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Life Estate Deed

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  • Life Estate Deed

    Hello, I filed BK CH 7 10/2015, My mother passed outside the six month window and she bequeathed her property to me and my siblings. Problem is that she executed a life estate deed with my father in 2007 when he was alive, naming me and my sibs as 1/3 owners. There is no Maryland precedent law on this and the trustee is hinting that I will not received my share of the estate even though it was outside the 6 month window. Any experience here? My bankruptcy attny is reviewing but just curious if this has happened to anyone else?

  • #2
    I'm sorry about your loss. Combining the loss with bankruptcy is never fun.

    The confusing part, for me, is that you say that your mother bequeathed the property after she passed (which you imply was more than 180 days after you filed). In the next sentence you say that in 2007, your mother actually created a life estate, years prior to you filing, giving you part of a 1/3rd interest in the property. That tells me that you were already given interest in the property prior to filing and that interest in the property was established in 2007 (prior to filing).

    The Trustee has an interesting case. I'm assuming that your father is alive and he was a co-tenant of the life estate. You are still an owner and the Trustee is going to determine how much they can get (is it worth it?). I would be concerned about a forced sale if it comes to that. The Trustee may try to have you buy your interest in the life estate from the bankruptcy estate. They may abandon the bankruptcy estate's interest in the life estate. Only the Trustee will know at this point. Hopefully your attorney is up to the task.

    You'll just need to wait and see what the Trustee decides.

    I have had some life estate issues but they surrounded title and probate issues because the title had issues. LadyInTheRed is better at estate planning than I will ever be. Maybe she'll chime in later.
    Chapter 7 (No Asset/Non-Consumer) Filed (Pro Se) 7/08 (converted from Chapter 13 - 2/10)
    Status: (Auto) Discharged and Closed! 5/10
    Visit My BKForum Blog: justbroke's Blog

    I am not an attorney. Any advice provided is not legal advice.


    • #3
      I appreciate your response. Both parents passed in 2016. My father died in feb of 2016 my mother in August of 2016. We listed and sold their home with the closing approaching next week. This is where we learned of the life estate deed. I just mentioned that they initiated ( unbeknownst to me ) the life estate in 2007. Hope this helps.

      Its just mind blowing to think the court counts this as an asset prior to death. During my parents lives I could not sell, nor paid real estate taxes on the property.


      • #4
        It was an asset because it was yours. A life estate, from what I personally know of them, actually transfers the property to the beneficiaries, but leaves the life estate tenants the exclusive rights to use the property until his/her (their) death. Maybe it's the way that a life estate works that is puzzling you as to why you have "interest" in the property when the life estate was created (and deeded). That interest is less than the full value of the property, but it does have some "value." It is the value which is interesting to the Trustee.

        (There are actual formulas to calculate "life" expectancy used by the IRS and probably used to calculate your interest in a life estate. In any event, it had "some" value when you filed your bankruptcy. This is what the Trustee is trying to figure out.)
        Chapter 7 (No Asset/Non-Consumer) Filed (Pro Se) 7/08 (converted from Chapter 13 - 2/10)
        Status: (Auto) Discharged and Closed! 5/10
        Visit My BKForum Blog: justbroke's Blog

        I am not an attorney. Any advice provided is not legal advice.


        • #5
          I also meant to ask if your Chapter 7 bankruptcy case is still open or did it close as a no-asset case? Did you disclose the life estate property as an asset in your Chapter 7 schedules? Does the Trustee know about this life estate property? Everything I wrote above assumed that the Trustee knew about this because it was scheduled in your petition and that your case is still open. If not, then I assume that your attorney is researching whether or not you have to disclose this property to the estate -- and therefore the Trustee -- and open it up to potential administration (and your case being re-opened).

          Hey despritfreya this is an interesting case. I didn't have this issue as my grandparent's life estate was already dealt with before I filed and I had no interest in the property. This particular case seems very interesting and I wonder if you've seen this before.

