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Clock ticking to get maintenance reimbursements

Dear Benny: We have an unusual situation.

When my dad died, he left a life estate in a house/rented duplex to his widow. My sister and I have managed the duplex for 12 years, with all income going for repairs and any surplus to the widow.

We would like to be done with it. His widow does not want to move. We are planning on putting it on the market, subject to the life estate. Do you have any guidelines on how much the life estate devalues the property? She is 76 and, as far as we know, healthy as a horse.

Also, I’ve been told a bank won’t loan on a property with a life estate, so that doesn’t help us much either.

Although we know we could just let her handle everything, we prefer to keep on top of duplex maintenance, taxes, etc., and so we are hands-on. Alternatively, if we can’t sell the property, can you suggest a fair and reasonable fee, as called for in the trust documents, to charge for taking care of maintenance and upkeep on this property?

For 12 years we haven’t charged anything. So far every agent we’ve talked to is stumped. –Linda

Dear Linda: The best person to know if there is a market for this type of investment would be a real estate broker or a real estate investment company. However, unless the price for the property is so low that it will be attractive to a speculator, I seriously doubt that you will be able to sell.

The value of the life estate can be determined by looking at actuarial tables in the Internal Revenue Service code. You can find these in IRS Publication 1457, “Annuities, Life Estates & Remainders” (http://www.irs.gov/pub/irs-pdf/p1457.pdf). However, different states may adopt different ways of valuing the life estate and the remainder interest, so you should consult with a local accountant familiar with this issue.

At age 76, the life estate probably still has significant value. The costs of upkeep, taxes, maintenance, etc., are of course the responsibility of the life tenant. So you may have some claim to reimbursement for those expenses depending on what the trust agreement states.

The trust language would control regarding payment of expenses and who is responsible for those payments. However, every state has a statute of limitations.

This means that after a set number of years (often three) you lose your right to make a claim. So if your state has a three-year statute, you can demand only that the widow reimburse you going back three years. You might want to consider starting to demand reimbursement now so that you will not lose any more years.

You asked what a reasonable fee would be for your services. If the trust is silent but says the life tenant is responsible for expenses, a reasonable fee would be the taxes, maintenance and upkeep.

It really depends on the specific language of the trust and/or the document setting up the life estate and your own state law.

Dear Benny: I was reorganizing my garage when I found a box of family memorabilia.

In it was a deed for four burial lots that were purchased by my parents in 1950 in the cemetery close to where they lived at the time (Pennsylvania). My parents moved the whole family to California in the early 1960s and all, except me, are buried in California. I am the last living member of the family.

Can you please advise me as to the best way to sell this property? How do I find out what it is worth? Is it possible that the cemetery director would sell the property for me? Are there any charges for this sale that I may need to know about? –Maggie

Dear Maggie: I would first find out if the cemetery is still operational.

Do a quick website search and confirm that. If the cemetery is operational, I would contact the manager of the cemetery and ask him/her your question. I have absolutely no idea what the lots are worth but, again, their website may give you guidance.

Alternatively, you may want to contact a local church in this Pennsylvania town and see if they are interested in taking the lots off your hand. You can donate the lots to the church and take a charitable contribution on your next tax return.

But you will need to know what those lots are worth, and you should consult a tax adviser to give you specific advice.

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 benny@inman.com.

One comment

  1. In regard to the couple who asked about reimbursement for expenses for managing maintenance on their deceased dad’s property, I would suggest also that they propose to the widow that they be paid a fair rate for management duties. Property management companies abound and they charge owners a monthly fee taken out of the rental income. The couple could research that and propose equal to or less than the average market rate for management, but give the widow evidence of such rate research. This management fee would be in addition to reimbursement for actual maintenance expenditures, such as cost of supplies (paint,new dishwasher, etc.) and labor to execute repairs/painting.

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