By John O'Grady, O'Grady Law Group
Real estate is a valuable asset and a blessing, but it can become a curse that causes family strife if ownership is not clearly spelled out in your trust. Consider a recent California Supreme Court case in which a man died, leaving half his apartment building to his surviving wife and half to his children and grandson from a former marriage. Now, assuming that adult children and their stepmother could amicably co-own an apartment building requires a certain leap of faith: in reality it’s a classic Cinderella setup that invites relentless conflict. And, no surprise, trouble started when the husband died.
The wife sold the apartment building and used the profits to buy herself two houses: one of which she would live in. The grandson disputed that his stepmother had the legal authority to sell the property, and petitioned to receive his share of the proceeds. The court ruled in his favor, and made the grandson trustee of the second residence in place of the wife. But the wife defied the court order to give the grandson control of the property, instead transferring title to her daughter. So the appellate court subsequently ruled against the wife for disobeying the court’s original order.
There are lessons here, apart from the benefits of complying with orders of the court. One, if you own a building and want to ultimately transfer ownership to multiple individuals, work with a psychologist to fully explore any potential rivalries. Then, two, if you are still committed to the idea, work with an estate planning attorney to consider alternative planning options such as life insurance for one beneficiary and the building for the other. If you must proceed with co-ownership, specify your exact terms. Your terms should be included in the trust document. You may also want an agreement with the intended beneficiaries, so that there is no confusion about who is entitled to do what with your property. Blumberg v Minthorne, 233 Cal.App. 4th (2015).
About the author
John O‘Grady, O’Grady Law Group, was the 2012 chair of BASF’s Estate Planning, Trust & Probate Section.