Property ownership/title headaches...options

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bbrock
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Property ownership/title headaches...options

Post by bbrock »

Hi Bogleheads,
Happy 2022.

I have been grappling for years with an unresolved situation. My brother and I were beneficiaries of a small mountain cabin. Originally, the two of us owned as tenants in common 50/50, but in 2011 he added his share to his trust which is under his and his wife's name. I am married, but still own my share as separate property. He does not pay anything on the property anymore, and has not for many years.

This is surfacing b/c my wife and I are estate planning. We have elementary school age children. My brother has no kids. The joint titling is not something that I want my wife to have to deal with if I die first. As it stands, my brother has written in emails that he has no interest in the property and his half is to go to our sons (his nephews).

Some of my struggles are that he owns the property but does not pay even for just half the property taxes and homeowner's insurance. And, if my brother dies, his half would not go to our sons (his nephews) b/c it is in his trust with his wife as beneficiary, who neither my wife nor I really care for. So, there in lies the struggle.

I wanted to bounce this off of Bogleheads for ideas and/or to see if I am missing anything. My thoughts and questions are as follows:

1) We previously had an agreement that when the property was vacant and not occupied full time, we would both split the expenses. Since I moved in 2011 and it has been vacant, I have paid for everything. I have asked my brother how he intends to settle up for the period since 2011, and he states that he can't remember any agreement that we would split expenses when it was vacant. My brother believes that since he wants to give his half to our sons (his nephews), then that should be good enough and settle things. How would you handle this?

2) Neither my wife nor I want our sons on title when they turn 18 b/c child owned assets would adversely impact their future college financial aid. One option I thought of is a legally binding contract in which my brother is still on title, but his intent of giving his half to our boys in the event of his death or the sale of the home is written out. And, he takes his property out of trust, puts his half back in his sole name, and then adds a Transfer on Death designee which would be our sons (his nephews) or to our trust.

3) He has also thought of just signing over title now to us (my wife and I), but that would force half of the property to get reassessed. I estimate that that would cause an increase in the property taxes of approximately $3000/yr. Would paying an extra $3000/yr in prop taxes be worth it to you to get out of this property titling headache that would be a complication when the property is sold?

4) I don't believe there is any way to avoid property tax reassessment if my brother is removed from the title, even if the property is placed into a LLC, which I only read up on briefly. Any ideas or thoughts?

Thanks for taking your time to read my post, and I thank you now for any input you offer.
Last edited by bbrock on Sun Jan 16, 2022 8:19 pm, edited 1 time in total.
bbrock
Nebraska_Drought
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Re: Property ownership/title headaches...options

Post by Nebraska_Drought »

Why not just sell the property and end this headache?
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bbrock
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Re: Property ownership/title headaches...options

Post by bbrock »

Because our boys and us like going to the property.
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Gill
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Re: Property ownership/title headaches...options

Post by Gill »

Why don't you consult a real estate lawyer who might suggest a partition action forcing the sale of the property at which you could acquire your brother's half.
Gill
Cost basis is redundant. One has a basis in an investment | One advises and gives advice | One should follow the principle of investing one's principal
SuzBanyan
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Re: Property ownership/title headaches...options

Post by SuzBanyan »

bbrock wrote: Tue Jan 11, 2022 3:30 pm Because our boys and us like going to the property.
Does your brother or his wife use the property? If not and he is serious about gifting you his half, the increase in property tax on his half seems a small piece to pay to resolve this issue.

An alternative is to offer to pay him fair market price for his half and deduct his unpaid share of expenses from that amount. It will still result in a reassessment of the half that is being transferred and obviously cost you more than if he gifts it. But this may be more “fair” and may have less impact on your relationship with your brother.
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bbrock
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Re: Property ownership/title headaches...options

Post by bbrock »

Gill wrote: Tue Jan 11, 2022 3:33 pm Why don't you consult a real estate lawyer who might suggest a partition action forcing the sale of the property at which you could acquire your brother's half.
Gill
Acquiring it is not the concern. I do believe he is serious about gifting his half to our sons (his nephews) and/or us if we don’t want property held in their names.
Last edited by bbrock on Sun Jan 16, 2022 8:13 pm, edited 1 time in total.
bbrock
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Re: Property ownership/title headaches...options

Post by bbrock »

SuzBanyan wrote: Tue Jan 11, 2022 3:49 pm
bbrock wrote: Tue Jan 11, 2022 3:30 pm Because our boys and us like going to the property.
Does your brother or his wife use the property? If not and he is serious about gifting you his half, the increase in property tax on his half seems a small piece to pay to resolve this issue.

An alternative is to offer to pay him fair market price for his half and deduct his unpaid share of expenses from that amount. It will still result in a reassessment of the half that is being transferred and obviously cost you more than if he gifts it. But this may be more “fair” and may have less impact on your relationship with your brother.
Yes I believe he is serious. I have thought that an approximate $3000 increase in taxes is a small amount to pay for peace of mind and a clean title.

No, my brother does not use the property. This is something our parents gave us, and there are still some possessions and belongings of our parents to go through. He stated he has no interest in the property.

Both my wife and I do not trust his wife. We believe if things stay as is and she stays on the title, she will not honor what he stated which is to gift it to his nephews.
bbrock
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Tubes
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Re: Property ownership/title headaches...options

Post by Tubes »

bbrock wrote: Tue Jan 11, 2022 4:04 pm
SuzBanyan wrote: Tue Jan 11, 2022 3:49 pm
bbrock wrote: Tue Jan 11, 2022 3:30 pm Because our boys and us like going to the property.
Does your brother or his wife use the property? If not and he is serious about gifting you his half, the increase in property tax on his half seems a small piece to pay to resolve this issue.

An alternative is to offer to pay him fair market price for his half and deduct his unpaid share of expenses from that amount. It will still result in a reassessment of the half that is being transferred and obviously cost you more than if he gifts it. But this may be more “fair” and may have less impact on your relationship with your brother.
Yes I believe he is serious. I have thought that an approximate $3000 increase in taxes is a small amount to pay for peace of mind and a clean title.

No, my brother does not use the property. This is something our parents gave us, and there are still some possessions and belongings of our parents to go through. He stated he has no interest in the property.

Both my wife and I do not trust his wife. We believe if things stay as is and she stays on the title, she will not honor what he stated which is to gift it to his nephews.
CA property tax laws are a blessing and a curse. I guess you found the curse part.

