Heirs to a Headache
The New York Times article titled "Heirs to a Headache," may be of interest to you. The author, Teri Karush Rogers, discusses the all-too-common conflicts that arise among heirs (mostly children) where valuable residential real estate is involved. Fortunately, while a proper estate plan cannot prevent unhappy heirs, it can prevent those heirs from causing costly and time-consuming conflicts that prevent the smooth transfer of property.
In helping you solve this problem, we are able to utilize several approaches depending on your unique situation. A simple, but often useful, method is for the parents to meet with their children to discuss their concerns about what will happen with the property. Sometimes, having the conversation brings up concerns that the parents didn't know the children had and vice versa. The parents can also provide detailed instructions in their estate-planning documents about how they wish the property to be distributed after their deaths. However, the death of a parent has a way of bringing out emotions in children that were unexpected, such as depression or anger, which can result in these instructions, which are not binding, being ignored.
Another option is for the parents to name a special trustee (someone other the children, who may be trustees of the other assets) to manage the property and, potentially, its sale. The special trustee might have the authority (a) to distribute the residence to one child but not the others (with an offsetting distribution to the other children), (b) to divide the residence between the children or (c) to sell the residence and distribute the sale proceeds to the children. The parents can go even further by including a no-contest clause barring any inheritance for a child who challenges the trustee's decision.
A more creative option to avoid arguments when the parents want the property sold is to set aside a reasonable amount of money that may be used to facilitate the sale and maximize the price, whether for repairs, improvements or other expenses. Any of that reserve not needed would then go to charity or a beneficiary of the estate who will not be receiving any part of the sale proceeds. In this way, the children are motivated to spend the money determined to be necessary to achieve the best result.
We are also able to counsel you about the use of qualified personal residence trusts ("QPRTs"), which can result in significant tax benefits. A QPRT is an irrevocable trust created during the parents' lifetimes, allowing them to oversee the transfer of the property to their children while the parents are still alive, thereby allowing amelioration of any problems or issues among the children upon that transfer.
