DEAR BENNY: My wife has a problem you may be able to resolve. About 30 years ago her father died without a will. All the other six children had heard him repeatedly say he wanted the property to go to our daughter, who was a minor at the time. Five of them signed quitclaim deeds assigning the property to my wife, but one sibling who lives back east refused to sign.
My wife now has a deed with six-sevenths ownership. However, the county where the property is located condemned the asset because the roof came off, making it too dangerous to occupy.
After 10 years of having the property neglected, my wife and I began to restore the property, a small 2-bedroom home. We paid all the taxes for the last 30 years, and have put thousands of dollars into keeping up the property.
Is there any way to get a clear deed to this property so she can liquidate the house? We would like to know how to proceed. Since her sister refused to help pay the taxes or renovation costs, is there a way to force her to sign a quitclaim deed? –Paul
DEAR PAUL: Your father-in-law died many years ago without a last will and testament. Was his estate probated? In most states that I am familiar with, probate proceedings must be initiated so as to make sure that title is legally transferred to someone.
You state that five of the seven children have deeded their interest to your wife. But did those other five siblings have legal title to the property? You should have the title searched, and consult a local attorney for specific advice.
Assuming, however, that probate was accomplished, and title was vested in all seven children, you will most likely have to file a lawsuit against the seventh holdout.
You basically have two options:
- You can file a suit against the seventh person, asking that she be required to pay one-seventh of the various costs you have incurred, such as insurance, real estate taxes and improvements. Keep in mind that every state has a statute of limitations, ranging from one to five years depending on the situation. You will have to confirm the number of years in your state with your attorney. But this means that you cannot sue beyond the statute of limitations period.
- You can also consider filing a suit for partition. Every state allows such a lawsuit when two or more people own property and one does not want to sell. However, such litigation is time-consuming and expensive. The best that could happen is that a court would grant your request and order that the property be sold. You will be able to ask the court to allow you to recoup your expenses (again subject to the applicable limitations statute).
But, what is the property worth? It may not be productive to spend a lot of money and time on a partition lawsuit if the sales proceeds — divided into seven parts — is less than the litigation costs.
DEAR BENNY: I have owned and lived in my house for 20-plus years. The duplex next door is a rental, and the owner lives in another town and doesn’t do maintenance to the property until a tenant moves out or something breaks. Our homes are close together and his paved driveway runs in between. The driveway covers his property from the side of his house to the property line. I have about 2 to 3 feet of space that is mostly plant beds.
The issue is the storm drain in the driveway. It is clogged and doesn’t drain. The water will build up during a rainstorm and will start to drain into my basement coming under the foundation. This will continue until the water level has dropped.
I have asked this absentee landlord several times to have it repaired, as it is impacting my house. His answer is that it doesn’t impact him and if I want it fixed I can pay for it myself. What recourse do I have to get him to do the repair? –Harry
DEAR HARRY: First, you have to make absolutely sure that the storm drain is not on your property. I assume that the "2 to 3 feet of space" you mention does not include the driveway.
Next, although the drain is on private property, have you contacted the appropriate county (or city) government agency to determine if they can be of assistance? In some jurisdictions, a governmental agency can issue an order demanding that the homeowner clean the storm drain. …CONTINUED
However, if all else fails, I think you have only two courses of action to take: You can get an attorney to file suit, which is time-consuming and expensive, or you can take the initiative and clean the drain yourself.
I recognize that my last suggestion is like rubbing salt in a wound; it’s offensive for you to have to pay for a problem caused by your neighbor. But you want to protect your own property, and that may be your best solution.
DEAR BENNY: I read the article about the man wanting to gift his house to his friend. If the man owned his house outright, why not sell it to his friend and carry the loan himself? He could then let his friend default on the loan. With no other action taken by either party, would this be a good deal for both? –Wolf
DEAR WOLF: Yours is an interesting suggestion but there are too many tax consequences. First, the sale must be reported to the IRS, and the seller may have to pay capital gains tax. Next, the interest on the seller carryback loan must be reported as income to the seller and as a tax deduction to the buyer. And if the interest rate is too low (or even zero), the IRS will impute interest to both parties.
And if there is a loan, will it be recorded on land records? Bottom line: It’s a fraudulent transaction that I cannot recommend.
DEAR BENNY: While working overseas, my husband and I bought a house that was to be our retirement home. But when we actually retired, we realized that it was too far from family so we sold it, taking the $250,000 exclusion.
Long before we were married I bought a house that has been rented for 25 years. Now I wonder if this house, being in my name only, is eligible should I want to sell it? I see you mention $500,000, so is that for two people? We received only a $250,000 exclusion, so I wonder if another $250,000 might be eligible. –Carolyn
DEAR CAROLYN: If you and your husband both owned and lived in the house for two out of the five years before you sold it (called the "ownership and use test") and if you filed a joint tax return, you are eligible for the up-to-$500,000 exclusion of gain.
Please note the words "up to." That does not mean that you can automatically exclude all of the $500,000. If your gain was only $250,000, that’s all you can exclude.
I would talk with an accountant about your situation. Depending on how long ago you took the exclusion, you may be able to file an amended return, so that you can claim the correct amount.
As for the rental property, it is not eligible for any exclusion. The exclusion authorized by Congress applies only when the ownership and use test described above is met.
DEAR BENNY: In a recent column, you refer to a 2008 tax law on allocation. Can you please tell me what law that is? –Julia
DEAR JULIA: The law is known as the Housing and Economic Recovery Act of 2008.
Up until January 2009, if you moved into your second home that you had been renting for many years, and live in it for two out of the five years before you sell it, you can exclude up to $250,000 of any gain that you make (or if you are married and file a joint tax return, the exclusion is up to $500,000).
But Congress, in an effort to offset other monetary losses that would be generated by the new law, decided to target second homes, which includes where you vacation every summer or your rental property.
Effective for property sales after Jan. 1, 2009, you now have to allocate the percentage of time that you owned the property as compared to the time that it was not used as your principal residence.
Simply put, after Jan. 1, 2009, when you sell your house that has not been used exclusively as your principal residence, you must "crunch the numbers" to determine any possible tax liability. Have your financial advisers do the numbers for you.