Having had to deal with something similar, but honestly without the tax increase problem, I found that getting a clean title added years to my life. The stress of it all, much as you describe, was a huge drain.

If he just wants to sign it over, I think you are fortunate. Consider the tax hit your payment for half. Then move on. Who knows, with this market, you may want to sell it and use the proceeds for you and your boys to explore different rental cabins from time to time. When I ran the numbers, I found that owning the property was more hassle and cost than just occasionally renting. This, of course, depends on how often you use it. So after the title was clean, I sold it.
VoiceOfReason
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Re: Property ownership/title headaches...options

Post by VoiceOfReason »

bbrock wrote: Tue Jan 11, 2022 4:04 pm

Yes I believe he is serious. I have thought that an approximate $3000 increase in taxes is a small amount to pay for peace of mind and a clean title.

You have your answer right there.

He's willing to gift you the property, (effectively making up for any costs since 2011 as well). $3k/year in exchange for half the property's value seems to be a pretty good bargain, not to mention no family drama in years to come. How much is the property worth?

If it were me, I would try to untangle the web as quickly as possible, even if it means costing me some $ in the process.

1) Take as gift
2) Buy out his share
3) sell the whole thing and then decide if I want to purchase a similar property in the area
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Tubes
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Re: Property ownership/title headaches...options

Post by Tubes »

VoiceOfReason wrote: Tue Jan 11, 2022 4:17 pm
bbrock wrote: Tue Jan 11, 2022 4:04 pm

Yes I believe he is serious. I have thought that an approximate $3000 increase in taxes is a small amount to pay for peace of mind and a clean title.

You have your answer right there.

He's willing to gift you the property, (effectively making up for any costs since 2011 as well). $3k/year in exchange for half the property's value seems to be a pretty good bargain, not to mention no family drama in years to come. How much is the property worth?

If it were me, I would try to untangle the web as quickly as possible, even if it means costing me some $ in the process.

1) Take as gift
2) Buy out his share
3) sell the whole thing and then decide if I want to purchase a similar property in the area
VoiceOfReason's name definitely checks out on this. Agree.
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bbrock
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Re: Property ownership/title headaches...options

Post by bbrock »

Tubes wrote: Tue Jan 11, 2022 4:11 pm
bbrock wrote: Tue Jan 11, 2022 4:04 pm
SuzBanyan wrote: Tue Jan 11, 2022 3:49 pm
bbrock wrote: Tue Jan 11, 2022 3:30 pm Because our boys and us like going to the property.
Does your brother or his wife use the property? If not and he is serious about gifting you his half, the increase in property tax on his half seems a small piece to pay to resolve this issue.

An alternative is to offer to pay him fair market price for his half and deduct his unpaid share of expenses from that amount. It will still result in a reassessment of the half that is being transferred and obviously cost you more than if he gifts it. But this may be more “fair” and may have less impact on your relationship with your brother.
Yes I believe he is serious. I have thought that an approximate $3000 increase in taxes is a small amount to pay for peace of mind and a clean title.

No, my brother does not use the property. This is something our parents gave us, and there are still some possessions and belongings of our parents to go through. He stated he has no interest in the property.

Both my wife and I do not trust his wife. We believe if things stay as is and she stays on the title, she will not honor what he stated which is to gift it to his nephews.
CA property tax laws are a blessing and a curse. I guess you found the curse part.

Having had to deal with something similar, but honestly without the tax increase problem, I found that getting a clean title added years to my life. The stress of it all, much as you describe, was a huge drain.

If he just wants to sign it over, I think you are fortunate. Consider the tax hit your payment for half. Then move on. Who knows, with this market, you may want to sell it and use the proceeds for you and your boys to explore different rental cabins from time to time. When I ran the numbers, I found that owning the property was more hassle and cost than just occasionally renting. This, of course, depends on how often you use it. So after the title was clean, I sold it.
Well appreciated input Tubes. Yes, I do end up thinking about this a lot. It does take its toll.

Sometimes, I have often thought that I seem to work more on upkeep in the property either physically or mentally then my wife and kids. I rationalize it by the fact as long as they enjoy it then I’m good. But what you are stating is very true. We would at least be freed up to go elsewhere and explore different rentals versus feeling obligated to use what we have if we sold it.

Having a clean title in the meantime until or when it is sold may be worth it though.
bbrock
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Re: Property ownership/title headaches...options

Post by Tubes »

bbrock wrote: Tue Jan 11, 2022 5:17 pm Well appreciated input Tubes. Yes, I do end up thinking about this a lot. It does take its toll.

Sometimes, I have often thought that I seem to work more on upkeep in the property either physically or mentally then my wife and kids. I rationalize it by the fact as long as they enjoy it then I’m good. But what you are stating is very true. We would at least be freed up to go elsewhere and explore different rentals versus feeling obligated to use what we have if we sold it.

Having a clean title in the meantime until or when it is sold may be worth it though.
Owning versus renting is also a choice. Some people like to own and go to their place where they have stuff they are comfortable with. Renting means you are free to try different places.

But back to your family situation. It is not unreasonable to worry about your sister in law. In my case, the property was between my sister and me. I get along really well with my brother in law. But when it comes to this stuff, he got just a tad weird. Even though my sister and I worked everything out regarding our inheritance, my BIL had to call a meeting with me to account for my parents' estate on their passing. He wanted some proof, even though I was completely transparent with his wife (my sister) on all accounts, finances, etc. I guess you could say he audited us. Ultimately, I suggested we give a good chunk to their kids (I have none) even though that was not in my parents' trust or will. That "got him off my back." That set things right and BIL and I are on good terms. I'm absolutely fine about support my nieces and nephews too, but I'm glad the title to this property was sorted out years before (like you, my sister signed it over to me). It would have gotten messy otherwise.

Things can get weird in families.

One more thing: if you do decide to sell, maybe give it a few years. It might look bad to get it signed to you and then you flip it right away. Just sayin'
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Re: Property ownership/title headaches...options

Post by Good Listener »

bbrock wrote: Tue Jan 11, 2022 3:30 pm Because our boys and us like going to the property.
I would sell it and then buy a very similar one near there if it is so critical for you. I have a feeling in a few years your boys couldn't care less about it.
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Re: Property ownership/title headaches...options

Post by HeelaMonster »

I can recommend the book described and linked below, which anticipates many of these problems. We have been reading in advance of passing our cabin along to our children, somewhere (far, hopefully....) down the road.

