[Michigan_LT] life estate question
Jean Brokish
jbrokish at chikamingopenlands.org
Mon Jan 22 12:28:19 PST 2007
Hello MaryKay, April and others,
In my original email introducing Mr. Smith and the Jones Family I neglected
to divulge one piece of information. The Jones family is not taking a tax
deduction for the easement donation. So this reduces some of the tax
related concerns, but doesn't explain their rush. I believe that their
attorney wants to "clean up his books." And all parties do recognize that
Mr. Smith could outlive us all!
I'd like to summarize the things I've learned (because it is so fun to learn
from each other!)
When doing an easement with a reserved life estate there are two options:
1. Have both the title owner and the resident landowner sign the easement
document, effectively binding both to the terms of the easement upon its
signature and recording. This creates a "live" easement that now requires
monitoring and defense.
2. Have only the title owner sign the easement - essentially they are
conveying a future interest - creating an easement in waiting. Mr. Smith
is ahead of the Jones Family and the land trust in the title chain, and
therefore he is not bound by the easement (unless he signs it). The
easement does not become effective and the land trust has no monitoring
obligations or rights to defend the conservation values until the life
estate ends. There is also no violation or need for a discretionary
approval at this time (of course once the life estate terminates and the
Jones Family takes full ownership, there is an immediate violation that
needs to be resolved).
There are pros and cons of both plans, and we've spent hours discussing both
options. It is essentially a task of comparing the different risks. For
those that really want to know (and it may stimulate some more spirited
discussion) we are moving ahead with option 2. Even though there will be
no discretionary approval, there will be plenty of documentation in the file
explaining the situation. We are completing the baseline now as well, and
plan to update it as soon as full title is held by the Jones Family and they
get the cows out of the stream.
Isn't this work so fascinating.
Thanks to all for their input!
- Jean
~~~~~~~~~~~~~~~~~~
Jean Brokish
Chikaming Open Lands
PO Box 291 / 14913 Lakeside Rd
Lakeside, MI 49116
p: 269-469-2330 f: 269-469-2471
_____
From: michigan_list-bounces at lists.ltanet.org
[mailto:michigan_list-bounces at lists.ltanet.org] On Behalf Of MaryKay
O'Donnell
Sent: Monday, January 22, 2007 1:09 PM
To: April Scholtz; michigan_list at lists.ltanet.org
Subject: Re: [Michigan_LT] life estate question
Hey everyone!
April is right . . . I do love a spirited discussion! April brings up many
excellent points - including the fact that you don't really know how long
this violation will go on for (does anyone remember the story about the
oldest woman in the world who lived in France where is was common for people
to buy an apartment from an elderly person and let that person have a life
estate to the apartment? She lived to be 120-something. Can you imagine
being the person waiting for the apartment? . . . but I digress . . .)
For my 2 cents worth, I change my position and agree with April! If this
can at all be avoided it should be.
I presume the landowners' attorney is pushing so that they get the increased
federal income tax benefit by donating in 2007. Therefore, I am guessing if
the Conservancy took the stance that it cannot accept the easement with the
current use being able to be continued, the landowners may be highly
motivated to ask the life lease holder to stop letting his cows drink from
the stream.
The other thing to keep in mind is that if there is a significant financial
benefit for the landowners here - would they be willing to pay for the
improvements for Mr. Jones so the cows have access to water elsewhere?
April, thanks for weighing in! Where is everyone else????
MaryKay
----- Original Message -----
From: April <mailto:april at naturenearby.org> Scholtz
To: michigan_list at lists.ltanet.org
Sent: Friday, January 12, 2007 5:21 PM
Subject: RE: [Michigan_LT] life estate question
Hello to all:
Regarding the easement on property with a life estate: LCWM hopes to be
completing an easement soon for a property in which an organization has what
is essentially a "life estate" and a municipality has the remainder
interest. The City attorney agreed with us that both parties need to sign,
since both have a legal interest in the land. Whether or not it's legally
required, we want both parties to sign the easement to reduce the likelihood
of violations or amendment requests.
Mary Kay knows I like a spirited discussion and so I'm putting forward the
opposing advice: I would not recommend a discretionary approval unless
there is some incredibly important reason to complete the easement, now.
I, too, was at Karen Marchetti's seminar that included her discussion of
discretionary approvals and I came away with a different view of them - as a
relatively untested legal tool to be used only as a method to avoid
potentially harmful litigation on an (unexpected) violation.
