What a mess!
A couple of basics first... a life estate holder should not be able to convince a bank to grant a traditional mortgage without the consent of all remainder interest holders. If the bank were doing anything else, it would be securing its loan only with the life estate... which doesn't make sense. Obviously your step children need to get a copy of everything filed in the land records on this property since they were granted the remainder interests. Depending on what they find, there are various steps they need to take.
To answer your specific questions:
1) The uncle is in bankruptcy and is listing the property in the bankruptcy. This means he must notify your step children as the remainder interest holders. I am concerned that he somehow forged or defrauded the bank to grant this loan thinking your step children were in agreement. If they find anything with their forged signatures, this would confirm the fear. If they have not agreed to the mortgage/lien then the lien SHOULD only cover his life estate and not their remainder interest. Though it is technically possible to place a lien on a life estate, it would be very uncommon. This is why I suspect foul play.
2) The step children do not take the property until the life estate terminates. The life estate terminates at the expiration of the measuring life. If the uncle is the measuring life, then the life estate would not terminate until his death.
3) His bankruptcy should not impact their credit in the long term. IF he forged their signatures to these documents (mortgage, etc) it could impact their credit until the crimes have been reported and pursued. Their credits should not be effected by an uncle's bankruptcy.
So to cut to the chase.... have them pull the property records (everything filed on this property since they were granted the remainder interest). Review them carefully with a local attorney together with the bankruptcy notice (initial consultations are normally free). It may be that no action is needed, but if there have been fraudulent activities then you may have to pursue civil and criminal action.
Please reply if I can help further.
If the uncle moves out of the property, can the remandermen rent or sell the property? The property would be empty and would not be kept up if no one lives there. It does not seem right that the uncle can defraud the bank and still retain his rights to the property.
No. The uncle retains the exclusive and absolute right of possession until the death of the measuring life. There is a provision that permits suing him if he damages the property or allows it to fall in disrepair. If he abandons the property, he may be willing to sign a simple document that gives up his right to the life estate (rather than being liable for the maintenance, upkeep and taxes on the property).
It doesn't seem right. He could go to jail for defrauding the bank (if that happened) and he could also lose his life estate to the banks... but it would still dissolve when the measuring life ended.
It's a bit confusing because the situation is unusual.
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