CHILDREN SUING THEIR OWN MOTHER OVER A BEACH HOUSE SHE GAVE THEM? YOU CAN'T MAKE THIS STUFF UP!

The facts of this case are fascinating and can be found in Davis v. Davis, 2015 NCBC 95.

This case caught my eye because I was trying to figure out how the language of a life estate was an issue that was heard in the NC Business Court, but once I started reading, I got much more than what I bargained for.  This case was in front of the NC Business Court because it involved issues dealing with the functions and operations of an LLC.

But, who cares about that?  That's definitely not the interesting part. 

In 2013, Plaintiffs Melvin L. Davis, Jr. and J. Rex Davis filed suit against their mother, Dorothy Davis, over a beach house at the Outer Banks.  Dorothy Davis and her husband, now deceased, purchased the beach house years ago.  From time to time, they would rent the home when they needed extra cash.  Mr. and Mrs. Davis decided they wanted to gift the home to their four children, but in order to satisfy certain other financial obligations, they gifted the home to MKR, LLC.    Plaintiffs, along with their sister Kaye, are the sole members and managers of MKR.  Davis v. Davis., 2015 NCBC 95, paragraph 11.  Plaintiffs hired an attorney to prepare the documents related to the deed from Mr. and Mrs. Davis to MKR.  The deed includes the following language:

    "The Grantors hereby reserve unto themselves, a life estate in the Property, said life estate to be         personal to the use of the Grantors, thereof, and may not be utilized by any other person, nor             may it be reduced to a cash value for the benefit for the Grantors, or the survivor thereof, but             must remain always during the lifetime of said Grantors, or the survivor thereof, available for             their individual and personal use without interference from either the remainder men or any             other person." Davis, paragraph 13. 

The attorney who drafted the deed testified that he drafted this language with the intention that it would prohibit Mr. and Mrs. Davis from renting out the Property during their lifetime.  He testified that he went over the documents with Mr. and Mrs. Davis and that they understood.  When Mr. Davis died, Mrs. Davis entered into a rental agreement with Outer Banks Blue, LLC, giving Outer Banks Blue, LLC authority to rent the property.  Once Mrs. Davis entered into this contract, the Plaintiffs filed suit and alleged that Mrs. Davis is precluded from renting the property based on the language of the deed.  Davis, paragraphs 15, 22, 23.

I mean, who wants renters ruining everything??

The Court cited several cases that reminded the parties of the purpose of creating life estates and the general policies that follow.  "An unlimited restraint on alienation of a life estate is against public policy, and therefore, void."  Davis, paragraph 27, citing Brinkley v. Day, 88 N.C. App. 101 (1987).  The Court agreed that there are certain limited restraints on alienation of life estates, such as indirect restraints on conveyance of a fee subject to a possibility of reverter or a condition subsequent.  Davis, paragraph 29, but in this case, there is nothing limited about the restraint on Mrs. Davis' life estate.  The Court ruled in Mrs. Davis' favor and found that the provisions in the deed are void.  Davis, paragraph 34. 

I think the Court definitely got it right this time.  If Mom gifts her children a beach house, it would seem contrary to public policy and fairness in general to allow the children to stop Mom from renting her property during her lifetime.

What Are The Most Important Things I Should Do Before I Die?

Woody Allen said it best....
"It's not that I'm afraid to die; I just don't want to be there when it happens."  

No one likes to think about their mortality, but in order to preserve our assets and our families' sanity, there are certain documents that we should, while still competent to do so, put in place.  There are many estate planning documents and options, but I typically advise people to, at a minimum, put into place five documents that will make life, and death in this case, much easier for all involved.

The Basic Estate Planning Documents

1.  Living Will
     Allows you to state your wishes regarding withdrawing life prolonging measures if you are                  terminally ill or permanently unconscious
2.  Last Will and Testament
     Allows you to determine who will inherit your property, who will take care of your children after        your death, and who is in charge of making sure these things are done according to your will
3.  Healthcare Power of Attorney
     Allows you to name someone to make healthcare decisions on your behalf if you can no longer            speak for yourself
4.  Durable Power of Attorney
     Allows you to name someone to act on your behalf in the event of your incapacity
5.  HIPAA Authorization
     Allows medical providers to release medical information on your behalf to the person you                    designated

These are all fairly simple, but important documents that will preserve your wishes, while helping your family cope with your incapacity and subsequent passing.  There are many other more complicated estate documents, and you should consult an attorney experienced in estate planning to help in these matters.