Estate planning for family cottages and cabins

No matter whether you’re planning to pass on a cottage to your children, or you’ve inherited a cabin with your siblings, it’s never too early to take steps to preserve a beloved family property for generations to come. Shared ownership of vacation property―especially when the co-owners are family members―can be fraught with problems. The idyllic dream of a cottage getaway can be shattered when co-owners’ emotions, financial concerns, and opinions on how the property should be used come into play.

Fortunately, a solid plan that dictates how the property will be owned and managed can prevent squabbles over the family cottage. Saving the Family Cottage lays out a roadmap for creating and implementing this plan. It also explains the possible pitfalls of co-owing a family vacation property, and provides time-tested guidance on how to:

* keep the peace among heirs
* prevent a family member from forcing a sale of the property
* keep your vacation home out of the hands of in-laws and creditors, and
* smoothly transition ownership of the property from one generation to the next.

The sixth edition includes an expanded discussion of legal issues that might arise from renting out a family cottage or cabin on a short-term basis. It’s also updated to reflect current tax and legal entity laws.

https://www.amazon.com/Saving-Family-Co ... b_title_bk
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Re: Property ownership/title headaches...options

Post by neverpanic »

bbrock wrote: Tue Jan 11, 2022 4:04 pm Both my wife and I do not trust his wife. We believe if things stay as is and she stays on the title, she will not honor what he stated which is to gift it to his nephews.
That's the correct assumption. She has entitled herself to 1/2 the value and none of the ongoing expenses.

I'm sorry your parents left you in this position, but projecting as always, I'd tend to agree with Good Listener that the likely best result is to sell this one and get your own.
I am not a financial professional or guru. I'm a schmuck who got lucky 10 times. Such is the life of the trader.
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bbrock
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Re: Property ownership/title headaches...options

Post by bbrock »

Tubes wrote: Tue Jan 11, 2022 8:04 pm
bbrock wrote: Tue Jan 11, 2022 5:17 pm Well appreciated input Tubes. Yes, I do end up thinking about this a lot. It does take its toll.

Sometimes, I have often thought that I seem to work more on upkeep in the property either physically or mentally then my wife and kids. I rationalize it by the fact as long as they enjoy it then I’m good. But what you are stating is very true. We would at least be freed up to go elsewhere and explore different rentals versus feeling obligated to use what we have if we sold it.

Having a clean title in the meantime until or when it is sold may be worth it though.
Owning versus renting is also a choice. Some people like to own and go to their place where they have stuff they are comfortable with. Renting means you are free to try different places.

But back to your family situation. It is not unreasonable to worry about your sister in law. In my case, the property was between my sister and me. I get along really well with my brother in law. But when it comes to this stuff, he got just a tad weird. Even though my sister and I worked everything out regarding our inheritance, my BIL had to call a meeting with me to account for my parents' estate on their passing. He wanted some proof, even though I was completely transparent with his wife (my sister) on all accounts, finances, etc. I guess you could say he audited us. Ultimately, I suggested we give a good chunk to their kids (I have none) even though that was not in my parents' trust or will. That "got him off my back." That set things right and BIL and I are on good terms. I'm absolutely fine about support my nieces and nephews too, but I'm glad the title to this property was sorted out years before (like you, my sister signed it over to me). It would have gotten messy otherwise.

Things can get weird in families.

One more thing: if you do decide to sell, maybe give it a few years. It might look bad to get it signed to you and then you flip it right away. Just sayin'
Thanks tubes. Yes to be candid, I think My Wife enjoys the feeling of cabin ownership more than I do. I am the one that has to deal with the upkeep, maintenance, projects, blah, blah, blah so that’s where many times it does not feel like a vacation for me. The rent vs. own is challenging as this is a cabin that I partially grew up in so have many sentimental feelings and still personal items up there. That in turn is where some of the family struggle comes in as now I have to deal with all of the possessions from my parents versus my brother who just washed his hands of the situation.

I second that things can get weird in families, especially when you throw in an Inlaw who you never liked.
bbrock
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Re: Property ownership/title headaches...options

Post by bbrock »

Good Listener wrote: Tue Jan 11, 2022 8:10 pm
bbrock wrote: Tue Jan 11, 2022 3:30 pm Because our boys and us like going to the property.
I would sell it and then buy a very similar one near there if it is so critical for you. I have a feeling in a few years your boys couldn't care less about it.
Thank you good listener. Yes our boys are eight years old right now. They love going up there. But I do agree probably come the teenage years they may want to do other things. Especially as there’s no Wi-Fi at the cabin, they won’t like that later on.
Last edited by bbrock on Sun Jan 16, 2022 8:03 pm, edited 1 time in total.
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Re: Property ownership/title headaches...options

Post by bbrock »

HeelaMonster wrote: Tue Jan 11, 2022 8:26 pm I can recommend the book described and linked below, which anticipates many of these problems. We have been reading in advance of passing our cabin along to our children, somewhere (far, hopefully....) down the road.

Estate planning for family cottages and cabins

No matter whether you’re planning to pass on a cottage to your children, or you’ve inherited a cabin with your siblings, it’s never too early to take steps to preserve a beloved family property for generations to come. Shared ownership of vacation property―especially when the co-owners are family members―can be fraught with problems. The idyllic dream of a cottage getaway can be shattered when co-owners’ emotions, financial concerns, and opinions on how the property should be used come into play.

Fortunately, a solid plan that dictates how the property will be owned and managed can prevent squabbles over the family cottage. Saving the Family Cottage lays out a roadmap for creating and implementing this plan. It also explains the possible pitfalls of co-owing a family vacation property, and provides time-tested guidance on how to:

* keep the peace among heirs
* prevent a family member from forcing a sale of the property
* keep your vacation home out of the hands of in-laws and creditors, and
* smoothly transition ownership of the property from one generation to the next.

The sixth edition includes an expanded discussion of legal issues that might arise from renting out a family cottage or cabin on a short-term basis. It’s also updated to reflect current tax and legal entity laws.

https://www.amazon.com/Saving-Family-Co ... b_title_bk
Thx for the reply! Sounds like a good reference book. I should get it just to reference that section how to keep it out of the hands of in-laws. It’s frustrating that my brother put his portion in trust and added his wife to the deed.
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Re: Property ownership/title headaches...options

Post by bbrock »

neverpanic wrote: Tue Jan 11, 2022 8:31 pm
bbrock wrote: Tue Jan 11, 2022 4:04 pm Both my wife and I do not trust his wife. We believe if things stay as is and she stays on the title, she will not honor what he stated which is to gift it to his nephews.
That's the correct assumption. She has entitled herself to 1/2 the value and none of the ongoing expenses.

