Friday, August 24, 2012

Story of the Week - Homestead Disaster

Here's a good one - and a good reason why families should seek counsel before transferring assets.  Mom and daughter, in their ultimate wisdom, decide mom should transfer her homestead property to daughter so they can "avoid probate" when mom dies.  Mom executes a quit claim deed prepared by daughter conveying the homestead property to daughter.  The deed is never recorded.  (I'm sure the gift was never reported either).

Four years later, mom dies.  Daughter records the deed.  The property appraiser contacts daughter to tell her she owes four years in past real property taxes of more than $20,000 because mom was no longer entitled to her homestead exemption upon the execution and delivery of the deed.  (Remember, it is not the act of recording that completes the transfer, it is the delivery of the deed.)

Here's another tidbit.  Daughter and mom had an agreement that after mom died, the daughter would "share" the property with her five siblings.  

Someone (not sure who) engages an attorney to obtain a Determination of Homestead.  Interesting idea except that mom didn't have an interest in the homestead property at death.  Attorney somehow manages to get this Determination of Homestead and an Order showing the property vesting in the six children.  (Somehow I'm thinking there may be a malpractice claim in here - appears the attorney didn't verify mom actually owned the property at the time of death and now has created a number of additional problems the family didn't have before.)

So now we have a giant mess.  Daughter owns the property and the liability for the back taxes.  The property now has a cloud on the title because of the Determination of Homestead Order.  And, there are five unhappy siblings who haven't received their share of mom's homestead property.  And, daughter lost the step up in basis on mom's home due to the transfer before death and may now also face capital gains consequences upon sale.

Brother wants to know if sister can quit claim her interest in the  property to him? What would you do and how would you advise this client? 

1 comment:

  1. Thanks for this information. I have dealt with some pretty ugly family matters over this topic. I found a probate lawyer florida that helped with the drama. Thanks again for your info!

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