Ask the TITLEMAN™ - Separated Couple; Estate Taxes; Trust

by John T. Lotardo aka TITLEMAN™-Sr VP/General Counsel, Stewart Title & Trust of Phoenix

Q. I am doing a FHA streamline refi for a husband in AZ. He never bothered to divorce his wife (they have been legally separated 11 years and have not lived together even longer) She had to disclaim her interest 6 months ago in a property when he purchased it. Does she have to “re-disclaim” or is the original recorded quitclaim legally “sufficient.”
A. Thank you for your email. Typically another disclaimer is not necessary. Unless they have reconciled (it happens) and she now makes a new claim to the property, the original disclaimer normally would stand and another would not be necessary.

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Q. I have an elderly Mother in Indianapolis that owns several pieces of property in Arizona. In order to get around the estate taxes in Probate is it best for her to do a Quit Claim Deed with Right of Survivorship, or a Beneficiary Deed?
A. Your question brings up a good point. The beneficiary deed is not intended to be a cure-all, especially when it comes to estate taxes. The intent of the beneficiary deed was to allow the original grantor to retain full control over his or her property while creating an automatic transfer to named beneficiaries at death. Protection against paying estate taxes is another matter altogether. It does not address the estate tax issues related to the person’s death. You mention that your mother owns many pieces of property in Arizona. These properties could exceed any exemption limits at the time of her death and therefore it may make sense to talk with an estate planning attorney in your area to see what your options are such as if a trust or some form of gifting program makes better sense.

Q. I am the successor trustee of my father’s trust and a beneficiary along with three siblings. All the beneficiaries want to set up an LLC to hold title to the real property they are inheriting in equal shares. Can I deed the real property that is in the Trust name directly to the LLC formed by the beneficiaries or do I have to deed it to the beneficiaries in their names and then have them deed it to the LLC?
A. Being TITLEMAN™, I will answer your question from a title company perspective. Typically a title company who later title insures the property will want to make sure that you had the power to do so. You need to review the trust documents to make sure you, as the successor trustee, have the power to do just that. Many times, there are specific requirements or limitations placed upon the successor trustee that the original trustee, your dad, would not have been burdened with. Check also with the tax advisor before you go ahead and do the deed. Remember, either way there may be special requirements on you to disclose the names and addresses of the beneficiaries regardless of the way you ultimately go. In Arizona, that has been required for many years.

The information supplied is of a general nature and should not be relied upon as comprehensive legal advice. Please consult with your own local legal counsel. To ensure compliance with requirements imposed by the IRS, we inform you that any U.S. federal tax advice contained in this communication (including any attachments) is not intended or written to be used, and cannot be used, for the purpose of (i) avoiding penalties under the Internal Revenue Code or (ii) promoting, marketing, or recommending to another party any transaction or matter addressed herein.

Copyright John T. Lotardo. All rights reserved. John Lotardo (aka the TITLEMAN™) is Senior Vice-President and General Counsel for Stewart Title & Trust of Phoenix, Inc., and State Underwriting Counsel for Stewart Title Guaranty Company. He is a member of the National Advisory Councils for GoGetEscrow.com, GoGetLoan.com, GoGetNotary.com and GoGetRealEstate.com. The information supplied is of a general nature and should not be relied upon as comprehensive legal advice. Please consult with your own local legal counsel. For more about John, visit: www.GoGetEscrow.com/Get/Titleman or www.AskTheTitleman.com.