encumbering an unencumbered property

[Lynn Potter]

Greetings,

We have an investment property that is not officially unencumbered, we borrowed money from a family member a few years ago, we were supposed to make payments but have not been able to, the family is ok with this as long as the loan gets paid back. Given that this property looks like a open opportunity for a person to sue us, we would like to officially encumber so that it shows on county records. We are in California, we do trust deeds out here or we could do a lein. I dont know the best way to go about this. If its a loan without interest, Im told, the IRS will see this as a gift, and want taxes. Any suggestions? thanks to all responders.

[Account Closed]

Originally posted by @Bill S.:

Here, Deeds of Trusts are done by title companies every day hundreds of times. Colorado also has standard language for a deed of trust so just fill in the blanks.

Ultimately that doesn't solve your problem because of the interest issue you previously mentioned. They could "loan" you the money as interest only and gift the interest back to you each year (with spouses you can do in excess of $40K per year). Kind of complicated but your situation is not exactly simple either.

Title companies here won't usually prepare and record docs without selling you a title policy. In this case, a lender's title policy. They'll sometimes do it as a courtesy for a regular client. Escrow and other services that these companies provide are all in support of selling title insurance.