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  1. #1
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    Mar 2014
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    Default Is a Remainder Interest Part of the Marital Estate

    My question involves real estate located in the State of: WI

    My wife and I are going through a jointly petetioned divorce and we are trying like mad to avoid legal fees. We are amicable and are trying to work together to settle this alone. I just found out today that my mother-in-law previously placed all of her seven children with their spouse (13 total) on her life estate. My mother-in-law currently resides in the home as the "life tenant" and we live in our own home. I need to know if our names being on this life estate has to be disclosed in the divorce, either on financial disclosure or settlement agreement paperwork. Is my name being on the life estate an asset to me that I need to take into account for the divorce. WI is a "no-fault" / "community property" state and I know judges don't like to see anything less than a 50/50 agreement. If I have a financial interest in the life estate at all, I'm sure my soon-to-be ex would be amicable in figuring out a settlement - I just need to know what process I need to go through and where to even start. Thanks!!!!

  2. #2
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    Oct 2006
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    Default Re: Is a Remainder Interest Part of the Marital Estate

    Quote Quoting jajaocon
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    My question involves real estate located in the State of: WI

    My wife and I are going through a jointly petetioned divorce and we are trying like mad to avoid legal fees. We are amicable and are trying to work together to settle this alone. I just found out today that my mother-in-law previously placed all of her seven children with their spouse (13 total) on her life estate. My mother-in-law currently resides in the home as the "life tenant" and we live in our own home. I need to know if our names being on this life estate has to be disclosed in the divorce, either on financial disclosure or settlement agreement paperwork. Is my name being on the life estate an asset to me that I need to take into account for the divorce. WI is a "no-fault" / "community property" state and I know judges don't like to see anything less than a 50/50 agreement. If I have a financial interest in the life estate at all, I'm sure my soon-to-be ex would be amicable in figuring out a settlement - I just need to know what process I need to go through and where to even start. Thanks!!!!
    I am not sure that being added to a life estate has any value at all. The purpose of a life estate (which is often granted by someone who has died) is to allow someone to remain in a home for the rest of their life, and then when they die, the property reverts to whomever was originally granted the property in the original will.

    A common example is a second marriage where the house is owned by one spouse as separate property, and they want it to go to the children when they die but they want their spouse to be able to live in the house for the remainder of the spouse's life.

    Therefore, unless you are mistaken as to the details, I don't see how it would have any value at all...marital asset or not.

  3. #3
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    Default Re: Is a Remainder Interest Part of the Marital Estate

    Quote Quoting llworking
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    I am not sure that being added to a life estate has any value at all. The purpose of a life estate (which is often granted by someone who has died) is to allow someone to remain in a home for the rest of their life, and then when they die, the property reverts to whomever was originally granted the property in the original will.

    A common example is a second marriage where the house is owned by one spouse as separate property, and they want it to go to the children when they die but they want their spouse to be able to live in the house for the remainder of the spouse's life.

    Therefore, unless you are mistaken as to the details, I don't see how it would have any value at all...marital asset or not.
    But that is certainly not the only use of a life estate. Parents, in particular, often gift property to children while retaining a life estate. To avid probate, to avoid Medicaid recovery...

    And a remainder interest does have value. There are several actuarial methods to calculate that value.

    But I'm not certain about the concern. It is certainly awkward for what will be (after the divorce) a legal stranger to end up as a co-owner of ex-MIL's property. Are you going to gift your remainder interest to your ex?

  4. #4
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    Default Re: Is a Remainder Interest Part of the Marital Estate

    Quote Quoting harrylime
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    But that is certainly not the only use of a life estate. Parents, in particular, often gift property to children while retaining a life estate. To avid probate, to avoid Medicaid recovery...

    And a remainder interest does have value. There are several actuarial methods to calculate that value.

    But I'm not certain about the concern. It is certainly awkward for what will be (after the divorce) a legal stranger to end up as a co-owner of ex-MIL's property. Are you going to gift your remainder interest to your ex?
    I quite understand the point you are making, but that is NOT what the OP SAID. The OP said that the mil added 13 people to her life estate. If what the mil did was gifted her home to 13 people while retaining a life estate, that is a different story, but the OP needs to come back and clarify.

    However...can you imagine the potential mess of having 13 people owning a single home?...with one or perhaps more of them being an ex of one of the other parties? If that is what mil did, then she didn't do her children any favor.

  5. #5
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    Default Re: Is a Remainder Interest Part of the Marital Estate

    I was taking into account the OP's use of "remainder interest" in the thread title to interpret the situation.

    However...can you imagine the potential mess of having 13 people owning a single home?...with one or perhaps more of them being an ex of one of the other parties? If that is what mil did, then she didn't do her children any favor.
    Oh yeah...

  6. #6
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    Default Re: Is a Remainder Interest Part of the Marital Estate

    There is value in the life estate. It is just it is small. One would allocate the life estate interest against the remainder interest in the property and then divide by the number of people given the estate and appropriately discount it for any of a number of reasons. (Control, alienability etc.)

  7. #7
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    Default Re: Is a Remainder Interest Part of the Marital Estate

    Quote Quoting Welfarelvr
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    There is value in the life estate. It is just it is small. One would allocate the life estate interest against the remainder interest in the property and then divide by the number of people given the estate and appropriately discount it for any of a number of reasons. (Control, alienability etc.)
    Well, that is true, but only if the remainder men are willing to buy out the life estate. Its not like mil can sell her right to occupy the space, for her lifetime, to anyone else.

  8. #8
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    Default Re: Is a Remainder Interest Part of the Marital Estate

    Quote Quoting llworking
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    Well, that is true, but only if the remainder men are willing to buy out the life estate. Its not like mil can sell her right to occupy the space, for her lifetime, to anyone else.
    There is no "if" in what I wrote. That is how it would be valued. MIL certainly CAN sell her right to occupy the space to anyone else. If someone was willing to buy it is a different issue and gets to the alienability discount.

  9. #9
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    Mar 2014
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    Default Re: Is a Remainder Interest Part of the Marital Estate

    Yeah. You hit it on the head. I really don't want to be a co-owner of my ex-mil's property. I'm not sure I want my name attached to any of that, although it's relatively valuable. As far as gifting my remainder interest to my wife.......I have no idea if that's the smart thing to do, or even how to do it. If I did nothing, then would I potentially have proceeds owed to me from the sale of her home/land after she passes?

    I'm not sure yet on specifics, but the way my soon-to-be ex-mil explained it, it sounds like she gifted the real estate to her children and spouses while retaining the life estate (life tenant).

  10. #10
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    Default Re: Is a Remainder Interest Part of the Marital Estate

    Quote Quoting jajaocon
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    Yeah. You hit it on the head. I really don't want to be a co-owner of my ex-mil's property. I'm not sure I want my name attached to any of that, although it's relatively valuable. As far as gifting my remainder interest to my wife.......I have no idea if that's the smart thing to do, or even how to do it. If I did nothing, then would I potentially have proceeds owed to me from the sale of her home/land after she passes?

    I'm not sure yet on specifics, but the way my soon-to-be ex-mil explained it, it sounds like she gifted the real estate to her children and spouses while retaining the life estate (life tenant).
    Well, then its one of two things. Either you were gifted the remainder interest as a couple, making it a marital asset that has to be dealt with in your divorce. Or you were each gifted an interest as individuals, making it separate property for both of you, not requiring it to be divided in your divorce.

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