Lien on life estate

[adam6909]

What is the name of your state (only U.S. law)? TN

I received land and a home when my mother died. As a part of that, my father received a life estate on the property. He had purchased a truck and let it get repo'd. There is now a lien on my father's life estate from the lenders for the truck. What are my options here? Will it disappear upon his death? Can he gift out of the life estate? Is there any way that this lien will be transferred to me? Thanks for your help in advance.

 

[Rexlan]

I am surprised a creditor would put the lien on the life estate since that estate has no monetary value. In fact their lien can actually incur liability but it will never make them whole from the judgment.

They can not transfer that lien to you or to the property. When the estate terminates so does the lien with it (dad dies). The lien is effectively worthless, however, dad should pay for the truck.

Others may chime in if I am mistaken about this.

 

[tranquility]

I agree with Rexlan with two differences. The first is that a life estate does have value. The holder can rent it out or sell it as long as the measuring life is, well, alive.

The second is that, while the right claimed in the lien will disappear with the death of the measuring life, I'm not sure how the lien is dealt with. It shouldn't be a cloud on title and the property can be re-recorded as a whole estate on the death, but I don't know the mechanics of the re-recording over the lien work.

 

[Rexlan]

I agree with Tranquility. I had not considered that the estate could be rented, leased, etc. and those proceeds attached to satisfy the judgment. I was more focused on dad living there in which case the estate would have no monetary value to a creditor.

However, the lien can not attach to the property.

 

[HomeGuru]

I agree with Tranquility. I had not considered that the estate could be rented, leased, etc. and those proceeds attached to satisfy the judgment. I was more focused on dad living there in which case the estate would have no monetary value to a creditor.

However, the lien can not attach to the property.

**A: the lien can indeed attach to the property as it would appear on the title report. The lien would have no effect though on the fee simple interest in the property since it would only be legally on the life estate interest in said property.

 

[adam6909]

Gift out

Is there any way the he can gift out of the estate. I know he is not going to pay his debt and I am trying to get a heloc to improve the house. I can not do this with the lien on the property.

 

[Rexlan]

NO ... that is a fraudulent transfer and the creditor is protected from that as you probably already know. A "gift" has nothing to do with it.

If he isn't going to do the right thing then that is the end of the story. If you try to get creative, and try to cut the creditor out, you may find yourself in a fix and you may also get to pay the debt yourself. At a minimum the creditor will spend some of your money defending yourself.

Using a HELOC for that purpose sounds fishy to me. Probably more to it than that. Why improve the property before he moves out anyway. Now, I think there is more to the story and your concern about it being transfered to you doesn't seem to fit.

 

[tranquility]

Even if he could gift the estate, the lien would still be a cloud on the title. To get the heloc, pay the debt underlying the lien. That's the point of the lien, it's an encumbrance on the property and not the owner of the property.

 

[adam6909]

life estate

He currently does not live on the property. I am trying to fix it up and live there as my primary residence in order to avoid paying someone else rent. He does not use the life estate and therefore I am trying to fix up the house for myself, my fiance, and my infant child.

 

[tranquility]

Who lives there is irrelevant. The person who has possession had a debt and the lien is placed on his rights to the property. It's not your property, you have no right to live there except for that which he has given you or you paid him for. You cannot encumber the property unless the lender accepts under the current lien or the lien is paid off or the measuring life has ended. Period.