Life Estate Deed - Early Termination Clauses - Posted by randypena2002

Real Estate Investing Real Estate Law
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Posted by randypena2002 on August 15, 2005 at 10:26:37:

Very good point!!! I agree with that whole-heartedly.

About ten years ago, my dad was involved in a big nasty lawsuit involving relatives who claimed that my dad screwed them. I was in the middle of the whole case too. In 1980, my uncle (a different uncle than the one I am dealing with now) GAVE my dad his share of the properties. Later on, in 1991, my cousin (not my uncle’s son, but his nephew), sued my dad, me, and my sister claiming that my dad screwed my uncle on the properties. They claimed that the transfer was due to a secret deal between my dad and my uncle. They claimed that my uncle was about to get sued because of an auto accident in which he was at fault. So to protect those interests, he gave those interests to my dad. It was all a lie, but the court believed them and we had to return those interests back to my uncle.

Now that I am making out the papers for my uncle to sign, i am doing exactly as you have suggested. Make it a ceremony, and make sure that everybody knows that he is making the deal voluntarily. Even if it costs an extra ten pages for the deed, it is well worth it. I am trying to include language in the deed where he acknowledges that he knows what he is getting into, and that if he makes this deal he knows what a life estate is all about and he knows what his limits are. Plus, I will make sure that we have plenty of witnesses, worse than signing a Will. Plus, I might make provisions for him to include his thumb-print, as is required for deeds recorded in California.

But, yes, I agree with you. Especially with my family, I have to take those extra precautions. But it is also good to use these extra precautions when dealing with retarded people or incompetent people. They can easily argue that you were out to screw them.

Another thing that is interesting to ponder. Even if a deed is a gift (for consideration given… etc.), be sure to give the Grantor some kind of compensation in the form of a cashier’s check or a title to something. That way there is no real argument that you cheated them.

A couple of years back, I was going to buy this guy’s interest in a property that he was losing to the county for taxes. This guy is incompentent and he is an alcoholic and about 60 years old. Well, the house he was going to give me, was registered under his mother’s name. (The house was condemned too.) She has been dead over twenty years. So I was only getting any claims that he MIGHT have to the property.

The offer I made him was that I will give him $100 for his share in the house. He will sign over a Quit Claim Deed to me, plus he will get me an official copy of his parents’ death certificates, and he will get me an official copy of his own birth certificate. If he does all this, I would give him $100 in the form of a cashier’s check. And we would do all the transactions at the bank. There at the bank he can cash the cashier’s check as soon as the papers were signed. Then on the way home, I would buy him a case of beer!

Thanks for the input…

Randy

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Life Estate Deed - Early Termination Clauses - Posted by randypena2002

Posted by randypena2002 on August 10, 2005 at 23:52:25:

Hi:

I started dealing with an uncle involving some property owned by a lot of family members. There are about eleven properties and each property has like eleven owners. I own a 20% interest in each of the properties. The uncle has been trading, buying, and selling his share with some of the other owners/relatives. He owns 10% of a few of the properties. The properties that he wants, he already has a 45% interest in them.

He wants my 20% interest in two commerical properties. [My share of] Those two properties are worth a whole lot more than what he wants to give me. He offered to buy my 20% of two of the properties, but he offered to give me just $1,500 and his 10% of two residential properties.

I am offering to give him my 20% interest in the two commercial properties, provided that we do a life estate deal. The proposition that I made to him was that he will deed to me his 45% interest of both properties, in fee simple absolute. Then in the same transaction, but right after we record his conveyance to me, I will deed a 65% interest in those two properties to him. In my deed to him, I will grant him a life estate and list me or my LLC as a remainderman.

I want to put in some reversion clauses to protect the remainderman’s interests from forfeiture, i.e., failure or refusal of life tenant to pay property taxes, or life tenant’s attempt to mortgage the properties, etc. Does anybody have a list of clauses or any suggestions as to what to include in the early termination clauses? I think it would be wise to include them in the deed back to him to protect my interests. I would also like some criticism and advice as to what else I could do or what I should leave in or leave out of either of the conveyance deeds.

By the way, I am 41 years old; my uncle is 74 years old. I am sure that a lot of you have a lot of suggestions that will help me brainstorm creative ideas.

Thanks in advance.

Randy

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Get a lawyer - Posted by John Merchant

Posted by John Merchant on August 12, 2005 at 13:02:15:

A good lawyer could probably save you lots of dollars and grief over this deal.

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Re: Life Estate Deed - Early Termination - Posted by dealmaker

Posted by dealmaker on August 12, 2005 at 11:48:12:

First off, before you start discussing percentages with him I’d try to figure some current value of each property so you know that you’re both talking with some commonality.

I’d also look for either a “nolo press” book on estates and or a used book store for a used RE law book. I’ve found that way I can at least read up on stuff so I’m not paying my attorney $175/hour to explain simple terms to me.