I'm sorry your parents left you in this position, but projecting as always, I'd tend to agree with Good Listener that the likely best result is to sell this one and get your own.
Thank you neverpanic for your input. Yes I’m sure my parents would not have thought that leaving this cabin to their sons as tenants in common would later in life lead to much drama.

The SIL has definitely entitled her self to have a say on things. I think a big refusal to pay for half of the upkeep when the property was vacant was due to her influence on my brother.
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Re: Property ownership/title headaches...options

Post by HeelaMonster »

bbrock wrote: Wed Jan 12, 2022 11:38 am Thank you good listener. Yes the boys are eight years old right now. They love going up there. But I do agree probably come the teenage years they may want to do other things. Especially as there’s no Wi-Fi at the cabin, they won’t like that later on.
When we were contemplating building our cabin (the one that has me reading the book I recommended just above), someone advised me to do it when the kids were young, so they were a "captive audience" with nowhere else to go. That was great advice. They were just a little older than yours, but they loved the cabin. We didn't have internet either, which encouraged lots of games, reading, hiking and family time. That continued through teenage years, with few complaints. By the time they got to college and older, they enjoyed taking friends out there (and never managed to wreck the place). They are now in their 30s, and still enjoy going there, with their SOs and with us. In fact, we have now added on to accommodate larger family gatherings.

All the more reason to learn from the lessons in that book, and set things up in a way that minimizes issues. I hope you are able to navigate yours successfully. :beer
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Re: Property ownership/title headaches...options

Post by WhyNotUs »

bbrock wrote: Tue Jan 11, 2022 1:59 pm
3) He has also thought of just signing over title now to us (my wife and I), but that would force half of the property to get reassessed. I estimate that that would cause an increase in the property taxes of approximately $3000/yr. Would paying an extra $3000/yr in prop taxes be worth it to you to get out of this property titling headache that would be a complication when the property is sold?
Yes it would be worth it to clarify title and expenses and use and future ownership. It also allows you to easily sell it.
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Re: Property ownership/title headaches...options

Post by CAsage »

Could you ask your brother to change his half title back to "Brother TOD Nephews A&B"? That would defer any property tax increase, and kick the whether to sell down the line. And you would get a capital gains bump on it when they inherit. Assuming you outlive your brother....
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Re: Property ownership/title headaches...options

Post by bbrock »

WhyNotUs wrote: Wed Jan 12, 2022 5:31 pm
bbrock wrote: Tue Jan 11, 2022 1:59 pm
3) He has also thought of just signing over title now to us (my wife and I), but that would force half of the property to get reassessed. I estimate that that would cause an increase in the property taxes of approximately $3000/yr. Would paying an extra $3000/yr in prop taxes be worth it to you to get out of this property titling headache that would be a complication when the property is sold?
Yes it would be worth it to clarify title and expenses and use and future ownership. It also allows you to easily sell it.
WhyNotUs, thanks for responding. I think for the sake of an easy and smooth sale (if that was to happen in the unknown future), that is the preference why I would want him removed from title.
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Re: Property ownership/title headaches...options

Post by bbrock »

HeelaMonster wrote: Wed Jan 12, 2022 5:11 pm
bbrock wrote: Wed Jan 12, 2022 11:38 am Thank you good listener. Yes the boys are eight years old right now. They love going up there. But I do agree probably come the teenage years they may want to do other things. Especially as there’s no Wi-Fi at the cabin, they won’t like that later on.
When we were contemplating building our cabin (the one that has me reading the book I recommended just above), someone advised me to do it when the kids were young, so they were a "captive audience" with nowhere else to go. That was great advice. They were just a little older than yours, but they loved the cabin. We didn't have internet either, which encouraged lots of games, reading, hiking and family time. That continued through teenage years, with few complaints. By the time they got to college and older, they enjoyed taking friends out there (and never managed to wreck the place). They are now in their 30s, and still enjoy going there, with their SOs and with us. In fact, we have now added on to accommodate larger family gatherings.

All the more reason to learn from the lessons in that book, and set things up in a way that minimizes issues. I hope you are able to navigate yours successfully. :beer
That’s funny, my wife and I talked about that last summer. If we are going to have that many generations in the house, it would be way too many. House is cozy, and our lot is small. We would have to convert the attic into a bedroom. Then we lose all storage. Not a lot of options. Otherwise we said it would just be limited gatherings if we were ever to be at that point in the future :)
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Re: Property ownership/title headaches...options

Post by bbrock »

CAsage wrote: Thu Jan 13, 2022 3:58 pm Could you ask your brother to change his half title back to "Brother TOD Nephews A&B"? That would defer any property tax increase, and kick the whether to sell down the line. And you would get a capital gains bump on it when they inherit. Assuming you outlive your brother....
CASage, thanks for responding. You hit the nail on the head. That is exactly what I am thinking versus assuming sole ownership of the title or having him give his half to my wife. Either way yes we’d see a $3000 approximate increase in prop taxes.

What you wrote is what I thought to do otherwise. Then he could always sign a quitclaim as well, if necessary. And if we really wanted to, I could have a legal contract written up.
bbrock
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Re: Property ownership/title headaches...options

Post by Bob Loblaw »

bbrock wrote: Tue Jan 11, 2022 1:59 pm
3) He has also thought of just signing over title now to us (my wife and I), but that would force half of the property to get reassessed. I estimate that that would cause an increase in the property taxes of approximately $3000/yr. Would paying an extra $3000/yr in prop taxes be worth it to you to get out of this property titling headache that would be a complication when the property is sold?
With CA property taxes being 1% of assessed value, are you estimating that a reassessment would be $600,000 greater than the current assessment?
SuzBanyan
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Re: Property ownership/title headaches...options

Post by SuzBanyan »

bbrock wrote: Thu Jan 13, 2022 4:20 pm
CAsage wrote: Thu Jan 13, 2022 3:58 pm Could you ask your brother to change his half title back to "Brother TOD Nephews A&B"? That would defer any property tax increase, and kick the whether to sell down the line. And you would get a capital gains bump on it when they inherit. Assuming you outlive your brother....
CASage, thanks for responding. You hit the nail on the head. That is exactly what I am thinking versus assuming sole ownership of the title or having him give his half to my wife. Either way yes we’d see a $3000 approximate increase in prop taxes.

