[WSBAPT] The story changes..... Gift vs. Unrecorded Mortgage

Fri Apr 20 11:45:56 PDT 2018

If the original $100k was a gift, the donor, not your decedent or his surviving spouse, would have been the one to report the gift to the IRS.

Sara D. Longley, J.D., LL.M.

LONGLEY LAW PLLC 

1734 NW Market Street

Seattle, WA 98107

 <tel:%28206%29%20434-5644> (206) 434-5644

 <mailto:Sara at longley-law.pro> Sara at Longley-law.pro

 <http://www.longley-law.pro/> www.longley-law.pro

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From: wsbapt-bounces at lists.wsbarppt.com [mailto:wsbapt-bounces at lists.wsbarppt.com] On Behalf Of Brent Williams-Ruth
Sent: Friday, April 20, 2018 8:59 AM
To: WSBA Probate & Trust Listserv <wsbapt at lists.wsbarppt.com>
Subject: [WSBAPT] The story changes..... Gift vs. Unrecorded Mortgage

Good Morning and Happy Friday list!

My prior email is amended as my client has given me the entire backstory.  Many twists, any guidance is appreciated. Will be hitting the books this afternoon to find the answers. 

There exists (so says my client, I have not seen it personally yet) a letter between client/personal representative - the surviving spouse, Decedent, and "Mrs. Smith" who gifted the two of them $100,000. (The only document allegedly in existence is that this money is a gift and not expected to be repaid).  Surviving Spouse is going back to look to see if money was reported to IRS as gift - though I find it unlikely. 

Apparently, Decedent was sending money, over $12,000 since then to Mrs. Smith. This was done without knowledge of the surviving spouse. 

Fast forward to January 2018. Two weeks after Decedent passed, Mrs. Smith tells Surviving Spouse that Decedent was paying her off, and that they had been meaning to sign contract/agreement saying that money was a loan and interest would be due with payment - but to the surviving spouses' knowledge, no such document was ever created or executed. 

Mrs. Smith is calling for repayment, plus interest. She wants all money now but is willing to just let Surviving Spouse pick up where Decedent left off - but charging interest.  

Questions that are running through my head (and please feel free to let me know if I have missed a question that I need to look up)

1) Since there is, currently, no other known document signed by all three (a marital community and Mrs. Smith) other than the Gift letter - do I stop right there and just make sure that they amend the 2016 tax return to declare such a gift (assuming it was not done originally)?

2) If I don't stop, and there IS a signed contract between Decedent and Mrs. Smith only indicating that the arrangement was a non-recorded mortgage with interest due - would Garn-St. Germain apply where Mrs. Smith is prohibited from calling the note; 

3) Would such a mortgage contract even be enforceable under Washington law given that as a community asset, Decedent encumbered the property without the knowledge and consent (and signature) of Surviving Spouse who has the good faith belief that this was a gift?

Thank you again for any suggestions on where to start my dive into coming up with a solution for my client. 

Brent

-- 

Brent Williams-Ruth 
Founding Member

BWR Consulting, PLLC

Phone: (425) 830-5134

e-mail <mailto:brent at bwrconsults.com>  / website <http://www.bwrconsults.com>  /  <http://www.facebook.com/bwrconsults> facebook 

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