Good fences don’t always make good neighbors

Thousands of lawsuits are filed every year by homeowners who feel that a neighbor’s fence, or one that is jointly owned, encroaches on their property.

Q. We moved into a community three years ago where most of the homes are on odd-shaped lots. Our neighbor, who bought his house about 20 years ago, is trying to refinance, but the bank ordered that he first get a full-blown survey of his property to establish the legal boundary lines between his home and ours. The survey report says that the cement wall that separates our backyards “encroaches” about 2 feet onto his property, so now he wants us to pay to tear the wall down and build a new one in its proper place. The wall was here when we purchased the home, and we didn’t know about the encroachment. Do we have to honor his demand?

A. “Good fences make good neighbors,” poet Robert Frost wrote, but that’s not always true when a fence or wall doesn’t stand on a proper boundary line. Thousands of lawsuits are filed each year by one homeowner against another when it’s discovered or alleged that a permanent divider illegally protrudes on the plaintiff’s property.

Fortunately, you don’t have anything to worry about. The wall was there when you purchased your home, which means you obviously didn’t build it yourself and therefore have no legal obligation to tear it down and replace it. And even if the surveyor’s report is accurate, the divider stands a couple of feet on the neighbor’s side of the of the property line — which makes it his problem, not yours.

It would be a nice gesture if you offered to pay half the cost of removing the wall and rebuilding it in the proper place, even though you likely have no legal obligation to do so. If you obtained an “owner’s title insurance” policy to protect your interest in the home when you first purchased the property, call the insurer for additional suggestions.

Should the issue fester and the neighbor eventually file a lawsuit, it’s doubtful that a judge would rule in his favor. And if you wanted to get nasty, you could countersue and ask a judge to demand that the wall stay exactly where it is now, under the state’s “easement by prescription” and “adverse possession” laws — two related legal concepts used in all 50 states that allow one person to permanently occupy or use another’s real estate if certain conditions have been met.

If the issue appears to be headed for court, though, you’d be wise to consult with a real estate attorney soon.

Q. Last month, my husband and I gave $10,000 to our son so he could make a larger down payment than he expected on his first home. Can we deduct this amount on our next tax return? Will our son owe income taxes on the money we gave him?

A. No, you and your husband cannot deduct a gift on your next tax return, because payments to an individual are never deductible. But the good news is that your son won’t owe any taxes on the money because the Internal Revenue Service doesn’t tax most gifts the way that it does earnings from a job or business.

Current IRS rules allow a taxpayer to give away up to $14,000 per year to a single recipient without triggering any immediate tax consequences. Because you are married, you could have written a check for up to $14,000 to your son and your spouse could have written another check for the same amount. Even though the two checks combined would have totaled $28,000, no taxes would be owed.

I sure hope your son saved a tiny fraction of the cash to get you an extra-special present for Mother’s Day!

Q. My friend recently created a living trust so his heirs can inherit his home quickly and inexpensively after he dies instead of forcing his heirs into probate proceedings. Following your advice, he also formed a “durable power of attorney” that would allow his accountant to handle his affairs if he gets too sick to do it himself. But doesn’t that same power of attorney also allow the accountant to unilaterally change the terms of the living will, either before or after my friend dies?

A. No. That’s because any well-written trust document includes two common provisions that protects it from any unauthorized changes.

The first provision states that only the “granter” — the person who creates the trust, such as your friend — is the only one allowed to amend or dissolve it unless he or she specifically grants such power to another person through a durable power of attorney. If the durable power document doesn’t contain such specific language, the trust can only be changed by the granter.

The other common provision states that the trust automatically becomes irrevocable and cannot be amended after the granter dies, unless an exception is made elsewhere in the trust document. This is another safeguard that protects against unauthorized changes, even if someone else holds a durable power of attorney.

Real estate trivia: Fences became popular in America only in the mid-1800s, researchers at the Smithsonian Institution say, when the invention of barbed wire provided farmers in Texas and other parts of the fast-developing West with an inexpensive way to protect their crops from free-ranging cattle.

Ÿ For the booklet “Straight Talk About Living Trusts,” send $4 and a self-addressed, stamped envelope to David Myers, P.O. Box 4405, Culver City, CA 90231-4405.

© 2012, Cowles Syndicate Inc.