          Adding the remainder calculations from Florida as an example ONLY. I do not know how to use these at all. (Appears to be the same as the Social Security Administration life expectancy/remainder charts.)

          Here are the ones from the Social Security Administration.

          Last edited by justbroke; 05-21-2017, 06:05 PM.
          Chapter 7 (No Asset/Non-Consumer) Filed (Pro Se) 7/08 (converted from Chapter 13 - 2/10)
          Status: (Auto) Discharged and Closed! 5/10
          Visit My BKForum Blog: justbroke's Blog

          I am not an attorney. Any advice provided is not legal advice.


          • #6
            Thanks again for your time. I understand the concept of Life Estatte.

            my Chapter 7 is not closed, it was discharged. I do own my own occupied property that has been up for short sale and the trustee has been hanklding that. ( separate from my parents property)

            My parents property had no liens and my share is 100k. It was no listed because I was not aware I had any interest in the property at the time of my filing, and only learned of it when my parents property was getting ready to close a little less than two years from filing. ( i never received forms, signed anything or received notification of the life estate). In fact the settlement attorney produced the life estate deed which only had my my parents signature with my siblings and me names.

            Fun fun, but my 100k may go bye bye


            • #7
              Hopefully your attorney finds some wiggle room. Late discovered assets are never fun to deal with in bankruptcy. I had to deal with a life estate but luckily not intermingled with a bankruptcy. The worse can be siblings and any fighting that may ensue if the Trustee forces a sale. I wouldn't blame you for being nervous or even wanting as much information as you could gather.

              I think, guess, if the bankruptcy estate is entitled to some portion (value) of the life estate it would be calculated based on the value and the life expectancy on the day you filed (???).

              Sending you some good vibes.
              Chapter 7 (No Asset/Non-Consumer) Filed (Pro Se) 7/08 (converted from Chapter 13 - 2/10)
              Status: (Auto) Discharged and Closed! 5/10
              Visit My BKForum Blog: justbroke's Blog

              I am not an attorney. Any advice provided is not legal advice.


              • #8
                Appreciate the good I tell my kids...sometimes life is just not just need to shake it off and keep moving. My gut is the trustee will take my entire $100,000.00 to pay off the difference on my current short sale house. Oh well!


                • #9
                  Who knows, maybe this will make new caselaw in Maryland (and/or the 4th Circuit Court of Appeals). That's if everyone (Trustee and your attorney) are going to fight it out. Maybe a good compromise will settle this and we'll just see. I hope that you let us know how it's going. It's very interesting.
                  Chapter 7 (No Asset/Non-Consumer) Filed (Pro Se) 7/08 (converted from Chapter 13 - 2/10)
                  Status: (Auto) Discharged and Closed! 5/10
                  Visit My BKForum Blog: justbroke's Blog

                  I am not an attorney. Any advice provided is not legal advice.


                  • #10
                    I certainly will let you know..We will see, you have been very helpful!


                    • #11
                      I missed this thread until now. It is an interesting issue and I look forward to an update.

                      I have one theory you could explore with your lawyer. The common law elements of a gift are an intent to give, delivery of the gift and acceptance of the gift. I did a quick search and that does seem to be the law in Maryland. If your father recorded a deed, but did not tell you, how could you have accepted the gift? If the gift was incomplete because you did not accept it, maybe the gift wasn't effective. I don't know if this argument would fly, but it is worth raising.

                      LadyInTheRed is in the black!
                      Filed Chap 13 April 2010. Discharged May 2015.
                      $143,000 in debt discharged for $36,500, including attorneys fees. Money well spent!


                      • #12
                        I have a life estate also only myself no other parties. When I filed for chapter 7 years ago my attorney told me they had not seen a creditor try and attach to such a thing. I still have the life estate.


                        • #13
                          P.S. Consult with a real estate attorney. They may have options your BK attorney is not aware of.


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