[WSBAPT] Family Support Award of house with negative equity

[Jane Bitz]

Eric:
I think your analysis of this situation is correct. I haven't zeroed out a home value in the past but I have used home loan debt to reduce the value so that cash can be included in the award.

Remember that the court can increase the award to the surviving spouse based on the statutory  factors. I always try to argue an increase because the basic award alone would have lots of people forced out of their homes or keeping their homes with no cash at all.
Jane Bitz

Sent from my iPhone

On Apr 21, 2016, at 4:33 PM, Eric Nelsen <Eric at sayrelawoffices.com<mailto:Eric at sayrelawoffices.com>> wrote:

Married couple with a house with slight negative equity due to multiple mortgages. One dies. There is sufficient cash in the estate to allow a family support award to the surviving spouse in the full amount of $125,000. There are numerous community creditors that would completely exhaust the $125,000, if it is not protected by family support award.

My thought is to make the family support award of (1) the house, subject to existing encumbrances as required by the statute, meaning that its "value" for purposes of calculating the family support award is zero; and (2) $125,000 in cash.

To my mind, that would mean that the house is protected from any unsecured creditors, and if it increases in value, any equity that results would remain protected from creditors.

Similarly, there is the possibility that one of the mortgages, a private loan, will become unenforceable in another year or so due to statute of limitations, at which point the mortgage can be stripped via quiet title. That results in even more equity – again, protected from creditors.

Is this kosher? Since the award is limited to $125,000 in value, can you effectively load the family support with "zero value" assets that might later appreciate?

Sincerely,

Eric

Eric C. Nelsen
SAYRE LAW OFFICES, PLLC
1320 University St
Seattle WA  98101-2837
phone 206-625-0092
fax 206-625-9040

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