My mother added me and my sister to her house deed, now I'm filing ch 7, problems?

[murphsmom]

Tobee, good suggestion, but I just can't see myself asking my mother to pay another attorney/filing fee to get me off the deed, when she just put me on it a few months ago. I'd have to tell her why, and a possible future bankruptcy is not something I want her to worry about.

I'm not going anywhere, will have tons of questions about ch7 as my husband will be filing very soon.

Thanks for all your support

[tobee43]

it doesn't ...or shouldn't cost much at all. actually, when and if you can, i'll call her atty and tell them to take you off...i bet it shouldn't cost more than $100 or so....in the future.

and there's always people here on the forum to lead a hand and a heart...so best of luck and glad your moving forward.

[StartinOver]

I don't know the OP or the OP's mother.... but unless you think she's utterly to mentally frail to handle adult financial topics, don't be so quick to walk away from the correct solution under the law for you, because you're afraid she'll 'worry.' She's been a mentally competent adult for about 20 or so years longer than you have. She may not be as fragile as you think, and if she were every to find out later that you didn't take the correct solution to protect her from simply knowing about something, would she be madder about that than she would have been upset about knowing? Worth thinking about.

[murphsmom]

She could handle the deed removal, but she could not handle the possibility of a stranger acquiring 1/3 equity in her only asset. I just need to decide if removing myself from the deed is the appropriate course of action at this point.

[tobee43]

you can alway have you added back on the deed at a more "safe" time.. of course i mean your atty or legal rep....i'm doing one today actually... a bit more complicated since i'm also working on deeding the tax limit of the party of 13k to each spouse...(just a job i picked up). but it doesn't take much to take you on and off. just some paper work and some filing with the county.

[debee]

Your Mom's house will not become property of the bankruptcy estate. Your interest in it will. You need to know the value of your interest. It is not 1/3 of the property's fair market value. It is calculated based on when you were titled and your Mom's life expectancy. Your value might be $1000 or less. Your Mom is only 70 and you were just added. (Go back to my earlier post which references the actuarial tables and provides links and do a run through).

We know that the trustee is not going to go to the expense of holding an auction to find someone to bid on an interest of $1000. Any bidder has to figure in the waiting time until full ownership. So they bid low knowing that.

If your value is low enough, you can look to exempt it with a wildcard, or to buy it back. If it's less than a $1000, then you can ask yourself which is the best route. Either way, your Mom is not going to get hurt. (But like everyone here I support and respect whatever course of action you take. I only recommend that you get the right information in front of you before you make a decision.)

You need an accurate valuation of your present interest in the property.

[murphsmom]

Also, I don't know where your attorney came up with the idea that you would need to exempt 1/3 of the house's value as of today. That's not what I'm seeing as I read on this topic this morning.

Over time, ownership of the property transfers incrementally to the beneficiaries of the life estate in the form of percentage future interest, culminating with full transfer of the property to the beneficiaries upon the owner's death.

How to calculate a beneficiary's future interest in a life estate:

1. Determine the current age of the life estate owner.
2. Determine when the life estate was created (look to the date the deed which creates the life estate was first recorded).
3. Using the date (month/year) determined in Step 2, determine the applicable interest at the time the life estate was created under 26 U.S.C. § 7520. The table of interest rates can be found at http://www.irs.gov/businesses/small/...112482,00.html if the interest was created this year. Presently, the IRS has these tables going back to 1997 - to access previous years' interest rates, go to http://www.irs.gov/businesses/small/...204934,00.html.
4. Access IRS Publication 1457 and open up Table S, which you can get at http://www.irs.gov/pub/irs-tege/sec_1_table_s_2009.xls. Scroll down until you find the interest rate you determined in Step 3. Then locate the age you determined in Step 1. Slide over to the column for Life Estate, and find your percentage.
5. Multiply the fair market value of the property by the percentage determined in Step 4. Then, account for any partial interests or any other encumbrances (such as mortgages, judgment liens, or tax liens) to determine the value of the beneficiary's future interest.

OK, I have tried in vain to determine my interest. Cannot figure out the table S portion for the life of me. I can tell you that the interest rate that I found in the first part said the following: 120% of applicable rate = 2.33%, Sect 7520 Interest Rate = 2.4%. The deed was filed in Sept 2010, and my mother is currently 69 years old, turning 70 in June, and in excellent health. I would estimate the value of the home to be approx $80,000 at MOST. Can anyone help?

Thanks

[tobee43]

OK, I have tried in vain to determine my interest. Cannot figure out the table S portion for the life of me. I can tell you that the interest rate that I found in the first part said the following: 120% of applicable rate = 2.33%, Sect 7520 Interest Rate = 2.4%. The deed was filed in Sept 2010, and my mother is currently 69 years old, turning 70 in June, and in excellent health. I would estimate the value of the home to be approx $80,000 at MOST. Can anyone help?

Thanks

i can only help, by suggesting you stop the insanity and let it go...especially if you have decided not to file. like des says...try for the 13...also like i stated in pm's...it could get you debt lowered without all this un wanted and un needed stress for you.