I wonder if it would be possible for an easement to be created that would
take effect only when the Jones' have full ownership of the property? Given
our organization's recent experience with an easement violation (didn't go
to court, but has taken up a lot of staff time), I would hate to hold an
easement on a property controlled by a party that doesn't agree with the
provisions, right from the beginning. I also wonder how the IRS would view
the conservancy taking on an easement for which they will not defend the
identified conservation values for (possibly) many years.
I'm surprised that the Jones' can tell Mr. Smith what to do with his cows.
The life estates I've dealt with usually allow the holder to continue to use
and manage the property pretty much as if they were still the sole legal
interest. I'd recommend getting a copy of their life estate/tenancy
agreement to learn more about the life tenant's management/use rights. Or
are the Jones' really just leasing the property to Mr. Smith, in which case
I would be concerned about the Jones' strength of commitment to protect the
conservation values of the easement.
Since the conservancy would be making it possible for the Jones' to seek a
significant tax benefit, I think that it's not too much to ask that the
conservancy agrees with the easement's provisions and that it believes the
easement protects natural values important to the public, worth defending at
any point in time.
Just my 2 cents. --April
April Scholtz, Land Protection Director
Land Conservancy of West Michigan
1345 Monroe NW, Suite 324
Grand Rapids, MI 49505
616-451-9476
_____
From: michigan_list-bounces at lists.ltanet.org
[mailto:michigan_list-bounces at lists.ltanet.org] On Behalf Of MaryKay
O'Donnell
Sent: Monday, January 08, 2007 10:31 AM
To: Jean Brokish; michigan_list at lists.ltanet.org
Subject: Re: [Michigan_LT] life estate question
Hi Jean -
I am going to leave the question of signing and how to do that to the
attorneys - I assume that the life estate holder would have to sign off on
the easement in some capacity or subordination. I hope the answers will be
posted to the list serve as I am sure there is a lot of interest in this
question.
As for the violation: I wonder if you should consider a "Discretionary
Approval." You could allow the violation to continue until such time as
the life estate holder passes away. That way you don't have to worry about
this becoming a permanent thing. Write in the Discretionary Approval that
within such-and-such a time after the gentleman passes away the property
will be brought into compliance.
The letter would state that the Conservancy grants discretionary approval of
the action, state why this is reasonable, the time line, and details of the
violation and the provisions of the easement. Then you would want to have
the legal language stating that all other provisions of the easement are in
full force and effect and that this discretionary approval does not
constitute a waiver of any rights to enforce the other terms of the easement
or any future violations of the easement.
Just an idea!
MaryKay O'Donnell
Little Traverse Conservancy
----- Original Message -----
From: Jean Brokish <mailto:jbrokish at chikamingopenlands.org>
To: michigan_list at lists.ltanet.org
Sent: Friday, January 05, 2007 4:55 PM
Subject: [Michigan_LT] life estate question
Hello,
I am working with a property that includes a reserved life estate for an
elderly man (Mr. Smith). The owners of the deed (the Jones Family) are
working with me to donate a conservation easement on the property.
I have a straightforward question: Does Mr. Smith need to sign the
conservation easement if we finalize the easement before his death?
And I have a sticky situation: the property as it is managed now (by Mr.
Smith) includes a violation of the CE terms. Namely, his cows have free
access to the stream and it is creating erosion and all the other expected
problems. The Jones Family agrees that this is not ideal and plans to fix
it, but they don't want to impose this change onto Mr. Smith. I have
explained to them our need to enforce the terms of the easement and that
they would be in violation. We have discussed waiting until Mr. Smith
passes before signing, but the Jones attorney is urging them to move ahead.
One other piece of info: Mr. Smith was on his death-bed one year ago, but
has made a remarkable recovery and was last seen driving his tractor. On my
most recent visit to the property, he joined me for a 2+ mile walk. No
telling how many other lives he has.
Should Chikaming Open Lands move ahead and sign the easement? Should we
hold the Jones Family to fixing the problem? Is there a feasible solution
that would make everyone happy?
Any advice would be so much appreciated!
- Jean
~~~~~~~~~~~~~~~~~~
Jean Brokish
Chikaming Open Lands
PO Box 291 / 14913 Lakeside Rd
Lakeside, MI 49116
p: 269-469-2330 f: 269-469-2471
jbrokish at chikamingopenlands.org
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