Legal Question in Real Estate Law in California

Transfer of Title to Property to Avoid Debts

My suggestion is to seek advice of local legal counsel. There are many issues of concern that have to be addressed. One of them is the fact that the transfer of title will need the consent of the mortgage company. If they do not agree, the transfer may be in default of the mortgage instruments. Other issues include creditors possible challenge of the transfer. The issues are so numerous that all documents need to be reviewed in order to fully evaluate your mother in law's options. You need advice of an attorney immediately before you take any action.

Fraudulent conveyance--look for another option

A transfer of this nature is a fraudulent conveyance. A creditor could sue and have thetransfer "undone." The deed must be recorded where the property is (California). May Isuggest some other alternative such as a reverse mortgage. This allows your mother toborrow money each month to pay bills and the mortgage increases until the property is sold.

Fraudulent Conveyance of Real Estate

For specific legal advice in AZ, check with an AZ attorney.

If suit has been filed, this transfer (if challenged) would be set aside as a fraudulent conveyance to avoid creditors. However, if she has a legitimate business purpose (you revealed none) and she is merely managing her assets for some legitimate business purpose, she could allow you or a third party lender to place a 2nd mortgage on the property. The 2nd mortgage would soak up the equity in the real property and should keep other creditors from pursing property on which there is 100 to 125% debt. However, to the extent that she retains access of the proceeds of the 2nd mortgage, that money would be available to pay creditors.

In the scenarios you pose, her conduct is borderline. I have pursed debtors through fraudlent conveyance actions and won and even chased them into bankruptcy and filed adversary proceedings against them to undo this type of conduct. You need competent local counsel to keep your mother out of legal trouble with creditors.

Good Luck