Attorney Thomas B. Burton discusses a reader question about a deceased mother's real estate and how to get a sibling, who is living in that house without the consent of other concerned family members to move out and salvage their inheritance, in this latest Real Attorney Reacts series.
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Welcome back to Real Attorney Reacts - the Series where I analyze reader questions under Wisconsin law and provide you, with opinion and analysis to aid you in your own estate planning.
So I was reading Market Watch this week and came across another question that I feel would be very helpful. It has to do with a house, real estate, and estate planning and again, The Moneyist is a columnist, personal finance writer, he deals with personal finance questions but many times, I see things come through related to estate planning, probate and real estate and this week's is no exception.
So the headline is, 'the house is truly in deplorable condition. My sister won't move out of our late mother's home, how do we salvage our inheritance?' and I'm going to read you the highlights, it's a very long answer, a very long question and then we'll run through the analysis.
So the reader says, "I have a long-standing financial and ethical problem that I could use some sage advice on. I will be as brief as possible. 29 years ago, upon my mother's passing, she left a small cottage to my disabled brother as a life estate. Four other siblings including myself, were given status as Remainderman to the property."
Okay, so right off the top, those are the legal terms if you use a life estate, the person who grants it, generally is the one who would retain the life estate meaning the ability to live there, for their life and then the people, who are going to get it after they die are called the Remainderman. so it sounds like the mother did this with the four children as Remainderman and people liked to use life estates back in the day but I do not really like using life estates because as you'll see in this question, what ends up happening is all the children become joint owners in the property after the mother dies and that can lead to trouble as we'll see here.
"My disabled brother lived there for many years until he became further incapacitated. At that point he had a court-appointed guardian. He was placed in a long-term care facility, paid for, by Medicaid. Soon thereafter my sister, the youngest Remainderman, asked if she could stay in the cottage, just until she got stabilized. Having recently been discharged from a six-month court-ordered lockdown, drug detoxification program. All siblings readily agreed. She assured us it would be no more than six months. That was approximately 2010. Fast forward to 2021", so here we are, 11 years later, "the brother who owned the life estate, died four years ago. My sister again asked to stay just until she could qualify for senior housing."
Okay, so back up, I should say, in this case, the mother left the life estate to the disabled son which was a nice thing, so he could live there but then she named the other siblings as Remainderman, so the mother didn't do a life state during her life but it triggered upon the son. So now the disabled son has passed.
"My sister again asked to stay or the brother died four years ago, my sister again asked to stay just until she could qualify for senior housing. When she did get old enough for that, she had another reason for not moving, she also has had a series of drug and alcohol addicted men living with her and paying her rent. She has never paid any of us any money in compensation for the usage of the property. When repairs are needed, which is often, she gets a church she knows, to do the work as a charitable activity. She has both a master's degree in social work and a law degree but has never earned enough money to support herself."
Okay, then the writer says, "the upshot is that my younger brother died this year, having never received any part of this inheritance." Now that's her language, not mine, upshot language. "My sister set up the original will for my mother and made the ownership joint and several, so my brother's daughter has entirely lost out on any inheritance from her grandmother."
So the one other brother has since died during this whole thing.
"I asked my sister to consider moving out last winter before my younger brother died, encouraging her to consider how she could use the money from it to find a better place. The house is truly in deplorable condition. She actually called a realtor and allowed it to be put on the market, resulting in an immediate offer. It's a great it's on a great lot. However, as soon as the offer came in, she refused to allow any further showings and let me know in no uncertain turns, she would never move out."
Okay so pause here, the sister is a co-owner so she can block any sale. When you own property jointly, it means you all have to agree on selling it and that's the problem I see here, what's happened with this property.
Okay, now the writer says, "I live 500 miles away. I do not need the money from this property, in fact, I could buy it myself outright with cash on hand. However, I have an older brother, who has never even owned his own car. He could really use his share of the estate. Having now lost a younger brother, I feel like it's wrong for none of the other siblings to receive any benefit of the inheritance before our death. Should I try to go to court in another state to force her out or just forget about it? My older brother says he has no energy to fight for this. You would be shocked at the details I left out. Please advise!" Signed - Last Straw.
Okay so that's the facts here and before we get into The Moneyist answer, I just want to say, this is, maybe an extreme example but one I've seen happen with the problems with joint ownership of property and that is why I don't prefer this as a method of estate planning. What I mean is I don't like using a life estate or a deed, to just leave property to four or five or six people, who then all have to agree on what to do with the property because as you can see here, sometimes it puts pressure on other siblings, one sibling says, "oh I just want to live there for six months" and in this example, six months turned into 11 years. So that's my first thoughts on the way they went about this estate planning, not my favorite plan.
Now here's The Moneyist answer in brief - "The upside your sister had somewhere to live for the last 10 years. Your family did the right thing at the time, you were and are good people."
I agree with him, they had good intentions here and were trying to help out the sister.
"The downside, she was never going to move out. This was a game of cat and mouse where the mouse finally picked up the cheese and walked away. Addiction is a terrible disease and from what you say, it sounds like your sister is not living a sober life. She has strung her family along for more than a decade and even persuaded and or manipulated depending on your vantage point, the local church to pay for improvements. Perhaps you and your siblings can set up a trust for your brother's children to fund their education. That could go some way in addressing the balance of the lost inheritance from this home. There are ways to help your brother's family but of course your hands are tied until your sister agrees to sell the home."
So I think he's saying that pre-deceased younger brother take his share, if you're ever able to sell the home and set up a trust for his kids and that is a good idea and I encourage them to explore that but again, the sister can block the sale, the one in the house currently she is.
