Quit Claim Deed with Life Estate and Succeeding Life Estate - Who Has What Rights

[darlingm]

State of Michigan.

I am not looking for a 100% absolute answer. I know that can't happen on this forum. I know for that, I need to send these people off to a real estate attorney and/or title company. I am posting to make sure I have a reasonable basis for concern before sending family down that path, because I don't have experience with life estates, succeeding life estates, and quit claim deeds, and want to make sure I'm not totally reading this wrong.


In 1987, a quit claim deed was signed by Father and timely filed with the county. It states:

* "Father, survivor of his deceased wife, Mother, whose death certificate is attached quit claims to Sister, Brother #1, and Brother #2, as tenants in common".
* "Grantor herein retains a life estate unto himself and a succeeding life estate is granted to Brother #3".

Father, Mother, and Sister are deceased. Brother #1, #2, and #3 are still living.

City property tax records list owner as "Father w/ Brother #2". City says all records on the property are old enough that they were all sent down to the county. Searched at the county, which turned up the quit claim deed referenced above. Nothing more recent for the property, except for some property tax leins.

I'm not sure whether Sister had any heirs, so if she would have any rights, I'm perfectly fine having an answer of "Sister's heirs" - then I could track down if there was a will, and if not, how that branch of ownership turns out.

I'm preparing a tax return for Brother #2, and he's the only one I know in this situation. Brother #2 received section 8 housing benefits for renting the property in 2011, and has historically paid the property taxes.

I think I understand the ownership situation, and think it's pretty cut and dry, but want to make sure before I send people down an unnecessary path. I'll delay putting in my understanding to avoid influencing responses.

[flyingron]

In 1987 you all should have consulted lawyers. Dead people can not convey property. Mom's share is still up for probate. The QC can not transfer it.

I don't thin you understand the ownership at all. First you'll have to title search to see how FATHER owned the property. If he had survivorship rights at the time of Mom's death, then he owned the whole property at the time the quit claim was issued. If it was held as tenants in common, that share will be distributed by the terms of Mom's will or the intestate succession laws.

Someone versed in real estate and estates needs to unravel the property ownership here.

[darlingm]

Agreed, big mistakes in past. Attorneys and appraisers should have been involved. I didn't know any of them until recently, and I'm not involved personally. Only trying to prepare Brother #2's tax return, and get them pointed in the right direction - especially should anyone dream of selling the property.

Just for my understanding's sake, putting the mother's and father's ownership aside, assuming the father had 100% ownership at the time the quit claim deed was signed/filed, would the two asterisked (*) sections in the original post make Brother #3 sole rights holder until he passed away, then Sister/Brother#1/Brother#2 and their heirs collectively would hold rights?

Am I correct that under even the best case scenario, Brother #2 doesn't have rights to the property - and shouldn't be receiving rent payments for it? (My limited understanding is telling me that the succeeding life estate means Sister (if still alive), Brother #1, and Brother #2 have no rights as long as Brother #3 is alive, unless a subsequent agreement is made.)

[jk]

would the two asterisked (*) sections in the original post make Brother #3 sole rights holder until he passed away,

it would make brother number #3 a life tenant. Nothing more, nothing less.

I'm preparing a tax return for Brother #2, and he's the only one I know in this situation. Brother #2 received section 8 housing benefits for renting the property in 2011, and has historically paid the property taxes.

Huh? Why and how is bro #2 renting out the property? It is bro #3's who has that right and is due the income from the property. It is also bro #3's liability to pay the taxes.

but as Ron stated, a dead person cannot convey property rights so how title was held prior to her death is important but so is the fact the deed may be ruled defective since is purports to convey the rights of a deceased person. If that happens, it changes everything and the property would then be put back into the father's estate and divided either per a will, if there was one, or by the laws of intestate succession.

so, accepting a situation where the deed was allowed to rule:

nobody has any current interest in the property until bro #3 dies or unless bro #3 allows it. Since you are dealing with bro #2's tax issues, what happens to sisters interest is irrelevant.

since you are doing bro #2's taxes, ownership is kind of irrelevant. If bro #2 received money, it is income to him. He can account for it however is factual. In other words, if I rent out my neighbors house (without permission from them) while they are in Africa for a 2 year sabbatical, that income is charged to me even though it was illegally obtained. What happens between me and the neighbor does not affect the income I received as far as the IRS is concerned. Whether they would chose to take some action against me does not affect the fact I have income derived from renting out some property.