[WSBARP] Inheritance question

Fri May 4 10:30:21 PDT 2018

Dear Anthony:
Those who have provided insight already have made valuable points. I want to add a couple of other ideas. If the cash infusion is made, I suggest the following.
There should be an appraisal conducted both before and after the remodel. The Elam case in an opposite circumstance indicates the before and after values and the proximate reasons for the increase in values is what is being compensated. So, if there is a identified remodel and there is expert testimony that can establish the increase as resulting from the remodel, then a court would or could have the path to provide that compensation. It would be equitable to do so. As indicated by the other commentators, a dissolution of marriage is really the confluence of property law and dissolution law. A court dissolving a marriage is empowered to divide both the separate and community property. You need to provide the incentive or equitable reasons to invade that separate property or to provide for the community contributions or conversely provide the equitable reasons to invade the separate property to provide for the community contributions. Courts, according to the statute require some equitable reason for this noted invasion of one character of property for the benefit of the other character of property. The equitable reason is to prevent the windfall of this contribution from one source that could possibly go without compensation. Even before the infusion of money, the appraiser may be able to indicate the expected increase in value. If it is going to be negligible, they may want to rethink the idea.
In addition to this appraisal process that pinpoints the direct result on the increased FMV of the home, I also suggest an agreement between spouses (following the dictates of Friedlander and its progeny) that acknowledges this transaction and the solution agreed to by this couple in case of dissolution and or death. Getting something established by them now is always better than later on when an agreement may not be possible.
I hope this helps.
Yours Truly,

Kerry A. Richards, Attorney
[cid:image001.png at 01D31B65.31A26710]
The Law Offices of Michael W. Bugni & Associates, PLLC
11300 Roosevelt Way NE, Suite 300, Seattle, WA 98125
EMAIL: krichards at lawgate.net
TEL: 206-365-5500
WEB: www.lawgate.net<http://www.lawgate.net/>

From: wsbarp-bounces at lists.wsbarppt.com [mailto:wsbarp-bounces at lists.wsbarppt.com] On Behalf Of Anthony F. Gibbs
Sent: Thursday, May 03, 2018 5:59 PM
To: WSBA Real Property Listserv
Subject: Re: [WSBARP] Inheritance question

Thanks to you both. Many of those issues had been swirling around in my head and it is immensely helpful to see them articulated so well.

Could I do a promissory note with the H&W as the drawers of the note with H's mother as the promisee? I'm familiar with the due on sale/transfer/death clauses in mortgages. Do I just crib that language from a mortgage to include in the note?

Thanks again!

----

Gibbs Law Offices
Anthony F. Gibbs
Attorney & Counselor at Law
15600 Redmond Way
Suite 101
Redmond, WA 98052
Ph: 206.734.4374
Fax: 206.971.5053
Email: gibbslawoffices at gmail.com<mailto:gibbslawoffices at gmail.com>
Web: www.gibbslawoffices.com<http://www.gibbslawoffices.com>
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 This e-mail is intended to constitute an electronic communication within the meaning of the Electronic Communications Act, 18 U.S.C. §2510. This communication may contain confidential, proprietary, or legally privileged information and is transmitted for the sole viewing and use of the intended recipient. Any review or distribution to other recipients is not permitted and does not waive the confidential or privileged nature of the communication. If you receive this message in error, please immediately delete it and notify the sender.

On Thu, May 3, 2018 at 1:34 PM, Eric Nelsen <Eric at sayrelawoffices.com<mailto:Eric at sayrelawoffices.com>> wrote:
I like Marcus's solution. Maybe not as emotionally satisfying to Mom to give a loan that only becomes a gift at death, but it evades almost all the legal conundrums.

Sincerely,

Eric

Eric C. Nelsen
SAYRE LAW OFFICES, PLLC
1417 31st Ave South
Seattle WA  98144-3909
phone 206-625-0092
fax 206-625-9040

From: wsbarp-bounces at lists.wsbarppt.com<mailto:wsbarp-bounces at lists.wsbarppt.com> [mailto:wsbarp-bounces at lists.wsbarppt.com<mailto:wsbarp-bounces at lists.wsbarppt.com>] On Behalf Of Marcus Fry
Sent: Thursday, May 03, 2018 12:54 PM

To: WSBA Real Property Listserv
Subject: Re: [WSBARP] Inheritance question

Eric has give a very nice and thorough analysis as always!

A simple solution for now is for mom to loan the money to the friend and the friend’s wife with a due on death or sale/transfer clause.  The interest rate could be set at the applicable federal rate with the friend and the friend’s wife as joint obligors.  Mom could then bequeath the debt under the will to her son.