What you wrote is what I thought to do otherwise. Then he could always sign a quitclaim as well, if necessary. And if we really wanted to, I could have a legal contract written up.
If your brother is willing to gift it to you now, don’t kick the can down the road. If he only changes title to TOD your sons, he could change it again tomorrow or your son’s could inherit as minors. A contract to gift in the future is only helpful if you would and could sue your brother to enforce it.
Tru Blu
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Re: Property ownership/title headaches...options

Post by Tru Blu »

Earlier Gill suggested a partition action as a solution and he is correct. It solves your problem. Suggest you do an internet search for Partition Lawsuit Explained.
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bbrock
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Re: Property ownership/title headaches...options

Post by bbrock »

Bob Loblaw wrote: Thu Jan 13, 2022 4:29 pm
bbrock wrote: Tue Jan 11, 2022 1:59 pm
3) He has also thought of just signing over title now to us (my wife and I), but that would force half of the property to get reassessed. I estimate that that would cause an increase in the property taxes of approximately $3000/yr. Would paying an extra $3000/yr in prop taxes be worth it to you to get out of this property titling headache that would be a complication when the property is sold?
With CA property taxes being 1% of assessed value, are you estimating that a reassessment would be $600,000 greater than the current assessment?
Maybe I’m not doing it correct then Bob. The assessed value is I think $293,000. That’s as of the latest tax statement. I can’t remember what was the assessed value when the deed was transferred to my brother and me back in 2000.

I was using what a current sale price would be and dividing everything in half. I think I was using a sale price of 500,000.
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bbrock
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Re: Property ownership/title headaches...options

Post by bbrock »

SuzBanyan wrote: Thu Jan 13, 2022 4:40 pm
bbrock wrote: Thu Jan 13, 2022 4:20 pm
CAsage wrote: Thu Jan 13, 2022 3:58 pm Could you ask your brother to change his half title back to "Brother TOD Nephews A&B"? That would defer any property tax increase, and kick the whether to sell down the line. And you would get a capital gains bump on it when they inherit. Assuming you outlive your brother....
CASage, thanks for responding. You hit the nail on the head. That is exactly what I am thinking versus assuming sole ownership of the title or having him give his half to my wife. Either way yes we’d see a $3000 approximate increase in prop taxes.

What you wrote is what I thought to do otherwise. Then he could always sign a quitclaim as well, if necessary. And if we really wanted to, I could have a legal contract written up.
If your brother is willing to gift it to you now, don’t kick the can down the road. If he only changes title to TOD your sons, he could change it again tomorrow or your son’s could inherit as minors. A contract to gift in the future is only helpful if you would and could sue your brother to enforce it.
So you don’t think Suz that kicking the can down the road to avoid increased prop taxes would be preferential?

Yes, I just thought about it and was going to get back to this post. The inheritance as minors is a problem. If the TOD is our sons and he dies and they inherit when they’re minors, that is a whole problem. Can he put a TOD as the trust I’m establishing with my wife?

Also, if he does die, and our children inherit as minors (guardianship? Would someone be a trustee in that situation?) or when they turn 18, that is adversely going to affect their future financial aid. That is why my wife and I are being careful to make sure as few assets are possible are in their names come time to apply for college financial aid. But that’s a topic for another discussion.
Last edited by bbrock on Sun Jan 16, 2022 8:07 pm, edited 1 time in total.
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Re: Property ownership/title headaches...options

Post by bbrock »

Tru Blu wrote: Thu Jan 13, 2022 4:48 pm Earlier Gill suggested a partition action as a solution and he is correct. It solves your problem. Suggest you do an internet search for Partition Lawsuit Explained.
I’ll search for that Tru Blu. I think I glossed over that at first.

Edit: just searched. But I don’t need a court to decide on a partition action to force me to purchase the property. I trust that he intends to gift his half to his nephews (and/or my wife or me with them being minors).
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Bob Loblaw
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Re: Property ownership/title headaches...options

Post by Bob Loblaw »

bbrock wrote: Thu Jan 13, 2022 5:12 pm
Bob Loblaw wrote: Thu Jan 13, 2022 4:29 pm
bbrock wrote: Tue Jan 11, 2022 1:59 pm
3) He has also thought of just signing over title now to us (my wife and I), but that would force half of the property to get reassessed. I estimate that that would cause an increase in the property taxes of approximately $3000/yr. Would paying an extra $3000/yr in prop taxes be worth it to you to get out of this property titling headache that would be a complication when the property is sold?
With CA property taxes being 1% of assessed value, are you estimating that a reassessment would be $600,000 greater than the current assessment?
Maybe I’m not doing it correct then Bob. The assessed value is I think $293,000. That’s as of the latest tax statement. I can’t remember what was the assessed value when the deed was transferred to my brother and me back in 2000.

I was using what a current sale price would be and dividing everything in half. I think I was using a sale price of 500,000.
So, your half of $293,000 would be protected by Prop 13. If reassessed at current fmv of $500,000, then the new assessed value would be $396,500 [($293,000/2) + ($500,000/2)], which would mean property taxes (ad valorem only, not including special assessments or bonds) would be $3,965 ($396,500 x 0.01).
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CAsage
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Re: Property ownership/title headaches...options

Post by CAsage »

Bob Loblaw wrote: Thu Jan 13, 2022 6:01 pm So, your half of $293,000 would be protected by Prop 13. If reassessed at current fmv of $500,000, then the new assessed value would be $396,500 [($293,000/2) + ($500,000/2)], which would mean property taxes (ad valorem only, not including special assessments or bonds) would be $3,965 ($396,500 x 0.01).
With those numbers, I'd be inclined to accept him just gifting it to you now! And yes, that's cleaner than risking future complications of inheritance...... Note that I don't think it changes your cost basis.
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neverpanic
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Re: Property ownership/title headaches...options

Post by neverpanic »

bbrock wrote: Thu Jan 13, 2022 5:19 pm Yes, I just thought about it and was going to get back to this post. The inheritance as minors is a problem. If the TOD is our sons and he dies and they inherit when they’re minors, that is a whole problem. Can he put a TOD as the trust I’m establishing with my wife?

