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Estate planning, Real Estate, Family and… Any Place For Lawyers?

February 19, 2014 Leave a comment

 

I had a client call me recently.  His father passed away and left him and his siblings a large amount of real estate to share equally.

My client wanted me to draft some deeds since  he and his siblings all “had already decided who gets what

What my client was referring to, is that his father left the Property to his children, as tenants in common. He and his siblings understood that they each shared a complete and undivided equal interest in the whole land.

 

My thoughts?

Red flag.

 

 

Don’t hear me wrong, I get my client’s rationale.  My client thought he and his siblings got along just fine and therefore they didn’t need anything in writing in order to agree to divide up the property. Or if they did decide to put something in writing, they would just do it themselves.

My client’s scenario reminded me of a 2013 Court of Appeals  case that came out quite differently…

Everett Schram Living Trust ex rel. Schram v. Smith, 312500, 2013 WL 5630038 (Mich. Ct. App. Oct. 15, 2013)

Facts of Everett Schram Trust:

Everett Schram (“dad”) owned 3 parcels of land.  Dad divided the land into three parcels and deeded one parcel to each of his children, Plaintiff Lawrence Schram, defendant Julie T. Smith, and defendant Diane L. Tudor.

Dad passed away.

After dad’s death, plaintiff, Smith, and Tudor discovered that the land deeded to each of them was inconsistent with their expectations.

After discussions, all three signed an agreement (Agreement) to redistribute the property in November 2010.

(My interjection – this might have been a great place for siblings to discuss the matter with a lawyer)

The Agreement, in its entirety, states:

I Larry Schram give a gift of money to my sister Julie Smith to move her west property line back to the east.Adjacent [sic] to Yearmans [sic] east property line out to Trask Lake Rd. Sister Diane Tudor is in agreement to have her property run north and south 770 feet wide on Trask Lake Rd.

Generally, the agreement involved a portion of Smith’s property becoming plaintiff’s.
Problem solved, Right?
Wrong.
However, Smith instead sold almost all of her property through a land contract to defendants Craig and Nicole Johnston in March 2011.
Plaintiff filed a lawsuit, requesting specific performance of the Agreement and alleged that his interest in the property was superior to the interest of the Johnstons.

Everett Schram Living Trust ex rel. Schram v. Smith, 312500, 2013 WL 5630038 (Mich. Ct. App. Oct. 15, 2013)

Law: “specific performance” of a real estate sales agreement.
In Michigan, courts have the equitable power to compel a party to go through with the sale/purchase of real estate. This relief is known as “specific performance.” This means that a court would force the sale of the land.   Courts can grant this equitable remedy because Michigan law recognizes the fact that land is unique.  No piece of real estate is the same.
The Problem in this case: The Agreement did not have all the necessary parts of an enforceable contract.
The Court noted that the agreement was “subject to the requirements of general contract law that ‘there must be a meeting of the minds regarding the essential particulars of the transaction.'” citing Zurcher v. Herveat, 238 Mich.App 267, 276–279; 605 NW2d 329 (1999) (quotation marks and citation omitted).
The “essential provisions” to be identified and included in a contract for the sale of land are the property, the parties, and the consideration. Id. at 290–291.
Regarding consideration, to be enforceable the contract must include either the price to be paid or a basis to determine the price. Id. at 282.
 In the Agreement at issue in the instant case, there is no question that neither the price nor a basis to determine the price is provided. Everett Schram Living Trust ex rel. Schram v. Smith, 312500, 2013 WL 5630038 (Mich. Ct. App. Oct. 15, 2013).
Conclusion:
The Agreement did not indicate an amount of consideration – so it was unenforceable. 
Take away:
In family matters, even when family gets along just fine, there is a place for sound legal counsel in matters of estate planning and real estate.

Questions? Comments?

 

Jeshua@dwlawpc.com

Categories: Uncategorized

The Words You Use In Real Estate Documents: They Matter.

February 13, 2014 Leave a comment

I recently met with a client at my office – her mother recently passed away.

 

My client had no siblings, she alone was scrambling to figure out what she needed to do to wrap up her mother’s estate. Mother had died without any estate plan, the largest asset that mother owned was her home.

 

Prior to passing away, mother added daughter on the deed to her house. Mother assumed that adding daughter to the deed would allow the property to pass to daughter, period.