[debee]

OK, I have tried in vain to determine my interest. Cannot figure out the table S portion for the life of me. I can tell you that the interest rate that I found in the first part said the following: 120% of applicable rate = 2.33%, Sect 7520 Interest Rate = 2.4%. The deed was filed in Sept 2010, and my mother is currently 69 years old, turning 70 in June, and in excellent health. I would estimate the value of the home to be approx $80,000 at MOST. Can anyone help?

Thanks

Another thing you might want to do is get an accurate current market value for the house. A lot of us have been surprised when we discovered what our homes were really worth.

2.4% & 69 years old gets you the percentage of 0.28602 on table S. Multiply that by 80K and you get $22,881. You have to reduce that by other interests. Since you have a sibling also on the deed, this value gets cut in half. So you're looking at around $10K in present value.

About 1/3 of what you originally thought.

Since you have no equity in your homestead, you can apply the unused homestead exemption of $10,825 (or so) to keep your interest in Mom's house safe from the trustee/creditors. I presume you know this already since you reference it in an earlier post.

[murphsmom]

Was reading my attorneys Blog, and found that he actually wrote a blog about this very topic:

By Peter R. Scribner on Tuesday, March 8, 2011

Occasionally we have to deal in bankruptcy with debtors who own a "remainder interest" in real estate. This can happen when the debtor's parents have engaged in Medicare planning and deed their home to their kids (typically), retaining a "life estate." This means the parents remain the legal owners of the property so long as they are alive, and, upon their passing, the children will become full owners of the property.

If one of the children who owns part of the future, or "remainder" interest in the property files bankruptcy, how would the asset be valued? The IRS deals with this issue all the time, in valuing for gift tax purposes the transfer today of a future interest in property. At least in the Bankruptcy Court in Rochester, trustees use the same calculation method as the IRS.

So, there you have it, not a new issue in my city, one that trustees are familiar with. We have a small amount of equity in our current home of $4000 based on an independent appraisal. We'd be over the limit.

[BKAttyMI]

I have filed cases by stating that the interest of the debtor in their parents' property was for "estate planning purposes only". The Trustees in this area have raised an eyebrow and questioned the debtor, but these cases have been fine simply because the parents' property did not have much equity anyways. I would be nervous if this property were owned outright with no mortgage, despite your arguments about remainder interests, etc., you face possibly arguing this in court and losing. I would suggest letting the husband file as is right now, keep your name on the deed (you'll need it on there for any future 13 anyways, to remove it would raise problems, at least in this area), and possibly consider doing a 13 once the finances become more stable. Good luck.

[murphsmom]

The property is owned outright with no mortgage, she paid cash for it after her husband passed away and she sold their previous home.

I checked this thread just as I was about to call our attorney about the possibility of me filing a 13 after my husband files 7. He's my next phone call. Filing the 13 singularly will also give me more time between my last credit card use. As I stated, I have two debts with the same bank, a debt consolidation loan and a visa cc, totaling approx 21,000. That's it. But those two payments alone now are making it difficult for me to buy groceries, put gas in the car, and pay expenses. I can't continue to live this way.

Would we have to wait until my husbands ch7 is DISCHARGED, or can I file soon after he files?

Thank You

[murphsmom]

Talked to the attorney, asked if I could file 13 after husband files 7. Basic answer is that would be "very questionable" because of the schedules J and I, I believe he said, noting household income, etc....

He does not think the Chap 13 that I file would fly, because of my husband previously filing 7, everything on the schedules would be questionable to the trustee.

This attorney is very wise, and I trust his judgement. He was a trustee for many many years, and well respected in our city.

[debee]

The IRS method for valuing life estates is the one that I described in my post and that you & I just did.

Your attorney's website describes it in detail here: http://www.scribnerbankruptcyblog.co...nkruptcy.shtml

Since it's only 4K, I would be sure you're right about the values of both properties. Find out what the trustees in your district accept for appraisal value and check that. If it's an auto valuation model (like Zillow) then get a CMA. You should move up the ladder of reliability for a more accurate appraisal if it would help your case to do it.

There's also the option of buying the interest back from the bankruptcy estate. I would discuss this with your lawyer as well.

[murphsmom]

We paid for an independent appraisal on our current home per the attorneys suggestion. The number is as accurate as can be. I'm actually a real estate agent and know the value of my moms property, it could be off by 3-4k but not enough to make an impact.

Buying the interest in my moms property back from the estate may be an option. But I'm seriously wondering if buying back $10k plus in 'future, possible' equity is a smart move just to discharge $20k worth of debt. I could buy it back and if my mother goes into any long term care facility in the next 4 years, Medicaid will take the house anyhow. So I've then paid $10,000 for nothing. I'd almost be better off applying that $ to my current debt, and not filing bk at all.

My biggest concern now is that I'm behind on my bills. Have missed the last payments thinking I was heading into ch7, and used the money for necessary living expenses and to write a $1000 check to the attorney. My credit is going to take a huge hit, but at this point, my credit score really shouldn't be a concern.

Have I told anyone how absolutely exhausted I am already, and we haven't even filed!!

Thanks for all your help.