It turns out that when he got a second mortgage on his home, the bank needed extra security so it required a mortgage on his land. Because home prices are now low, the bank won’t release its mortgage on the land. So, the guy who buys the land needs to know there is a lien on it, that the mortgage isn’t released and he better hope his buddy continues to pay the mortgage on his house. “You need to make sure you have a title with no liens on it,” said Attorney Ungrodt who provides a simple answer to these problematic situations: “Get it done right. Hire a professional.”
“People go into things innocently but need to be aware of the consequences. a lawyer needs to point out the pitfalls that might happen...the 10 percent of problems that are out there.”
Land and cabins
In addressing the multiple ownership of things such as a cabin in the north woods, Attorney Ungrodt asks, “How do you set this up?” When it comes to recreational type property, it is important that everybody knows the rights and responsibilities, e. g. allocating certain weeks of use to friends and relatives and how far down the generation does this privilege go? What form of ownership does it entail?”
The same care should be taken with
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regard to ownership of property. “One thing that people can do now for estate planning is a transfer on death deed to avoid probate, but if you totally avoid probate, how do you get money to pay the last bills? And that becomes complicated with real estate especially because you can’t divide it up like a bank account. If you own it five ways, how do you sell it?” Attorney Ungrodt asks.
When you decide to sell the property you have five different people making the decision, said Attorney Ungrodt. “All have to sign all the documents unless you have power of attorney, and disputes can arise as to the the asking price. Then there is the issue of co-owners living on the east or west coast. Some might have very different views of what the property is worth. ‘It’s got to be worth a lot more than that!’ some might assert. And don’t forget about the shared payment of property taxes.”
Attorney Ungrodt offered another consideration on ownership. “You can have an entity owning things, a corporation of an LLC to perpetually own a parcel of land. An entity can be formed to perpetually own a parcel of land, then you don’t have to transfer title between people. The rules of the entity determine how that property is managed and disposed of; who is allowed to use it and what it is used for. It is something like a small business and may require further thought into how to handle title transfer and buy-out on death.”
Capital gains consequences
“If an out-of-state person owns an interest in Wisconsin real estate, then the sale of that real estate brings about potential capital gains income tax consequences for that out-of-state person because Wisconsin likes to tax,” Attorney Ungrodt said. “There is even a withholding requirement to consider. Estates generally don’t have capital gains consequences because the real estate is valid as of date-of-death and there is no gain, but if there was a gain, the estate would have to withhold some proceeds. The out-of-state parties would have to pay a withholding tax to the state because of a law passed several years ago.”
In the past few years, Attorney Ungrodt said there have been lots of questions about property easements. Questions arise pertaining to the property that is benefited by the easement, and property subject to the easement. What is it used for? Who will take care of things, the ingress or egress? What about multiple people using the easement? Can one park on the driveway or is it for entering and leaving the property only. One can perhaps have rights across a property if it is not in writing but don’t bank on it. If it is by permission, the permission can be withdrawn. If by permission then it is not adverse,” Attorney Ungrodt said.
“One needs to put it in writing; if not in writing, it might not be enforceable,” Attorney Ungrodt said. “An easement is such a thing that it must be done right the first time. See a professional, because it has to be recorded in the register of deeds office for posterity. It must be indexed under all the parcels of properties involved, what is called the burdened and benefited properties.”
The same is true of covenants in subdivisions, for instance, on the storage of boats and trailers. When one buys a property, one needs to look at the title insurance commitment...note the encumberances and restrictions. The buyer may have different responsiblities or rights. Check out all the “What ifs?”, Attorney Ungrodt said.
“When in doubt consult your friendly local professional, whether it be accounting, law, or money management. Talk to the professional. It’s cheaper in the long run,” said Attorney Ungrodt who in August will be marking the 40th anniversary of his law practice in Kiel.