"You now face a decision, do you allow her to live there as you have done weighing the risk and reward of legal fees and emotional turmoil or do you take action? That decision requires a family meeting and consultation with a lawyer, so you can weigh the pros and cons of the expense and upheaval in your family" and then The Moneyist says, he asked this lawyer Blake Harris, his thoughts on the situation. He does not believe it's worth it. "If the property is owned by all of your living siblings then each of you have the right to live there and each of you also have the right to sell your portion of the property, he said." and I generally agree with that. Now I don't know where the property is, the person never said but in Wisconsin, they would all be co-owners, I haven't seen the deed but co-owners of the property and they would all be responsible for the maintenance upkeep and taxes but they're letting one sister live there and it sounds like you know she's not paying her share or even the full share.
Now The Moneyist says, "if you can't live with that, an attorney could issue a partition action for the probate court to force the sale of your mother's property. The property taxes in the meantime, should be paid from your mother's estate and if not, the children or beneficiaries must pay for them" and he's right about that but it's a life estate and they're Remainderman, so I don't even think necessarily, the estate would pay this, it would be the people who own the property now, the Remainderman. So again, I'd have to look at the deed but a partition action would be the option in Wisconsin, when you have co-owned real estate, one of the co-owners can sue and ask a judge to partition the property. Now in the case of a small lot with a house, a judge is unlikely to literally partition what we mean is divide it up because it's very hard to divide a single family home. When you think of King Solomon, when the two mothers claimed the baby was theirs and they brought the baby to the king and he said, well cut it in half and you'll each get half of the baby and in the biblical story, if you recall, the true mother said stop because she cared so much, it was her real baby. She wouldn't want the baby cut in half and that's how King Solomon determined the owner but in this case, with real estate, that's the concept of the partition action. If you have, let's say 160 acres, you could perhaps partition it into 40 acre parcels and four people walk away with 40 acres but a lot of real estate, if it has a house, you can't divide a house into two in most instances or four, plus even with acreage sometimes one acreage is worth more than the other. So but vacant land would be an example, a judge could possibly partition it but in a lot of other instances, if you do a partition action, what's actually going to happen is a partition sale, where the judge orders the property sold and the proceeds divided among the owners.
So The Moneyist says, "taking legal action is a last resort as it can be costly and time consuming. It would likely permanently end your relationship with your sister, it could get ugly with a sheriff knocking on your sister's door, forcing her eviction. You must ask yourself as a family, whether it's worth it." So I agree with this advice there, they never said the value of this property, okay but the lower the value, you have to realistically think about how much you want to spend on legal fees, is it five thousand, ten thousand, twenty thousand to sell a property and if the value you know is lower than $150,000, that's the decision you're going to have to make and then who fronts the fees because someone will need to pay the attorney on behalf of the petitioners, until you get hopefully what you would want is the property sold but litigation is expensive and this is litigation. "In Florida," he says, "for instance, when two or more beneficiaries are entitled to distribution of undivided interests in any property, the personal representative or any beneficiary may petition the court before the estate is closed, to partition the property the state's probate law says." Okay so in this instance, I am not even sure, if a probate was ever opened, if this was the only asset, the real estate but in Wisconsin law, probate by law must be closed six months to two years, is the maximum unless extended by a judge. So if there was a probate open in 2010, it would have to be closed by now, unless special exception by the judge. If no probate was ever opened and this sister is an heir, they could petition to open a probate but the probate alone, if this property is not under the will or anything else, it's currently co-owned with the other heirs, they're going to need from what I see to pursue that partition action which is litigation itself, to force the other co-owners to sell the property.
He continues, I don't know if The Moneyist is in Florida but he's quoting Florida law, "The court may direct the personal representative to sell any property that cannot be partitioned without prejudice to the owners and that cannot be allotted equitably and conveniently, the statute adds, you can check the law in your state but this is an option likely available to you and your family." So he's right, it's going to vary state to state but likely, that partition action would be there in some form.
"An attorney will advise you on the state law where your sister lives. She is a co-owner after all, not a tenant or a squatter" and he's correct to point that out. "If the court forces to sale the property, it may likely be sold for less than the market value of the property" and I would generally agree with that, you're likely going to get highest and best market value by selling it on the open market, not a force sale type of situation because savvy buyers may take advantage, realize it's a partition sale and get a better price. So if you could reach agreement, you might get a higher price and have more to split. "One final warning, once a partition action is taken, it's almost impossible to go back." So I think that's very good advice, about the partition action, that's what if this was in Wisconsin, what they'd be looking at for options of partition action which is a formal litigation. It will be expensive.
So if I was the attorney advising them, I would want to know what's the value of this property and what do you realistically think it could get on the open market and then, what's your budget to spend on this and do you want to go down the route of litigation? So the answers to those questions will determine, in my opinion, what door they should go through but once again, to me this is a cautionary tale to the dangers of owning real estate jointly with anyone other than a spouse, you're married to, after death. I don't often see situations where it works out well and that's why I would prefer to pass the real estate through either the will through the probate court or my preferred method through a trust, outside a probate where one person is in charge of the estate and carries out your wishes as expressed, in your will or trust, after your death. Then we have one document, we have one decision maker and they're bound by the terms of the will or trust to follow your wishes.
In addition, for the disabled son, the trust could have still allowed the disabled son to live there for life and then said what happens after he passes, without making all the children co-owners. It could have said the property should be sold, after his death and then distributed etc.
So I don't know all the details here but we got a lot of them in this article. I hope this Series has been helpful to you as you consider your own estate planning and think about issues out there with the assets you own and possess and what's the best way to lead them to your family, friends and relatives, in a way that leaves a blessing and not a burden.
So thanks for watching and we'll see you next time.
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