Also, if he does die, and the children inherit as minors (guardianship? Would someone be a trustee in that situation?) or when they turn 18, that is adversely going to affect their future financial aid. That is why my wife and I are being careful to make sure as few assets are possible are in their names come time to apply for college financial aid. But that’s a topic for another discussion.
Separate discussion, yes, but if you're the grantor, be sure to look into whether your family trust may be an asset that has to be counted with respect to current financial aid eligibility, even though your children would not own or have control of it while you're alive. Rules are always changing, but we had to list it a few years ago.
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TropikThunder
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Re: Property ownership/title headaches...options

Post by TropikThunder »

OP's brother can't just give away SIL's share of the house, can he? Does it being in a trust change things? I know property inherited by one spouse is separate property unless co-mingled with shared property (like if you deposit a cash inheritance into a joint account, it is now shared). Has brother made his share community property by placing it in a joint trust?
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Re: Property ownership/title headaches...options

Post by ee22bee »

If he gifts his half to you/your family, I'd be wary that it opens a door to potential future drama. For example, whenever you decide to sell, he/SIL may ask for some of the proceeds. Or if they need a financial favor down the road that you prefer not to help with, they may say you "owe" them. Others more creative than me can probably think of other undesired scenarios.

Personally I'd either sell the property together and split the proceeds, or if you want to keep it then buy out his half. Either of those options over receiving it as free gift.
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Re: Property ownership/title headaches...options

Post by bbrock »

Bob Loblaw wrote: Thu Jan 13, 2022 6:01 pm
bbrock wrote: Thu Jan 13, 2022 5:12 pm
Bob Loblaw wrote: Thu Jan 13, 2022 4:29 pm
bbrock wrote: Tue Jan 11, 2022 1:59 pm
3) He has also thought of just signing over title now to us (my wife and I), but that would force half of the property to get reassessed. I estimate that that would cause an increase in the property taxes of approximately $3000/yr. Would paying an extra $3000/yr in prop taxes be worth it to you to get out of this property titling headache that would be a complication when the property is sold?
With CA property taxes being 1% of assessed value, are you estimating that a reassessment would be $600,000 greater than the current assessment?
Maybe I’m not doing it correct then Bob. The assessed value is I think $293,000. That’s as of the latest tax statement. I can’t remember what was the assessed value when the deed was transferred to my brother and me back in 2000.

I was using what a current sale price would be and dividing everything in half. I think I was using a sale price of 500,000.
So, your half of $293,000 would be protected by Prop 13. If reassessed at current fmv of $500,000, then the new assessed value would be $396,500 [($293,000/2) + ($500,000/2)], which would mean property taxes (ad valorem only, not including special assessments or bonds) would be $3,965 ($396,500 x 0.01).
Thanks Bob for explaining and running that example. Much appreciated.

Edited:
I believe when I spoke with the county assessor, property taxes generally are about 1.25% of the fmv. That was what I based my original calculations on.
Last edited by bbrock on Fri Jan 14, 2022 10:50 pm, edited 2 times in total.
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Re: Property ownership/title headaches...options

Post by bbrock »

CAsage wrote: Thu Jan 13, 2022 6:25 pm
Bob Loblaw wrote: Thu Jan 13, 2022 6:01 pm So, your half of $293,000 would be protected by Prop 13. If reassessed at current fmv of $500,000, then the new assessed value would be $396,500 [($293,000/2) + ($500,000/2)], which would mean property taxes (ad valorem only, not including special assessments or bonds) would be $3,965 ($396,500 x 0.01).
With those numbers, I'd be inclined to accept him just gifting it to you now! And yes, that's cleaner than risking future complications of inheritance...... Note that I don't think it changes your cost basis.
Thanks CAsage. Yes, I believe my half (cost basis) is unchanged. Yes it would simplify things, without an exorbitant tax increase.
Last edited by bbrock on Sun Jan 16, 2022 8:08 pm, edited 2 times in total.
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Re: Property ownership/title headaches...options

Post by bbrock »

neverpanic wrote: Thu Jan 13, 2022 6:40 pm
bbrock wrote: Thu Jan 13, 2022 5:19 pm Yes, I just thought about it and was going to get back to this post. The inheritance as minors is a problem. If the TOD is our sons and he dies and they inherit when they’re minors, that is a whole problem. Can he put a TOD as the trust I’m establishing with my wife?

Also, if he does die, and the children inherit as minors (guardianship? Would someone be a trustee in that situation?) or when they turn 18, that is adversely going to affect their future financial aid. That is why my wife and I are being careful to make sure as few assets are possible are in their names come time to apply for college financial aid. But that’s a topic for another discussion.
Separate discussion, yes, but if you're the grantor, be sure to look into whether your family trust may be an asset that has to be counted with respect to current financial aid eligibility, even though your children would not own or have control of it while you're alive. Rules are always changing, but we had to list it a few years ago.
Thanks neverpanic. I would have never thought that our trust directions could negatively impact financial aid. Will definitely try to earmark this (okay brain note that) for the future.
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Re: Property ownership/title headaches...options

Post by bbrock »

TropikThunder wrote: Thu Jan 13, 2022 6:50 pm OP's brother can't just give away SIL's share of the house, can he? Does it being in a trust change things? I know property inherited by one spouse is separate property unless co-mingled with shared property (like if you deposit a cash inheritance into a joint account, it is now shared). Has brother made his share community property by placing it in a joint trust?
Thx TropikThunder. I do believe my brother’s intentions are to sign it over to his nephews (our sons) or us. How much pushback in the end will there be from the SIL, let’s see.

I don’t think he knew or thought of keeping it as a separate property with a TOD. Nor did he even care that it was a separate property inheritance. I think his intention was just to make all his assets/possessions community property.
Last edited by bbrock on Sun Jan 16, 2022 8:09 pm, edited 1 time in total.
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Re: Property ownership/title headaches...options

Post by bbrock »

jljl222 wrote: Fri Jan 14, 2022 3:19 am If he gifts his half to you/your family, I'd be wary that it opens a door to potential future drama. For example, whenever you decide to sell, he/SIL may ask for some of the proceeds. Or if they need a financial favor down the road that you prefer not to help with, they may say you "owe" them. Others more creative than me can probably think of other undesired scenarios.

