Q: My father owns an old family farm that he has willed to me. The will states at his passing the property comes to me instead of my mother or other family. It is a working farm that he and I have operated together. His health is failing.
Several years ago he co-signed a mortgage with another family member on that person’s home and that individual has mismanaged her finances. The home has been at the point of foreclosure.
Our concern is that the family farm might have to be sold to cover this co-signed note even after my father’s passing, since his estate would be obligated for the mortgage.
Is there a way to transfer ownership of the farm while my father is still living to get it out of his name and out of his estate so that it is protected from this co-signed obligation?
A: It’s unfortunate that your father is having financial issues stemming from a bad decision that he made to co-sign a mortgage. In theory, if that other property is foreclosed, that lender can go after your father for the debt that is still owed and ultimately, the family farm may be at risk.
Your father should discuss this issue with an estate or tax attorney. The estate attorney might recommend that your father put the family farm in an irrevocable trust that names you as the beneficiary. The estate attorney might also have other suggestions for you on how you should proceed. As a working farm that you continue to operate on a day-to-day basis, you might have a right to claim some form of ownership to some of the farm. But your father might have to agree that your work on the farm entitles you now to some ownership right to the farm, not just as an inheritance.
You should approach this issue legally, so that you understand the full ramifications of what your father and his estate are facing. If the other family member is going through financial problems and has failed to make the monthly mortgage payments, you father’s credit history will be damaged.
While your father’s credit history and credit score may be of a lesser importance to him now, the fate of his family farm is important. While he can’t just get rid of his family farm to avoid paying creditors, he can have a constructive conversation with an estate planning attorney to determine how to protect his family farm and structure a transaction that can properly transfer title of his farm to you and satisfy his estate planning wishes.