QUESTION
What will happen if my mother's life estate is to be sold and do we have to pay her any of the proceeds?
Asked on Aug 17th, 2013 on Estate Planning - California
More details to this question:
My mother has a life estate since 1990 but has been is in a nursing home since 2008. Both brothers and myself are listed as remaindermen, but the brothers are trying to force the sale of her home. She's 89 and the market value is $385,000.00. Do they have to pay her any of the proceeds of the sale if it's Court ordered it must be sold? Are we responsible for any capital gains taxes? I've been maintaining the home's expenses and now I want to rent it and they are opposed to the rental and they have hired an attorney who has written me requesting that I terminate her life estate. Any help would be greatly appreciated. Thank you.
11 ANSWERS
Bankruptcy Attorney serving Florissant, MO
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Law Offices of Thomas Corcoran Phipps
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It is her life estate. She is entitled to It until she dies. You will have to go to court and have a judge decide all of these matters.
Answered on Sep 04th, 2013 at 12:04 PM
Business Planning Attorney serving Livonia, MI
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Frederick & Frederick Attorneys at Law
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The best advice I could give you is to get your own attorney. There is enough money at stake, here, that it is worth the expense. Whether or not there are capital gains depends on facts which you have not included. What is your mother's basis in the property? Since she has not lived there in a number of years, she would not be able to claim the personal residence exemption to exclude capital gains. As for the life estate, it depends on the terms outlined in the deed. Normally, your mother's life estate would have value and you would not be able to simply wipe that out.
Answered on Aug 28th, 2013 at 2:44 PM
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Hire your own lawyer. Most cases, you can buy out their remainder interest.
Answered on Aug 28th, 2013 at 2:44 PM
Probate Attorney serving Newport, OR
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Minor, Bandonis & Haggerty P.C.
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First, this question can't be answered except by reading the actual document that created the life estate. Second, if your brothers have lawyered up and you don't, you're going to lose ugly and it will probably cost you more than getting an attorney involved on your side.
Answered on Aug 28th, 2013 at 2:44 PM
Commercial Contracts Attorney serving Boise, ID
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Peters Law, PLLC
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Your mother will be entitled to the value of the life estate. Given that she is 89 and in a nursing home, it probably won't be worth much. Consult a tax expert on who will pay the capital gains tax. I presume it will be the remainder men.
Answered on Aug 28th, 2013 at 2:44 PM
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You should hire counsel and possibly a CPA and an actuary. There will capital gains based upon the adjusted basis in the property. You mother will be entitled to receive the value of her life estate. This is not a simple questions. I urge you first seek out counsel where the property is located and then consider if both a CPA and an actuary are needed.
Answered on Aug 28th, 2013 at 2:44 PM
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A review of the document giving your mother a life estate would be necessary to advise you. That said, it is unlikely that they can terminate the life estate unless the document specifically says they can in this situation. If you did rent the property, after expenses, the income would belong to your mother. See an attorney ASAP to review the life estate documents and advise on what you can do.
Answered on Aug 28th, 2013 at 2:44 PM
Once her life estate is terminated, she is entitled to nothing. A life estate means she has a aright to use the property while she is alive but can not sell it, encumber it, nor damage it. There must have been some document, probably a Trust, that established the life estate and that document has to be followed as to ending it. I do not believe you would have to pay any capital gains tax on the transfer to you and your brothers as you technically the owners of the property. If you are all owners, then you have the right to do with the property as you want and if the brothers want to sell it they would have to file an action for partition of the property, which could easily cost $15,000 or more if it is fought by you.
Answered on Aug 28th, 2013 at 2:43 PM
She should be compensated for the value of her life estate. That will require actuarial assistance.
Answered on Aug 28th, 2013 at 2:43 PM
Trusts Attorney serving Sacramento, CA
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Law Office of Victor Waid
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You are advised to seek the assistance of an estate planning attorney to assist you or a probate attorney. An ounce of prevention is cheaper than a pound of cure, should you make mistakes that have long term consequences.
Answered on Aug 28th, 2013 at 2:43 PM
Yes, she has a financial interest in the property. The life estate has a value unto itself. Should mother die, the IRS taxes the remainder of the life estate based on Actuarial statistics and market rent. Therefore, the nursing home, if paid by the government may have a lien on the property, certainly the DOR has to sign off on any sale.
Answered on Aug 28th, 2013 at 2:43 PM