Hey there, Legal Tea Listeners –This is your host, Jenny Rozelle! Today’s episode of Legal Tea is a cautionary tale, where we talk about a real-life case with real-life clients with real facts. Though, of course, names are altered for confidentiality purposes. So, for today’s episode, we’re going to be talking about some of the problems I see when people try to do their own property transfers without seeking professional help or guidance. When I say property transfers, what I mean is things like houses, land like farmland, etc. People have no idea that transferring property comes with a very unique set of rules/laws – scary enough, the way many things in property-world work is that you do not technically need a lawyer involved. The question here though is – Should you? Insider’s secret: The answer is YES. For the love, YES. I think this episode will show you a few examples why the answer is yes…
Today, you’re going to get three mini stories … not just one long one! Hey, if I can come up with 3 mini “cautionary tale” stories of things that have happened recently to clients, then that probably goes to show you the depth of this issue. Guess what? Two of the three stories did not have lawyers involved when the property-transfers occurred, but guess who had to get involved to clean things up? Lawyers. And probably for way more than what it would have cost the lawyer to do it right the first time around!
Alrighty, mini story #1 – Property Titling
I had a referral from a friend and professional contact that works at a title company. Long story short, they were helping, let’s call her Melinda, Melinda with title work for the sale of a property. Melinda’s ex-husband, who she was very amicable with, passed away. I won’t bore you with the nitty gritty details, but basically Melinda had hired a realtor, signed a contract with the realtor, got and accepted an offer, and they were nearing closing. The title company noticed something a little strange and to this day, I think the title company referred them to me because I think they knew what needed to happen.
I gathered all the facts and realized that because of the property ownership, Melinda’s ex-husband’s estate needed to get probated. What happened, in the shortest version ever, was the property was owned as “husband and wife” between Melinda and her ex-husband. When they got divorced, they never touched the property titling. They did the divorce without attorneys involved, which hey, that is fine -- I know that happens sometimes. The issue is that the property titling should have been addressed at that time. You can’t just assume things in my little legal world. Anway, so when Melinda’s ex-husband passed, I started piecing together that, “Oh dear – this property defaulted to, what is called, tenants in common, when they got divorced.” That means they EACH own a half interest in the property; it didn’t automatically default in ownership to Melinda at the ex-husband’s passing.
To this day, I think she thought I could just “whip up” an Affidavit or Deed transferring the house to just her. Nope.Legally-speaking, his half interest needed to get probated meaning that closing was NOT going to happen. I got to be the bearer of bad news – honestly, it was not fun. Even though I had no relationship with Melinda or her ex-husband before this … meaning I obviously was not the cause of the messed up deed, but I still felt bad. They thought (aka assumed) that the property was still jointly-owned after the divorce, but it was the divorce that severed the “husband and wife” relationship.
Thankfully for them, the buyer was willing to be patient and wait until I got things rocking and rolling in probate land. So, we got things cleaned up … everything taken care of, but boy – it was a doozy! I sure think they learned their lesson.
On to mini story #2 – Transferring property for “Some” Bad Reason
So, I helped a client, who is a gentleman in his early 60s that was recently put on hospice. He wanted to get his basic estate planning done, and near the end of the conversation, he asked me to also help with some deed work. Long story short, in 2017, he transferred a property to his 20-something old daughter. When I asked him why he did this, he said his real estate attorney said it’d avoid inheritance taxes for his daughter (when he passed). I quickly interjected and asked, “When was the transfer done?” He said, “2017.” I said, “Well, we haven’t had inheritance tax since 2012 – so you got some bad advice.”
Oddly, he seemed to shrug it off. In my head, I was thinking, “Well I’d be ticked off at that real estate attorney – but okay buddy, I guess if you don’t care, I shouldn’t care!” He proceeded by saying that he wants his daughter to transfer it back to him because he didn’t realize that transferring it to her, would cause him to lose his property tax exemptions – like homestead exemption and mortgage exemption. Again, I was thinking, “Well, yeah – I could have told you that too.”
