People are always asking me legal real estate questions. But because I’m not a lawyer, I often don’t know the answers.
So I decided to ask some of them to Oak Park-based attorney Paul Prybylo, who concentrates his practice in real estate, probate, commercial law and business transactions.
Prybylo serves on numerous real estate-related committees at the Chicago Bar Association, the DuPage County Bar Association, the American Bar Association and the Association of Foreclosure Defense Attorneys, to name just a few.
He’s written chapters on real estate practice for the Chicago Bar Association Young Lawyers’ Real Estate Guide and is also a licensed managing real estate broker and a registered title agent.
I figured he would be filled with good, solid professional advice, so I sent him some questions. Prybylo’s responses are general and not intended to provide legal advice.
“It is imperative to obtain legal counsel and legal advice from your own personal attorney; such advice will be tailored to your specific situation,” he said.
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This is part one of a two-part Q&A with Prybylo.
Q: Finally, after 30 years, your house is about to be paid off. What is the best way to protect it?
For example, you have $1 million in insurance and get into a car accident. It’s your fault. The other person is terribly injured (or even killed) and medical bills and a lawsuit will surpass your insurance coverage. How do you protect your home from the several-million-dollar lawsuit filed against you? What do you do in advance once the house is paid off to make sure you don’t lose it in a case like this?
A: This question can be answered within a number of areas, from insurance coverage (I strongly suggest umbrella coverage in most instances) to re-titling the property to protect. Most of the time, for those properties obtained, as your example shows, some 30 years ago, property was taken (titled) in either tenancy in common or joint tenancy with rights of survivorship. In either of these instances, were there a claim against either tenant, the property could be taken to satisfy the judgment.
Today, spouses can take title to property in another manner, tenancy by the entirety (TBE). Under TBE, each tenant owns 100 percent of the property: tenants in common only “owned” whatever percentage was vested to them by the deed and if none provided, 50 percent is presumed; joint tenancy with rights of survivorship is only a vesting mechanism by which the survivor obtained the deceased tenants “share.”
TBE eliminates that vesting at death, and 100 percent of the whole vests upon execution of the deed. As 100 percent title to the property is in each of the spouses, a judgment against one cannot be satisfied by attaching and selling this real estate. Period. The judgment creditor will have to look to some other asset to attach to satisfy the judgment in the lawsuit. Property is safe and secure in that respect.
Belt and suspender answer — (1) Have your deed reviewed and amended from JTWROS or TIC to TBE. This is only available on your principal residence and for spouses only. (2) Obtain an umbrella insurance policy in an amount, per your question, of $2,000,000 or more.
Q: Again, your house is paid off. You want to make sure it stays in the family for years down the road. The property taxes are high, though, and your kids don’t make a lot of money. Is there a way to leave money to pay off the taxes annually for years to come? Can you set something up for, say, 10 years or more or even perpetual tax money?
A: This is an interesting question, which I’ve seen in most of the time regarding high-value property. There are a great number of methods to accomplish this — from dynasty trusts to annuities to land trusts to etc., etc., etc. Each has their own special requirements based on value, duration, and needs. Many of these methods are completed using not only the attorney but also a financial consultant or insurance agent; it is advisable for these professionals to work together to obtain the best results.
Felicia Dechter is a freelance columnist for Pioneer Press. Got a real estate-related story idea? Email her at [email protected].