[WSBARP] Life Estate Deed

[Eric Nelsen]

I'm interested in the background behind his ownership, if it's titled in his parents' name. If that's literally true--as in, he paid all the money for it and the parents have never contributed a dime to anything, and hold the title for reasons unrelated to them having a financial interest--then the parents are holding the property merely as nominees (agents with undisclosed principal). See also WAC 458-61A-214<https://apps.leg.wa.gov/wac/default.aspx?cite=458-61A-214>.

If that's the case, then he owns the property now, and there is no need to have any kind of change in title on record. It might actually confuse things to have the parents convey interests, and could have tax consequences.

Instead, he and his parents could sign an agreement confirming that the property in fact belongs to PC already and title is held by the parents nominally only, without any financial interest. Parents could include in the agreement a directive to any future Personal Representative of their Estate that the property should be immediately conveyed to PC on their death, without consideration. Attach and/or keep with the agreement all the documentation clearly tracing PC's funds into the purchase, so there is a solid evidentiary record proving that the parents never had a financial interest.

If the above scenario doesn't fit here, and in fact the parents do have some kind of financial interest, it gets trickier and I would question the purpose of the deed change. To get the step-up on tax basis on death it's generally better to leave the parents' interest alone during life and let PC actually inherit it. That could be done with a TOD deed plus a side contract agreeing that the TOD deed shall not be revoked without PC's consent, and agreeing that a constructive trust would be imposed in the event of a breach by parents. Other protections could be added too, but that would be my starting point, I think.

There is always significant tension between opposing goals of "protect my interest in the property" and "keep my name off the property." And what to do varies significantly, I think, depending on the reasons for the opposing goals, and the true financial history regarding interests in the property.

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] On Behalf Of nestor at pplsweb.com
Sent: Friday, January 11, 2019 9:11 AM
To: 'WSBA Real Property Listserv'
Subject: [WSBARP] Life Estate Deed

PC's owns property which he put in father and mothers name. He is not sure he wants to be put in title, just yet, but wants to make sure he gets the property on death. He asked me about a TOD deed, but that can always be canceled. I thought of 2 scenarios that would be better. (1) F &M convey to F&M and PC as joint tenants with the right of survivorship. There will be excise tax on conveyance of partial interest since there is an outstanding DT; or (2) F&M to F&M a life estate with remainder to PC.

I believe that option 2 will be better, since there is no transfer of a present interest (no excise tax) and parents cannot terminate remainder interest.

I am curious as to which way, my learned colleagues would go or show me the error of my ways.

Happy Friday!


Nestor Gorfinkel, Attorney at Law
Licensed in Washington & Florida
Florida Civil-Law (International) Notary

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