I would also GET OUT OF ANY PROPERTY that I own an (undivided) interest in with so many others. Nothing but trouble. What if one relative dies intestate, and they have an ex-spouse, and kids who you don’t have a relationship with? Either get EVERYONE to agree to a mutual buy-sell devisement or get out.

Just my opinion as a guy who had to work through this type of deal due to decedents who got POd at each other sometime right after the Civil War!

dealmaker

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Re: Get a lawyer - Posted by randypena2002

Posted by randypena2002 on August 12, 2005 at 17:16:55:

Over here the good lawyers do not know real estaate laws too well. I live in a town that is similar to a third world country. In fact, one of my cousins is a practicing attorney. However, he is one of the owners and he is one of the adversaries in this whole ordeal.

I believe that my best interest is to deal on a life estate deal. I know it is difficult. you need to get all 12 or 15 owners to say yes at the same time. I have been dealing with them since 1978. So I know what is really, really involved. Back in 1991 through 1994, I went through a nasty district court lawsuit defending against this lawyer/cousin over the same properties. The subjects of the court case was fraudulent conveyances, probate, and breach of fiduciary duty. I was successful as a pro se litigant in saving half of what was involved in the lawsuit.

Some ideas for the reversion clauses that i was thinking of would include:

Grantee/Life Tenant cannot sell, convey, or mortgage any part of the property.

Grantee/Life Tenant must maintain and upkeep the value of any and all buildings and improvements of the property.

Grantee/Life Tenant may not use the property for illegal or immoral purposes.

Grantee/Life Tenant must make sure that property taxes, assessments, and any other levies against the property be paid up to date throughout the term of the life estate.

Grantee/Life Tenant may have the option of relinquishing his or her interest in the properties to the remainderman at any time, without seeking compensation of any kind from the remainderman.

Any other ideas and suggestions would be appreciated.

Thanks.

Randy

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Re: Life Estate Deed - Early Termination - Posted by randypena2002

Posted by randypena2002 on August 12, 2005 at 17:06:06:

Thanks for your response.

I think I am involved in EVERY property to the extent of 20% per property. I am willing to deal with the other owners/relatives. But it seems as if they want to give you three dollars for your roll of quarters.

I figure that a life estate deed would be the best for me. I can live without owning the property for a few years, and then when the grantee dies, it will come back to me. I plan to be making my living and my adventures with deals “outside the family.” The owners/relatives are trying to get out of the relationship, but they want to profit from it too. I don’t care one way or another to deal with them.

I agree with you and believe you about when someone dies, you have to deal with the dead person’s heirs and spouses and kids and everybody. That is the reason for the life estate deed. If I successfully execute this transaction, I will not have to worry about dealing with heirs and claims of the Grantee. Instead, his interests and claims die with him and his shares goes back to me.

In fact, any deeds made out with joint tenancy or life estate will not make it through probate or to a Will. If my uncle made this deal with me and then he left his property to his son and his grandkids in a Will, he would have failed to leave it to them because his share dies just as instantly as he does.

My uncle suggested that we add his grandkids who are ages 4 and 8 to the list of life tenants. I answered with an off the wall remark, “Yea, and if I want to collect on the deed, I would have to kill them!” Then after that remark, I suggested that I would not mind adding them as life tenants, providing that we include some very strict reversion clauses and that he put up some additional money as part of the trade. So instead of trading land and deeds ONLY, I will want his 10% interests in the other lands, plus $20,000, plus a few restrictive covenants to the life estate deed, and then we will include the grandkids as some of the life tenants.

I found some clauses in the lawyer’s enclopedias such as American Jurisprudence Practice and Pleadings Forms. However, I was hoping that one of the members and readers of this board would have creative or strict reversion clauses that I may adopt to my own Life Estate Deed.

Any other suggestions would be appreciated.

Thanks.

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Treacherous ground - Posted by John Merchant

Posted by John Merchant on August 14, 2005 at 13:22:04:

You need to also remember, whenever dealing with any old/older person in any business deal, you should prepare for the later claim by his/her heirs that you took advantage of Granny…as she really wasn’t competent at that time to take care of herself and NO business decision by her should hold up to court scrutiny.

This is why, whenver I’m dealing with anybody in their late years, I want plenty of witnesses who can testify to her competency, reasoning ability, knowledge of what she owned, and where, and its value, etc.

And I"ve even gone to the trouble on occasion, of having granny meet me in my lawyer’s office, or better yet, HER lawyer, so I can build my case that she knew exactly what she was doing, etc.

At the very least, on any RE document you want her to sign, be sure and have your own notary there to be a witness and acknowledge her signature, and you can prompt that notary to pay attention to how quick Granny was, what a sharp mind she had, etc.