Marcus J. Fry
Lyon, Weigand & Gustafson, P.S.
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From: wsbarp-bounces at lists.wsbarppt.com<mailto:wsbarp-bounces at lists.wsbarppt.com> [mailto:wsbarp-bounces at lists.wsbarppt.com] On Behalf Of Eric Nelsen
Sent: Thursday, May 03, 2018 12:41 PM
To: WSBA Real Property Listserv
Subject: Re: [WSBARP] Inheritance question

That's a difficult situation in which to preserve a separate property right. Actually, marriage in general is a difficult situation in which to preserve a separate property right. :-)

Gift letter won't work by itself. That makes the money traceably F's separate property (SP) upon F's receipt of the funds, but then F messes that up by using the funds to make improvements to community property (CP) real estate. The use of SP funds to make improvements to CP real estate does not raise a presumption of gift to the community, but it does mean that at best, F retains an equitable right of reimbursement for the SP contribution to CP improvements, and that right would be protected by an equitable lien on the improved real estate.

Even that is not certain, though. The case law for equitable reimbursement almost always involves a reimbursement to the community for use of CP funds to make improvements to SP real property--the exact opposite of this situation. The natural bias of the law is to be reluctant to allow reimbursement to SP out of CP assets; it's not an express legal rule, but the court is reluctant to say a community should reimburse someone's SP contribution because the basic image of marriage under CP law is that both spouses contribute into creating a community estate of assets.

And keep in mind, the judge in a divorce has jurisdiction over all property, both SP and CP, and makes a "fair and equitable" division of all property, which can include in some circumstances the allocation of one party's SP to the other. So even if it's thoroughly documented that the money was SP, that doesn't mean F will get it back in event of divorce.

Probably the best that could be done is a document signed by F and F's wife, in which they agree and acknowledge that F is contributed $X of SP funds toward improvements on the house, and that F's wife agrees that the contribution is not a gift to the community. That provides firm evidence, later on, of the SP contribution if they divorce years later and other records are no longer available, or if one of them dies and there is a dispute with their heirs concerning their interest in the house.

You could consider adding a clause that specifies how it should be reimbursed in event of death, divorce, sale, whatever. But then you get into, what should the reimbursement be? Just $X back, even if it's 30 years later? What about interest on it? Or should F get a portion of increased value of the real estate? But if you do that, then is the real estate "actually" becoming partly SP? Or is it more than F's wife is entering into a contract with F to reimburse?

Also, is that a post-nuptial agreement that requires scrutiny of substantive and procedural fairness, and possibly separate counsel for F's wife if there is any doubt about the substantive fairness? Or is it more in the nature of an agreement as to status of property, in which F and F's wife agree that the status of the house is X% community and Y% F's SP (or perhaps 100% community but F has an equitable right to reimbursement for $$ protected by a lien)?

See WSBA Community Property Deskbook (4th ed. 2014), Ch. 3.4 "Right of Reimbursement: The Equitable Lien." It is pretty thorough.

Sincerely,

Eric

Eric C. Nelsen
SAYRE LAW OFFICES, PLLC
1417 31st Ave South
Seattle WA  98144-3909
phone 206-625-0092
fax 206-625-9040

From: wsbarp-bounces at lists.wsbarppt.com<mailto:wsbarp-bounces at lists.wsbarppt.com> [mailto:wsbarp-bounces at lists.wsbarppt.com] On Behalf Of Anthony F. Gibbs
Sent: Thursday, May 03, 2018 11:50 AM
To: WSBA Real Property Listserv
Subject: [WSBARP] Inheritance question

A friend's mother wants to contribute a lump sum of money to help with a remodel of a portion of the community home in which friend and friend's wife live. Friend's mother does not want the money to be subsumed into the community property but to instead remain friend's separate property even after remodel.

Friend's mother wants that the lump sum contribution to the community home remain traceable and devisable through friend's estate and not be commingled with wife's estate.

Would a gift letter allow that lump sum to remain traceable and therefore allow him to, for example, give that "extra" lump sum according to his will? Or, would they be wiser to do a separate property agreement addressing the lump sum and identifying it as separate property of H?

If it's complicated, I'd be happy to refer him.
Thanks,
Anthony
----

Gibbs Law Offices
Anthony F. Gibbs
Attorney & Counselor at Law
15600 Redmond Way
Suite 101
Redmond, WA 98052
Ph: 206.734.4374
Fax: 206.971.5053
Email: gibbslawoffices at gmail.com<mailto:gibbslawoffices at gmail.com>
Web: www.gibbslawoffices.com<http://www.gibbslawoffices.com>
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 This e-mail is intended to constitute an electronic communication within the meaning of the Electronic Communications Act, 18 U.S.C. §2510. This communication may contain confidential, proprietary, or legally privileged information and is transmitted for the sole viewing and use of the intended recipient. Any review or distribution to other recipients is not permitted and does not waive the confidential or privileged nature of the communication. If you receive this message in error, please immediately delete it and notify the sender.

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