So, following the meeting, I proceeded to pull the last Deed and have my office prepare a Deed transferring the property BACK to this gentleman (meaning his daughter would have to sign it – not him; since after all, she was the property owner). I learned a few days later (after my office incurred expenses of pulling the Deed, preparing the Deed, etc.) that the daughter was planning on refusing to sign the Deed ... even though her Dad was paying the mortgage on the property (the mortgage for the property was still in HIS name) and he was paying the property taxes. Oh my gosh…
He asked me, “So do I have any leverage?” I was like, “Well you could stop paying the mortgage and expenses, and see if she ponies up the cash to start paying them. Because then, if he stops paying the mortgage, the bank would foreclose on the property – and since she’s the titled owner, she’d definitely have to get involved…” It’s beyond me that this is a father (trying to work things out amicably) and his daughter (who is a 20-something year old stubborn individual, apparently). To be honest, I don’t have how this story ends up – I’m in the middle of it right now. So, we’ll see … but things are not looking good for the ol’ Dad. She’s the titled owner, period. End of story. She’s holding the cards – not him.
Lastly, on to mini story #3 – Transferring property Based on ... Trust?
This one … left me scratching my head when I heard what happened. So, my husband, who is an attorney at my law firm, met with a lady that during their conversation brought up a piece of property … I think, if I remember correctly, it was a parcel of farmland. Anyway, she proceeds to share that many years ago, her and her now-deceased husband purchased the property from a neighbor. They thought, “Oh, they don’t need those silly lawyers involved – we’ve got this!” So, they gave the neighbor money for the land … and the land was theirs! So she thought…
At that time, she shared that they were unsure “how” to title the property – you know, should they put it in both their names? Just one of their names? In their kids names in case nursing homes get into the picture? (Side note: Legal Tea Listeners, DO NOT do the whole transfer-property-to-your-kids things … for 1000 reasons. You’ll get creamed in taxes and it probably won’t work for Medicaid!) Anyway, so they went into what I like to call analysis-paralysis … where someone stews about something for so long that they freeze. They don’t move. That’s what happened – then, life must have gotten in the way because THEY NEVER ACTUALLY TRANSFERRED THE PROPERTY INTO THEIR NAMES! You heard me right.
So, my husband proceeds to contain his shock and continue asking questions – “Okay, so what’s up with the neighbor? Are we still cool with him?” She said, “Oh, he died many years ago.” I’m sure my husband was thinking, “Grrrrrrreat.” My husband has not had the lady’s next meeting to figure out exactly what she/we are going to do, but she’s got VERY limited options available. I’m fairly confident that the farmland will get into her name (aka, do a little clean-up all these years later), but to do so will either be 1) a really long, hard, annoying process (aka, costly); 2) somewhat short, as-long-as-everyone-is-on-the-same-page process (aka, less costly).
We’ll sure see what happens with this case – but I think this case, as well as the prior two mini stories, shine a big ol’ light on property transfers. I had a realtor friend say once, “You know – I don’t understand why people are so careless with property. Oftentimes, a house is a person’s biggest asset. Heck, if you have farmland or rentals, it amplifies this point. Why do people not get professionals involved when doing property transfers?!” He’s so right. People do their own Deeds that they pull online or pull from the county recorders’ office. If they do it wrong or ASSUME something that is NOT accurate, they have NO idea the consequences of their action – whether it be a consequence they deal with in their lifetime OR their kids/beneficiaries lifetime. If it’s not done right and not done well, SOMEONE will have to clean it up eventually – either you or them.
I feel like I’ve talked about this so many times here on Legal Tea, but again – if I, the lawyer, have to play clean-up, it’s not fair to assume that me, the cleaner-upper, will give you a break. Heck, oftentimes, I’m having to work harder, which requires more time, on those cases. Why would I not charge more than, say, someone that did seek professional help regarding property transfers and did it well/right?
Lastly, when you think about these stories, you have to weigh the cost “then and now.” You know, had any of these stories sought professional assistance BEFORE they fiddle-farted with the property record, yes – they would have spend a little money. We charge a few hundred bucks for a Deed (like per Deed). So, a few hundred bucks – to have the peace of mind knowing what was done, was done well/right. Compare that to not spending anything initially – but the “clean up” of all three stories cost them way more than a few hundred dollars … because it’s just that. We’re cleaning up, dare I say, a little bit of a mess. Or, a lot a bit!
Alrighty … let’s wrap up this episode. Next week, we are back to the current events/current trends topic -- something I’ve seen or run across that I think would be interesting on here. During that episode, we’re going to be talking about rental properties. I feel like it is very timely because does it not feel like everyone and their brother are buying properties to make rentals?! Maybe it’s the hot thing to do, maybe it’s the housing market to blame – who knows. Nonetheless, we’re going to be talking about rental properties and incorporating them into an estate plan. So, until then, be well and talk soon!