I inherited real property with my siblings....What if one of us wants to sell?

You have heard it said many times over, "Money is the root of all evil."  I know this to be true because I have seen it happen many times.  A beloved parent dies and the siblings are tearing the pictures off the walls, stripping the house of antiques, and fighting over every little item down to the vacuum cleaners and old sheets.  Personal property items are difficult enough to deal with, but when two feuding siblings inherit property as tenants in common, things become more complicated.  If multiple owners of real property cannot agree on whether to keep the real estate or sell it, a partition proceeding may be necessary.  

A partition is a special proceeding in front of the clerk of superior court where the clerk must determine if the real property can be divided or if it must be sold.  

There are two types of partitions:

1.  Actual partition:  This is the physical division of the property among property owners, but this is typically difficult to do.  This type of partition is favored by the law.

2.  Partition by sale:  This is the sale of the real property, where the proceeds are divided among the owners

In order to determine which is the best choice between the two types of partitions, the clerk will consider the nature, character, condition, and location of the land, the ownership interests of each party, and any economic waste that a division of the property would cause.

If an actual partition is chosen by the clerk, three commissioners will be appointed to divide the land.

If a partition by sale is chosen, the clerk will determine if the sale will be private or public, and a commissioner will conduct the sale.    

Although partitions resolve the legal differences between the parties, there are rarely any winners, as the court costs, attorney fees, and commissioner fees can add up quickly and the emotional differences are usually exacerbated during the process.

Partitions can involve complicated legal matters and you should consult an attorney if faced with these issues.

I was named as the Executor of my loved one's will....now what?

Most of the time, your family member or friend will tell you if they plan to appoint you as Executor or Executrix of their will.  Often, you will also be a beneficiary of their will as well, or at the very least, they will let you know you will be in charge of handling their affairs after their death and where the will is located.  

Once your loved one dies, if you choose to honor the deceased's wishes, you will take a copy of their death certificate and go to the Clerk's office in the county where the deceased lived.

How to become the Executor/Executrix

Unless the Clerk finds good cause not to appoint you (criminal record, conflict of interest, etc), you will be issued Letters of Administration, which appoint you as Executor/Executrix of the decedent's estate.  You will have to submit a preliminary inventory of the decedent's assets as of the date of death, so you will need to be familiar with the decedent's bank accounts, real estate, vehicles, personal property, etc.  This can always be amended, but it's good practice to go in with as much knowledge as possible.  You will take an oath where you promise to carry out your fiduciary duties to the estate.  You may also be asked to pay a bond, depending on what the will provides, which acts as an insurance policy should you violate your fiduciary duties by misappropriating funds.

What it means to be the Executor/Executrix

Once you are given your Letters of Administrations, you now how the ability to collects assets of the estate, pay claims, and distribute monies to the beneficiaries under the Will.  Most of these actions can be handled without prior court approval, but sometimes, selling real estate and various other matters require court approval.  

With these powers, come great responsibility.  You are responsible for noticing creditors of the decedent that an estate has been opened.  You must file an inventory within three months from the date you qualified as Executor/Executrix that shows exactly what assets the decedent had at the time of death.  After you have determined all the assets the decedent had, paid all the claims, and costs of administration, you can request commissions (payment for administering the estate), and then file a final accounting, which shows the Clerk's office the records you kept of all monies coming into the estate and all monies distributed.  The Clerk will determine if your accounting balances, and only discharge you from your duties once the final accounting is approved.  

What if you cannot submit a sufficient final accounting or if you violated your fiduciary duties to the estate?

The Clerk will not discharge you from liability until you can submit a final that will be approved.  The Clerk may require you to attend a show cause hearing where you will be able to give an explanation of why you cannot submit a proper final accounting.  If you do not appear at the hearing or file a final, the Clerk may issue an order for contempt and you could be jailed until you comply with the order.  

Being an Executor/Executrix is a title that is a privilege, because your loved one put that trust in your hands, but it also comes with great responsibility.  There are potentially complicated matters in many estates, and it is advisable to consult an attorney if you are appointed the Executor/Executrix in an estate.