DEAR BENNY: My mother-in-law passed away in April 2000. Her home, which is paid for, was placed in a trust fund.
The trust states that the youngest son is to live in the home until he moves or is deceased, then the house is to be sold and divided among the five grandchildren.
There are three children, one older son and one daughter also.
The trust states that the youngest son is to pay all property taxes, homeowners insurance and all maintenance of the property. No money was designated to support this trust fund, and the son pays no rent. He has defaulted in paying the property taxes, which the daughter, who is the first executor, has had to pay three times in the past 10 years.
When the time comes for the house to be sold and the proceeds divided among the five grandchildren, what inheritance taxes will they be responsible to pay?
Also, the house has not been maintained, according to the provisions of the trust fund. Can the son who lives in the house be told to maintain the property or the house will be sold? And if he cannot purchase it, can he be forced to move out? – J.C.
DEAR J.C.: These are questions that can be answered only by reviewing your own state law. However, I have to assume that any required inheritance tax was paid when the mother-in-law passed away.
When the youngest son dies, there should be no inheritance tax because he is not transferring any interest. Likewise, if he moves out and you sell the property, no inheritance tax would be due.
If the youngest son (the life tenant) fails to keep up the property, depending on state law, the remainder beneficiaries (i.e., the five grandchildren) can generally pay the costs of upkeep and sue him for amounts expended or, in certain cases, ask the court to sell the property, in which case he would probably receive the value of his life interest (based on actuarial tables taking into account his life expectancy) less the costs the remainder beneficiaries were required to pay to maintain the property.
The value of a life estate can be surprising large in comparison with the remainder interest. You all need to consult a lawyer in your state and review the appropriate valuation tables used by that state. Hopefully you should be able to settle this matter without going to court.
DEAR BENNY: I read that the Obama administration created a new program to help homeowners who have lost their jobs pay for their mortgages.
I lost my home to foreclosure and am now renting, but I recently lost my job and I am in danger of being evicted.
Is there a similar program that could help my family stay in the house we are renting? We can’t afford to move. – Theresa
DEAR THERESA: It wasn’t the Obama administration only that may provide you some relief, even though it may only be temporary. On May 20, 2009, President Obama signed into law the Protecting Tenants at Foreclosure Act of 2009, which was enacted by the Congress of the United States.
If your home was foreclosed upon, unless a bona fide purchaser at the foreclosure sale wants to personally move into the house, you can remain in the house at least until your current lease expires. If you are on a month-to-month lease arrangement (in other words, your existing lease expired, and you did not sign up for another lease term) you can stay for at least 90 days.
If, on the other hand, the buyer of your house does want to move in, while you still have to be provided a 90-day notice, this notice can take place even if your existing lease would run for more than those many days.
This is a sharp deviation from the normal landlord-tenant laws. Normally, if a buyer wants to move into a house that has tenants, the buyer must wait until the lease term ends.
You should also review your own state laws. Some jurisdictions, such as in the District of Columbia, where I practice law, have very strong laws protecting tenants, and those laws may take priority over the 2009 federal law.
In many large cities, there are nonprofit organizations that may also be able to assist you. Your local elected representatives should be able to provide you with the names of some of these organizations.
Benny Kass is a practicing attorney in Washington, D.C., and Maryland. No legal relationship is created by this column. Questions for this column can be submitted to firstname.lastname@example.org.