Personally I'd either sell the property together and split the proceeds, or if you want to keep it then buy out his half. Either of those options over receiving it as free gift.
Thanks jljl222 for your input. I doubt they will ever be in dire straits. They don’t have any children, live extremely frugal; are doing well financially. And I doubt they’d be coming to us asking a favor.

True he may hold this over our heads if we ever ask something in the future.
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SuzBanyan
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Re: Property ownership/title headaches...options

Post by SuzBanyan »

bbrock wrote: Fri Jan 14, 2022 10:27 pm
CAsage wrote: Thu Jan 13, 2022 6:25 pm
Bob Loblaw wrote: Thu Jan 13, 2022 6:01 pm So, your half of $293,000 would be protected by Prop 13. If reassessed at current fmv of $500,000, then the new assessed value would be $396,500 [($293,000/2) + ($500,000/2)], which would mean property taxes (ad valorem only, not including special assessments or bonds) would be $3,965 ($396,500 x 0.01).
With those numbers, I'd be inclined to accept him just gifting it to you now! And yes, that's cleaner than risking future complications of inheritance...... Note that I don't think it changes your cost basis.
Thanks CAsage. Yes, I believe my half (cost basis is unchanged. Yes it would simplify things, at no an exorbitant tax increase.
The only reasons I don’t think you should act on the gift now and accept the property tax increase (which looks lower than you thought) is if you plan to sell the whole property in the next few years. Otherwise the value of the gift (half of a $500k property) would seem to outweigh the added cost. And once you own the whole property, if the combined costs (most of which you were already paying) feel like they exceed the value of the property, you can sell the property at that time without involving your brother in the decision.
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Re: Property ownership/title headaches...options

Post by bbrock »

SuzBanyan wrote: Fri Jan 14, 2022 10:42 pm
bbrock wrote: Fri Jan 14, 2022 10:27 pm
CAsage wrote: Thu Jan 13, 2022 6:25 pm
Bob Loblaw wrote: Thu Jan 13, 2022 6:01 pm So, your half of $293,000 would be protected by Prop 13. If reassessed at current fmv of $500,000, then the new assessed value would be $396,500 [($293,000/2) + ($500,000/2)], which would mean property taxes (ad valorem only, not including special assessments or bonds) would be $3,965 ($396,500 x 0.01).
With those numbers, I'd be inclined to accept him just gifting it to you now! And yes, that's cleaner than risking future complications of inheritance...... Note that I don't think it changes your cost basis.
Thanks CAsage. Yes, I believe my half (cost basis is unchanged. Yes it would simplify things, at no an exorbitant tax increase.
The only reasons I don’t think you should act on the gift now and accept the property tax increase (which looks lower than you thought) is if you plan to sell the whole property in the next few years. Otherwise the value of the gift (half of a $500k property) would seem to outweigh the added cost. And once you own the whole property, if the combined costs (most of which you were already paying) feel like they exceed the value of the property, you can sell the property at that time without involving your brother in the decision.
Thanks Suz for your input. I think my desire to get our trust fully resolved and things simplified for my wife would necessitate that I move forward on the gift now though.
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mnecon
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Re: Property ownership/title headaches...options

Post by mnecon »

Am I the only one who thinks that asking the brother to gift the property and then sell it in a few years is unfair to the brother? He may want his nephews to inherit the property because he wants the cabin to stay in the family if they use it, not because he wants to gift his brother/nephews $200,000.

The parents left the cabin/value of the cabin to both brothers. If one brother hasn't been paying taxes/doing maintenance, those costs should come out of his half of the proceeds of a sale, but your opinion of his financial situation and your SIL shouldn't lead to an assumption that the other half of the cabin is your 'rights.' Maybe if he got $$$ from the cabin sale, he wouldn't be so frugal and would splurge on something he has always wanted.

I agree the current titling is a mess but... either you decide I want this to be a family cabin that I eventually leave to my own sons and ask your brother to change the set up so that your kids clearly get his half of the cabin or you decide the cabin should be sold and then your brother should get 1/2 the proceeds minus the costs he hasn't paid over the last X number of years. Then if he wants to give/will you or your nephews that money he gets to decide that.
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Re: Property ownership/title headaches...options

Post by SuzBanyan »

mnecon wrote: Sat Jan 15, 2022 10:21 am Am I the only one who thinks that asking the brother to gift the property and then sell it in a few years is unfair to the brother? He may want his nephews to inherit the property because he wants the cabin to stay in the family if they use it, not because he wants to gift his brother/nephews $200,000.

The parents left the cabin/value of the cabin to both brothers. If one brother hasn't been paying taxes/doing maintenance, those costs should come out of his half of the proceeds of a sale, but your opinion of his financial situation and your SIL shouldn't lead to an assumption that the other half of the cabin is your 'rights.' Maybe if he got $$$ from the cabin sale, he wouldn't be so frugal and would splurge on something he has always wanted.

I agree the current titling is a mess but... either you decide I want this to be a family cabin that I eventually leave to my own sons and ask your brother to change the set up so that your kids clearly get his half of the cabin or you decide the cabin should be sold and then your brother should get 1/2 the proceeds minus the costs he hasn't paid over the last X number of years. Then if he wants to give/will you or your nephews that money he gets to decide that.
You are not the only one with concerns. Others have commented that it probably wouldn’t sit well if the OP receives a gift then turns around and sells it.

But there are other factors at work at well. First, Brother was neither using the cabin nor paying for his half of the expenses. Second, there is really no good way to set up a future transfer to the nephews, that isn’t expensive or temporary. When the nephews are in high school and college, there may come a time when no one is using the cabin.

I went through something similar last year. After my Mom passed, my 92 year old Dad wanted to gift the cabin to my brothers and I so that my Dad would no longer be primarily responsible for everything including repairs and maintenance. My brothers use the cabin regularly and I do not. I told my Dad to give it to my brothers. I asked my brothers only that they keep the cabin, if at all possible, as long as my Dad continued to want to use it. And I asked my brothers not to let co-ownership ruin their currently good relationship.
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Re: Property ownership/title headaches...options

Post by bbrock »

Thx mcecon and Suz for your input.

I don’t want to take title to the property only to sell it. My intent is to want to simplify title. Since my brother has not been paying on the property x10 years, or using it at all, I think he should gift it over as he had stated. Plus, he knows our sons (his nephews) enjoy spending time there. I agree it gets messy and complicated to gift it to our sons (his nephews).

