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updated: 8/15/2011 8:32 AM

Law talk: Family trust simplifies inherited rental property

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Q. My six siblings and I own some property we inherited from our parents. The property brings in a fair amount of income that we split every month. For now, everyone is happy with the situation and it looks like we will keep the property for the foreseeable future.

I am the one who generally deals with the day-to-day issues regarding the property. From time to time, I have a problem with the fact that the property is in all seven of our names. There have been occasions when, to do something with the property, I was required to get all seven signatures on a contract, or mortgage, or whatever. As we are scattered all over the country, this is a real pain.

Any suggestions on how to simplify this?

A. If the property is in Illinois, you could convey the property into a land trust with you retaining a power of direction over the trust. You alone would have the authority to execute documents on behalf of the trust. Each of you would presumably own a 1/7th interest in the trust.

Another possibility is to create a "family trust" to hold the property. The trust agreement would dictate which party or parties would have the authority to make decisions regarding property held by the trust, and the agreement would further delineate each parties interest in the trust. The disadvantage of the family trust is the fee you would pay to create the trust. Creating the land trust would be less expensive, though it would carry an annual fee that the family trust would not.

There may be other reasons to choose one over the other based on your specific situation. I would suggest speaking to an attorney regarding your options.

Q. My wife and I are getting a divorce and I am out of work. We need to deal with our house, which is severely under water. I have been speaking to our mortgage company and they have offered us a deed in lieu of foreclosure. I am tempted to take them up on this, but I am afraid that there are ramifications I am not aware of. Is there anything I should be looking out for?

A. There's always something you should be looking out for.

The main disadvantages to a deed in lieu of foreclosure are you will take a credit hit, though generally not as severe as a foreclosure or bankruptcy, and you will need to vacate the property pretty quickly.

The main advantage to staying in the property and riding out the foreclosure process is that you have months and in some cases years before you are required to vacate the property, which allows you hopefully to save enough money to obtain new lodging. You take a larger credit hit, though many times folks going through a foreclosure have already taking a beating on their credit score and this isn't a significant issue.

Make sure your agreement with the lender specifies that once you tender the property back to the bank, there is no deficiency and no further money is owed.

You may also wish to investigate one or more of the federal programs that may be available to you.

• Send your questions to attorney Tom Resnick, 345 N. Quentin Road, Palatine, IL 60067, by e-mail to tdr100@hotmail.com or call (847) 359-8983.

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