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P. Simmons
P. Simmons, Attorney
Category: Estate Law
Satisfied Customers: 33303
Experience:  12+ yrs. of experience including estate law.
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Two sisters are named on the deed of a 2 family income

Customer Question

Two sisters are named on the deed of a 2 family income producing property of which the parents have a life estate. How can one sister buy her own home and take a loan from this property to get the down payment. What's the best way so the elderly parent still gets income for their retirement.
Submitted: 5 months ago.
Category: Estate Law
Expert:  P. Simmons replied 5 months ago.

Hello! My name is ***** ***** I am a licensed attorney with more than 18 years of experience. I am here to assist you with your questions. Please understand that if I ask you for additional information, you are NOT charged again and our communications are NOT timed. So please see this as a relaxed conversation between friends. I am here to help

Also, if you would like to chat on the phone, let me know and I can make that happen.

I am sorry for this dilemma. But not sure I understand your specific question. The daughter wants to sell her remainderman share to purchase a home for herself?

Customer: replied 5 months ago.
but the capital gains taxes and loss of long term reliable income to the elder parents would be gone if the property gets sold. The sister was also days from getting divorced from her spouse. How can money be obtained from this home without outright selling it?
Expert:  P. Simmons replied 5 months ago.

She can sell her share. That would have NO impact on the parents life estate.

That said, it may be tough to find a buyer (since the buyer has to wait for the parents to die before they can take possession)...or get the price she wants (because the buyer has to wait an undetermined time to take possession).

But that interest (the reminderman interest) is an interest in the real property and can be conveyed (sold).

Please let me know if you have more questions. I am happy to help if I can. Otherwise, please rate the answer so I may get credit for my work.

Customer: replied 5 months ago.
I want to know if a loan can be taken out on her share.
Expert:  P. Simmons replied 5 months ago.

Sure...in theory.

That interest can be conveyed (so it has some value)

But you may have a tough time finding a lender.

This is NOT a typical mortgage...the rules for FHA (the most common type of mortgage) will not allow a bank to lend on this interest. You would need to find a lender that specializes in this....and will likely pay a premium if you can find one willing to take the interest as collateral.

So possible?

Sure

But most lenders will not touch this...consider searching for a private party who would provide the loan.

Please let me know if you have more questions. I am happy to help if I can. Otherwise, please rate the answer so I may get credit for my work.

Customer: replied 5 months ago.
i would like to help her get a house... any other ideas? Today a bank told me that they could loan the money if the life estate is revocable, but for example if the loan is $50k, and she defaults, the bank wants the whole house and not just the $50k....That seems unfair...
Expert:  P. Simmons replied 5 months ago.

Again, I would shop private lenders. You are looking for something that is unique (again, not FHA approved). But a private lender who understands the value of the real property interest may be willing to give a loan

Customer: replied 5 months ago.
Can you think of any other way to keep it simple? What if i loan the money to her somehow and then her share is smaller. I just don't have the money but because i am not familiar of anything of this nature, i don't have ideas,
Expert:  P. Simmons replied 5 months ago.

Sorry...I do not understand. What do you mean by you loan money and her share is reduced? What does that mean?

Customer: replied 5 months ago.
If the house is worth $400,000 and we each have $200,000.....
What if my share becomes $250,000 and her share becomes $150,000......Then she can have her $50,000 for buying her house if i am able to loan her the money myself by getting a loan. This way if she defaults, her share is less.
Expert:  P. Simmons replied 5 months ago.

Are we talking about your sister? Your original question was not clear...

Customer: replied 5 months ago.
my sister. I am trying to find ways to have my sister buy a house without jeopardising the life estate of the parent because the parent benefits from the rental income for their retirement.
Expert:  P. Simmons replied 5 months ago.

Thank you

That makes sense.

Then yes...if you want you can offer to "buy out" a portion of her share...so you give her money now in return for a larger share of the property. You can have a local attorney help you complete this transaction.

Customer: replied 5 months ago.
Ok.. but i need to get the money from somewhere. I can't get it out of the house itself because that would still be a loan which is subject to all the laws about defaulting. But it would be in my name so i would just be resonsible for the loan correct? And that just gives me a larger piece of ownership so...the only downside is that i have to come up with the money to pay it back each month or I default and the bank takes the whole house as opposed to just the value of the loan which would be $50k
Expert:  P. Simmons replied 5 months ago.

That is a problem. You may be able to find someone to loan on this...but they will require you pay the money back.

Consider selling your interests...that would give you money that you could use as you liked.

Customer: replied 5 months ago.
34;selling your interests" what does that mean in this context
Expert:  P. Simmons replied 5 months ago.

You can sell of your interest...it can be conveyed. So can your sister.

So you and/or your sister sell your interest in the home. That would give you money to do with what you like

You are asking for ways to turn this into money...the easiest way is to sell it.

Customer: replied 5 months ago.
But then our parents have no retirement money from the rental income.
Expert:  P. Simmons replied 5 months ago.

You selling your interest and or your sister selling hers would not impact your parents right to use the house for the remainder of their lives.

Customer: replied 5 months ago.
Well they don't live there but are suppose to be collecting the rent. So a buyer would be purchasing the home knowing there is a life estate correct? Which makes it hard to sell is my understanding. But a good way to protect the elderly who would still be collecting the rental income from the life estate from a future buyer.
Expert:  P. Simmons replied 5 months ago.

Yes...You selling your interest and or your sister selling hers would not impact your parents right to use the house for the remainder of their lives. This includes collecting rents.

More difficult to sell?

Perhaps. And not worth what the home is worth outright (without a life estate)

But there is some value. If you want to tap the value and do not want to take a loan your recourse is to sell

Customer: replied 5 months ago.
Do not want to "tap" the value? Meaning drop the value down or take a loss?
I've learned my parents still profit from the proceeds but less than 1/3....
Would that be wise if they have the home they live in and their soc Sec income just about covers that with $10,000 remaining for their other living expenses and caregivers.
What professional title gives advise on budgeting and how to determine ways of making their assets fund their future? They were immigrants and integrating them into nursing homes is going to take some creative work.,They just can't be forced into nursing home while still have their autonomy.
Expert:  P. Simmons replied 5 months ago.

YOu ask

What professional title gives advise on budgeting and how to determine ways of making their assets fund their future?

You can seek the advise of an investment adviser.

We have gone back and forth on this for some time.

Experts on this site (myself) are compensated ONLY if the customer (yourself) "rate" or "accept" the answer.

Please rate the answer so I may receive credit
Thanks for your understanding
Phil

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