If we take sole ownership of the title, and I die, it’s just easier in our trust if my wife then becomes sole owner and she could decide in the future to sell or then leave for our children.

Edit:
And, if the property is ever sold well into the future, half could be earmarked for each son.
Last edited by bbrock on Sun Jan 16, 2022 8:12 pm, edited 1 time in total.
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mnecon
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Re: Property ownership/title headaches...options

Post by mnecon »

I agree the current trust setup on your brother's side could lead to a mess, but I think you also need to figure out a way that your brother can feel comfortable about just gifting the other half of the property to you. Just as you don't like the idea of your SIL having control over the half if something happens to your brother, he may not like the idea that it is in your trust and your wife would have control over all of the property if something happened to you. I am NOT insinuating that your wife would behave unethically, but your brother can't be sure of that just as you worry about your SIL. Unless your trust is not as I understand you describing.

It just seems like if you want him to gift the 1/2 property now, the right thing to do would be to put some contract type language around what happens in case you suddenly predecease your wife or in the case of a sale in the near future. I could see some sort of language where if the cabin is sold with X years, your brother gets a share of the proceeds and language that again, subtracts the unpaid taxes, etc from the proceeds. And some sort of language that if you predecease your wife, the property goes into trust immediately for your sons. But the only way to know how he sees a 'fair' disposition of the property is really just to ask him how do we deal fairly with our joint ownership and see what he says.
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Re: Property ownership/title headaches...options

Post by celia »

I first would like to know what the current deed says, as that determines who legally owns the property.
bbrock wrote: Tue Jan 11, 2022 1:59 pm I have been grappling for years with an unresolved situation. My brother and I were beneficiaries of a small mountain cabin. Originally, the two of us owned as tenants in common 50/50, but in 2011 he added his share to his trust which is under his and his wife's name.
bbrock wrote: Thu Jan 13, 2022 4:20 pm
CAsage wrote: Thu Jan 13, 2022 3:58 pm Could you ask your brother to change his half title back to "Brother TOD Nephews A&B"? That would defer any property tax increase, and kick the whether to sell down the line. And you would get a capital gains bump on it when they inherit. Assuming you outlive your brother....
CASage, thanks for responding. You hit the nail on the head. That is exactly what I am thinking versus assuming sole ownership of the title or having him give his half to my wife.
Does the latest deed say:
bbrock and <brother>, Tenants In Common
bbrock, <brother>, and <SIL>, Tenants In Common
bbrock and <brother and SIL living trust>, Tenants In Common
or somethng else? I’ll bet the deed hasn’t been changed yet but your brother’s trust (with his wife) is just the catch-all for his will that says anything of his not titled in the trust goes into the trust, when he dies. If that is the case, your SIL doesn’t own any of the property until he dies.
TropikThunder wrote: Thu Jan 13, 2022 6:50 pm OP's brother can't just give away SIL's share of the house, can he? Does it being in a trust change things? I know property inherited by one spouse is separate property unless co-mingled with shared property (like if you deposit a cash inheritance into a joint account, it is now shared). Has brother made his share community property by placing it in a joint trust?
That would be the case only if the deed is titled as:
bbrock and <trust>, Tenants In Common.
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Re: Property ownership/title headaches...options

Post by celia »

bbrock wrote: Tue Jan 11, 2022 1:59 pm We previously had an agreement that when the property was vacant and not occupied full time, we would both split the expenses.
bbrock wrote: Tue Jan 11, 2022 3:30 pm Because our boys and us like going to the property.
Did you have an agreement for what happens when only one of you occupy it part-time? It seems that if you’re the only ones using it for vacations, you should be paying the full property tax and insurance. Why would you expect your brother to subsidize your family’s use?

In fact, if you are using community property (you and your wife's money) to pay for the property tax and insurance, she has an implied interest in it, should you divorce. You would not be treating this as "separate property" for you and your brother. You should be paying using other inheritance money you received from your father, in order to maintain your share as "separate property".
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Re: Property ownership/title headaches...options

Post by celia »

bbrock wrote: Tue Jan 11, 2022 1:59 pm This is surfacing b/c my wife and I are estate planning. We have elementary school age children. My brother has no kids. The joint titling is not something that I want my wife to have to deal with if I die first. As it stands, my brother has written in emails that he has no interest in the property and his half is to go to his nephews.
. . . Neither my wife nor I want our nephews on title when they turn 18 b/c child owned assets would adversely impact their future college financial aid.
Are the nephews your brother is referring to the same as your sons? I was assuming they might be from SIL’s side, because you would refer to your sons as “sons” instead. If they are your’s, why are you referring to them as “nephews”? If they are not your kids, why are you worrying about college financial aid for another family, other than to be considerate?
bbrock wrote: Thu Jan 13, 2022 5:19 pm
SuzBanyan wrote: Thu Jan 13, 2022 4:40 pm If your brother is willing to gift it to you now, don’t kick the can down the road. If he only changes title to TOD your sons, he could change it again tomorrow or your son’s could inherit as minors. A contract to gift in the future is only helpful if you would and could sue your brother to enforce it.
So you don’t think Suz that kicking the can down the road to avoid increased prop taxes would be preferential?

Yes, I just thought about it and was going to get back to this post. The inheritance as minors is a problem. If the TOD is our sons and he dies and they inherit when they’re minors, that is a whole problem. Can he put a TOD as the trust I’m establishing with my wife?

Also, if he does die, and the children inherit as minors (guardianship? Would someone be a trustee in that situation?) or when they turn 18, that is adversely going to affect their future financial aid. That is why my wife and I are being careful to make sure as few assets are possible are in their names come time to apply for college financial aid. But that’s a topic for another discussion.
Leaving assets to minors has it’s own pitfalls. Here’s an older thread about Inheritance on Behalf of Minor Children that you should read.

And if brother changes the deed to his name and TOD <OP and OP’s wife’s trust>, he is giving it to you and your wife AFTER HE DIES as well as keeping the right to change the TOD in the future. This would still keep your estate planning messy. Why don’t you suggest he deed it to you and tell him you are in the process of getting a trust where after both you and your wife have died, your sons can fight over it can decide what makes most sense for them at the time they inherit. Maybe one will want it and one won't. Or one could marry and want to move towards his wife's family. Or a thousand other things could happen.
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