 

After a review of the deed, it was clear to me that although mom did add her daughter to the deed, unfortunately, the property would not pass to her when mother died.

 

Why?

 

Because mother failed to include a few key words in the deed.

 

 

Two ways to hold joint ownership of  Property in Michigan

 

Under Michigan law, there are generally two ways to jointly own real property – Tenants in Common and Joint Tenants with Full Rights of Survivorship.

Tenants in Common

A tenancy in common is a legal estate, with each tenant having a separate and distinct title to an undivided share of the whole.  Kay Inv. Co., L.L.C. v. Brody Realty No. 1, L.L.C. (2006) 731 N.W.2d 777, 273 Mich.App. 432

Holding property as Tenants in Common means that each owner holds the entire title along with the owners.  Each owner shares in possession of the entire property, and each is entitled to an undivided share of the whole. If an owner dies, his interest in the property is passed on two his heirs.

 

This is what happened. Since my client’s deed did not contain the “magic words” with full rights of survivorship, my client held the property was a tenant in common with her mother. So, when mother passed away, the property passed to mother’s estate.

 

The practical effect:

In order to own 100% interest in the property, my client now needs to open up a probate estate and then transfer it to herself. Although this isn’t a really overly burdensome outcome, you can imagine scenarios where the effect would be very much unintended:

what if client’s mom had a will directing where her estate assets should go?

then mom’s 50% interest in the property would go to the will’s beneficiaries

 

What if mom had other children?  

Then all would take an equal share in the estate’s

 

You could imagine many scenarios that could result in disputes, or possibly litigation.

Lesson: the words you use matter. Using the wrong words could have unintended and unfortunate consequences.

 

email: Jeshua@dwlawpc.com

http://www.dwlawpc.com

 

 

Categories: Uncategorized

If You Think Money Can’t Buy Happiness, Try Giving Some Away-Michael Norman

February 10, 2014 2 comments

 

 

 

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Today I attended the Economic Club of Grand Rapid’s Luncheon at the JW Marriot.

For those of you in the business community in Greater Grand Rapids, I would highly recommend that you check out getting a membership. The Econ Club always hosts top notch presenters and is a great place to connect with other business professionals.

 

The speaker, Michael Norman, is an author and professor at Harvard’s school of business . Professor Norman is the author of “Happy Money: The Science of Spending”. Although I haven’t read his book, his presentation was extremely interesting. the premise was simple: People who spend money on others gain more satisfaction than those who spend money on themselves. (my paraphrase).

 

 

In a lot of respects Professor Norman was “preaching to the choir”  – we all know that Grand Rapids is one of the most philanthropic cities in the U.S. – but his message is one that we all need reminding.

 

Why do we need reminding?

 

I believe the answer is simple – we all are selfish.

 

We think about ourselves, and our own interests.

 

Professor Norman compiled a lot of data in his book. He most aptly noted that whenever he would ask someone what they would do if they won the lottery, the answers may have varied, but they all had one thing in common – it always involved spending the money on themselves.

 

To quote the Bible, it is why the apostle Paul had to specifically state it in Philippians 2:3-4:

Do nothing out of selfish ambition or vain conceit. Rather, in humility value others above yourselves, not looking to your own interests but each of you to the interests of the others.

 

We need this reminding – because it is against our nature to simply think of others above ourselves.

 

Another statistic Professor Norman presented was that the people who give the most are the poorest.

The middle class generally give the least.

 

Why is this? I was captivated by Professor Norman’s explanation:

The poor are generally much  more sensitive to the needs of others around them, since they themselves know what it is like to be in need.

Conversely, the middle class are comfortable – and naturally – the fact that there are those out there in need is not the thought at the forefront of their minds.

 

We all need to be reminded to think outside of ourselves.

 

I would take Professor Norman’s observation a step further – we will be happier if we give not only our money, but also our time, talents and resources for the good of others.

 

If we open up our home to share a meal with others in need, if we use our spheres of influence to raise funds, or we use our talents to serve on the board of a local non-profit, we will be truly blessed.

 

My exhortation to non-profits everywhere:

 

Keep reminding us that people all over the world are in need – we need to be reminded and to get outside of ourselves.

 

 

Questions? Comments?

 

Email me: Jeshua@dwlawpc.com

http://www.dwlawpc.com

 

Categories: Uncategorized