DEAR BENNY: My ex-husband died two years ago without a will. He left our two daughters as the beneficiaries to his life insurance, but he owned a townhouse also, and my daughters have since renovated it because (of) years of neglect.
Currently, my eldest daughter and her husband are living in the property and paying the mortgage payments (her younger sister is a senior in college and resides on campus). The property is beautiful now and the mortgage has been paid on time. They cannot refinance the property because they own a rental property and will not qualify to carry both mortgages.
How can they get this property in their names so that they can get the tax write-off from the mortgage payments? The mortgage and deed is still in their father’s name. They would like the deed to have both of the girls’ names on it as owners, but the eldest daughter would like to take the tax write-off from the mortgage interest because she and her husband are paying the mortgage payments. –Melinda
DEAR MELINDA: I don’t know the laws in the state where the property is located, but suspect that you or your daughters will have to have your ex-husband’s estate probated. When a person dies, unless title to his or her property is such that the surviving owner will automatically (by operation of law) own the property, it is my understanding that in most (if not all) states some form of probate is required.
If, on the other hand, title to the property is such as "tenants by the entireties" — which is reserved for husbands and wives — or "joint tenants with rights of survivorship," then no probate is required for the distribution of the property. It goes to the survivor by operation of law.
My suggestion: Retain a local attorney whose practice includes estate and probate law. That lawyer should be able to assist and accomplish your daughters’ objectives.
DEAR BENNY: Our senior condo (274 homes built in 1999) has notified us that the directors want to change some of the bylaws: (a) Directors want no term limits (currently two consecutive terms of two years then one year off and possibly two terms more); and (b) The vast majority of residents vote in elections and/or on questions submitted to the community.
There are some owners who may not be present (estate ownership, extended absence, etc) who do not vote. The proposed amendment follows the procedures adopted by various corporate proxies voting, to wit, the ballots of the nonvoting residents may be cast by the board secretary.
I don’t like "A" because it seems to concentrate power with the current board (who, at this time are great), but that could change in a twinkling. I’m really afraid of "B" because I know it will enable a few to control the purse strings of many, including me. Do you have any advice? –Pete
DEAR PETE: The first amendment you mention would remove term limits for directors. I have mixed reactions to this. From my experience, a competent director provides a historical perspective to the association, something that often is a valuable resource.
A friend of mine who is an elected member of a county council once reminded me that there are term limits to every elected official — namely "election." If you don’t like the policies of a board member, throw the rascal out of office either at the next annual meeting or at a special meeting. Your bylaws will spell out the procedure for such a recall.
As for item "B," I need clarification. If it will allow the association secretary to vote — without instructions — on behalf of owners who do not show up in person for the election, I am absolutely opposed to that. That defeats the democratic concept of community associations, whereby owners have the right to elect their own board of directors.
On other hand, if it merely allows the secretary to vote based on proxies submitted by owners who are unable to attend the election, that’s fine. However, the concept is already contained in most association documents, where it says "voting can be in person or by proxy."
So I suspect that this is an attempt to allow the secretary to vote as he or she so pleases — and I oppose that concept.
DEAR BENNY: I recently applied for a personal loan at my credit union. It was to help out a relative. While going through the application process, we were completely honest about the reason for the loan. My credit rating is very good, and I had just made the last payment on my car loan there.
With all of that information given as well, I was under the impression my interest rate would be doable. The loan officer said it would be around 7 percent, and then she took the application to her superior. I received a call an hour later saying that the loan was approved.
I went back to sign the papers and to my surprise, the interest rate was higher than the aforementioned 7 percent. In fact it had risen to 10.7 percent, I balked a bit, but knowing that the payments were still within my budget, I signed. I was so surprised and asked why there was an increase; the answer was that because I was honest about the purpose of the loan, that changed the interest rate.
I am still confused. The paperwork states that this is a "debt consolidation loan," and my relative is on the loan as a co-borrower. The whole idea was that I would have the loan in my name and the relative would make the payments. I don’t know if this is now going to affect my credit rating of 826. Do I have any recourse? Can I complain and renegotiate? –Jorie
DEAR JORIE: Yes, you can complain, but I suspect that the credit union will tell you, "Sorry, you signed the legal documents, and there is nothing more that we can do."
I don’t want to sound so negative, but no one forced you to sign, especially when you saw that the interest rate was so high. In today’s market, a 10.7 percent interest rate is, in my opinion, outrageous — especially if you have good credit.
I have one suggestion: Can you repay the loan now? You have to determine if there is a prepayment penalty, and that will be spelled out in the loan documents you signed.
If there is such a penalty, you should talk to the manager of the credit union. Explain your situation and tell the manager he should waive that penalty and give you the loan that you were asking for originally. I fail to understand why your rate jumped so high, merely because you were going to assist a relative.
If the credit union is not prepared to give you a new loan, try a local bank. It may be worth your while to pay off that high loan and get a loan with a more realistic interest rate.
The moral of the story: Don’t sign any legal documents unless you fully understand and agree with their terms. And if you cannot understand the legalese in a document, ask an attorney for assistance.
DEAR BENNY: In your column, I sometimes see a reference to a "deed of trust." Exactly what is that, and how is it different from a mortgage? –Keith
DEAR KEITH: In practical terms, there really is no difference. You borrow money and if you don’t pay, you don’t stay.
Seriously, most states use deeds of trust, but a few still use mortgages. With a deed of trust, when you borrow money to buy a house, the seller gives you a deed to the property, and in return you deed the house to a trustee.
That deed of trust is recorded among the land records in the county where your property is located. If you pay off the loan, the trustee will release the property from land records.
But if you default, the trustee has the power to sell your house at a foreclosure sale. The trustee must follow the state laws regarding foreclosure. The main difference is that with a deed of trust, in many states the foreclosure sale can take place without court involvement; with a mortgage, however, a judge must approve a foreclosure sale.
Deeds of trust were created years ago to expedite the foreclosure sale process. However, more and more state laws are beginning to enact legislation to better protect the homeowner, and are requiring some form of judicial involvement and oversight before the home will be taken away.