Inman

Negligent life tenant raises foreclosure risk

DEAR BENNY: My sisters and I "own" some Tennessee properties inherited from my late father, who died in 1984. In his will, he wanted to provide for his current wife ("B"), so she was given a "life estate" for her use of both properties during her lifetime. My sisters and I are the owners on the deeds. One of the properties is a residence, and the other is an income-producing commercial property.

Fast forward to today, and here’s the picture: The residential property has been abandoned for three years now, housing mold and the occasional vagrant. "B" has advanced Alzheimer’s, and is in a nursing facility; she seems destined to live forever in that regrettable state. Her guardian (daughter) states that "B" will not return to the residence, and they have stopped insuring it or paying real estate taxes on it.

We have received nothing from the county tax office, so I inquired and found the taxes are unpaid for the previous two years, as well as for this current year. After three years of nonpayment, the county can auction the property for back taxes. I asked them to send me the tax bills. My sisters and I are confused at how "B" and her guardian can renounce their financial responsibilities and yet retain control of the deteriorating property.

The commercial property is producing income for "B" and family, and the taxes are currently paid. We have offered to let "B" enjoy continuing beneficial control of the commercial property if she will abandon claims on the residence, so that we can save the house from complete destruction, but they say their attorney advises that they can’t do that, and they don’t really care anyway.

What are we to do? Is there a legal action to remedy this situation? –John

DEAR JOHN: I don’t know Tennessee law, but your question sounds like what we lawyers call a "waste issue" with respect to the residential property. The life tenant can be sued for waste, meaning that by her inaction, she is letting the property deteriorate (i.e., going to waste).

Usually it is a damage claim, but there are cases where, faced with facts showing that the life tenant is not properly maintaining the property, the court may order injunctive relief in the form of allowing the remainderpersons to receive the property. You all are the remainderpersons.

Either way, it would require paying off the life tenant for the remaining value of the life tenancy, which uses actuarial tables based on age of life tenant, value of property and applicable federal rate. Waste damages could be deducted from any payoff to the life tenant, as would taxes and other maintenance costs the life tenant is required to pay.

Life tenants are entitled to rental income on property. The life tenant must pay taxes, insurance and upkeep of the property, and is entitled to income unless specifically stated otherwise in a last will and testament or the instrument creating the life estate.

DEAR BENNY: What are the tax complications of gifting a home? In one of your columns you wrote: "If you die and leave the house to someone, that person gets the stepped-up basis. In other words, the value of the property at the time of death. …" My question is, wouldn’t the brother who received the gift have to pay an inheritance tax if the property was not in a trust? –Don

DEAR DON: Inheritance laws vary state by state. For example, Virginia and the District of Columbia have no inheritance tax. States that do have inheritance tax have exemptions for property passing to certain family members. A brother may or may not be exempt depending on state law.

You may also be thinking of estate tax, which is a transfer tax on the value of assets transferred on account of the decedent’s death, reaching probate and nonprobate assets. The federal exemption is currently $5.12 million. Under certain state laws, such as in Maryland and the District of Columbia, there is an estate tax imposed for assets that pass from a decedent. Both Maryland and the District of Columbia impose estate tax on assets of greater than $1 million. The tax is imposed on the estate rather than the recipient, unless there are insufficient assets in the estate to pay the tax.

I don’t know all of the state laws, so you really should consult an attorney in your state. Alternatively, many states have lots of information on their website, so check there first.

DEAR BENNY: We live in a large condominium complex and our unit happens to be located close enough to the lobby that we hear the elevator constantly. The sound, what I call harmonizing, has been occurring for the last five to six years. I have spoken to the management many times and they have responded by repairing, but the fix is never long-lasting.

This noise is mind-numbing since it is more of a scraping sound that on occasion seems to go right through you.

My question is, would it be too much if I told management that I will no longer pay assessments until this issue has been resolved? Would I be justified in doing this? I have looked in the bylaws and found nothing pertaining to an issue like this. What would you suggest? –Mark

DEAR MARK: No! No! No! I cannot under any circumstances recommend that any homeowner in a community association, whether that be a condominium, a cooperative or in a homeowners association, withhold the assessment.

There are several reasons. First, you admit that this problem has been plaguing you for several years. If you suddenly decide to withhold your association assessments, I seriously doubt that a judge would be sympathetic.

More importantly, as soon as you are delinquent, I suspect your association will start collection efforts, which can include filing a lawsuit against you. Once again, while you may have a legitimate concern, case law throughout this country makes it clear that a homeowner has an obligation to pay his assessment, regardless of any problems that the homeowner has.

You will be accused of just trying to get out of paying the assessment, and using the noise problem as an excuse.

I don’t mean to be unsympathetic; I just don’t think it’s a good idea to withhold your assessment. However, that does not mean you don’t have remedies. You claim that the noise is a major concern. Noise is subjective; I have often joked that my definition of noise is my son’s definition of music.

You need to prove that the noise is excessive. I suggest you ask the association board to hire an acoustical engineer to do a study of the noise level in your unit. If the board refuses, then you should hire the engineer yourself. Once you get a report that indicates that the noise in your apartment is above acceptable levels, present that report formally to the board and demand that they resolve the situation. A good engineer will also recommend possible solutions to the problem.

In the final analysis, you may have to file suit. At that point in time, you can start withholding your assessment, but make sure that you give it to someone (perhaps your attorney) to hold in escrow. You don’t want the judge to think you are a deadbeat, just trying to avoid paying the assessment.

This way, you are the plaintiff and not the defendant. In my opinion, it makes you look more favorable to a judge.

DEAR BENNY: We have Diamond points and want to know how to not burden our four adult kids with them. They cannot afford them. Actually, I do not want to burden my wife with them and wonder where I can get advice. –Phil

DEAR PHIL: I was not familiar with Diamond points, so I researched this on the Internet. Frankly, I was shocked at the number of websites offering to sell (or rent) those points. For my readers, Diamond Resorts International operates as a form of time share, and for those who have been following my column, you will know that I get more time-share questions than on any other subject.

I don’t know the answer and seek guidance from readers who may have had success in selling their points. However, I do want to repeat my strong advice: If you find someone who is prepared to sell your time share (or your points or any other similar product), under no circumstances should you give them any money upfront.

You should also contact the Better Business Bureau in your area to determine if it has had complaints about that company.

Also, contact your state’s attorney general, since there have been many lawsuits against fraudulent time-share sellers filed by a number of attorneys general (as well as a number of class actions filed by private attorneys.