving charity would be happy to explore taking this off your hands. Anyway, seems better than just walking away with zero and a bad feeling for years thinking about it.

 

[RetiredHappy]

Joint tenancy with rights of survivorship makes this interesting if it is donated to a charity that does not "die". It is guaranteed to get 100% of the property when the "life estate/tenant" dies.

I wonder the estate has other language that precludes transferring one name out to another party other than quit claiming to the co-owner.

 

[FIREd]

I inherited a majority ownership (70%) in a condo back in 2012. The other 30% belong to an elderly family member with a life estate on the property. In my case, the life tenant can live in or rent out the property as she wishes but in exchange she is required to pay all HOA fees and property taxes. She is also required to keep the property maintained at minimum in the condition it was back in 2012. Failure to meet those obligations would trigger the sale of the condo and the division of the proceeds 70/30. Upon the death of the life tenant, I inherit her 30%. In case I die first, the life tenant inherits my 70% since I have no heir.

When I agreed to this deal back in 2012, the life tenant seemed to have enough income to meet her obligations. But my relationship with the life tenant has soured over time. She keeps trying to extort me to help her pay part of the HOA fees. Some of those fees are used to improve the building rather than maintain it and she claims that she shouldn’t have to pay for that. I’ve had to consult an attorney to fend her off. On top of it, it seems like she is now having difficulties meeting her financial obligations due to a steady rise in HOA fees, so it looks like the property will have to be sold in the future.

 

[pb4uski]

Joint tenancy with rights of survivorship makes this interesting if it is donated to a charity that does not "die". It is guaranteed to get 100% of the property when the "life estate/tenant" dies. ...

Interesting point. But might a charity not want it for the same reasons that the OP doesn't want it like potential liability of being associated with a property that they have no control over for a long time.

 

[JoeWras]

Interesting point. But might a charity not want it for the same reasons that the OP doesn't want it like potential liability of being associated with a property that they have no control over for a long time.

Yes. I've helped accept incoming donations for various charities. News flash: if you are donating something broken or undesirable, you are not doing the charity any favor. If you are "laundering" your gift and valuing it high, even though it is trash, you are a dishonest person.

Many donations go straight to trash. A real estate transaction might get more scrutiny before acceptance, though.

 

[sparky08]

What happens if the life-tenant marries, and then dies? Does the surviving spouse have an interest in the property? Or would he/she legally have to vacate?

This sounds so messy.

 

[RetiredHappy]

What happens if the life-tenant marries, and then dies? Does the surviving spouse have an interest in the property? Or would he/she legally have to vacate?

This sounds so messy.

I don't think new spouse can have an interest in the property since the estate has designated the two as joint tenants with right of survivorship.

 

[gauss]

edit: Just read post #9 above. Looks like OP is not 100% owner -- weird. Perhaps OP can sell his equity on the open market as others have suggested (but not likely). A conversation with an attorney to plan exit strategies may be time well spent up front. Who knows, the deed might not even be valid under Michigan law if the original owner hand-crafted it themselves.
--

!) When I have seen these in the past, the "life estate" holder of the property does not typically own any equity.
Is OP sure that he only inherited 50% of the house and not the full 100%

2) If the Deed or whatever legal instrument sets this up so that there is no requirement for the "life estate" holder to maintain the property, then I think you may get screwed. If there are requirements to maintain, or other conditions to maintain the "life estate", that are not being met, perhaps a court order could terminate the life estate and the other person evicted -- assuming they hold no equity in their own right.

-gauss

 

[pb4uski]

What happens if the life-tenant marries, and then dies? Does the surviving spouse have an interest in the property? Or would he/she legally have to vacate?

This sounds so messy.

No, surviving spouse would have no rights at all and would either have to negotiate with the new owner(s) or move.