Estate Planning for Co-op and Condo Owners Planning Ahead

Estate Planning for Co-op and Condo Owners

Most people would rather not talk about divorce or death. Unpleasant as they are however, they're both facts of life—facts that any apartment owner must face up to and plan for.

In the case a co-op or condo apartment, a thorough, legally sound plan for your property is one of the most important things to do before the need arises. Questions over ownership and inheritance are the last thing a grieving or separating family needs at what is already a very difficult time.

Co-op vs. Condo

Whether you are living in a condo or a co-op, it's important to look at your building's governing documents to determine what happens in the cases of inherited property.

"The legal difference in the two forms of ownership is that with a condo you have a deed to your apartment just like a detached home," says Gerard Dunworth, an attorney with Gibney Anthony & Flaherty, LLP in Manhattan. "With a co-op, you own shares of stock in the cooperative corporation and you also have a lease to your particular apartment. In addition, the co-op board must approve all changes in ownership of the share of the cooperative corporation. That's what gives them control over who can live in the building."

Basically this means that even though someone wills you a co-op apartment, it doesn't mean that you can just move in without going through the same process that everyone else who lives there had to go through—that means submitting to an extensive examination by the board.

"When you are looking at the difference between them when someone dies, most condos permit transfers by gifts during an owners life under a will or state inheritance laws, without first applying to board under right of first refusal," says Mindy Stern of Schoeman, Updike & Kaufman, LLP in Manhattan. "Co-ops usually require board approval in those scenarios. Some co-op proprietary leases have provisions that say they won't withhold their consent to a transfer after death to certain family members and will identify them (spouse, adult children, siblings, parents). A small number of other co-ops—usually much older co-ops—will permit transfers on death to designated family members without board approval, but most require board consent."

A co-op will be transferred at the time of its owner's death in one of the following ways: Either to their heirs through the owner's last will and testament or living will, or to the joint owner. When organizing a person's estate, as executor you have to determine which is the most efficient.

"Often it is simply having the shares in a joint name," says Dunworth. "If that doesn't work—if there may be several children who will inherit, for example—then you pick either a will or a living trust. The living trust is used to avoid going to the Surrogate Court to probate a will. In order to use a living trust though you have to obtain the permission of the co-op board and also the bank if there is a mortgage. This could be a cumbersome process."

Co-op boards will generally approve the change of ownership to the living trust, but they usually want their attorneys to review the documentation. In addition the co-op boards usually ask the tenant to sign a personal guarantee of the maintenance and to sign an occupancy agreement allowing the co-op board to stay in control over who will live in the apartment.

Get it in Writing

It's important that you get the proper documentation in order before unforeseen events such as divorce or death happen.

"With a divorce, either a prenuptial or postnuptial agreement will be required in the transfer of a condo or co-op, assuming that the governing documents have allowed for the new owner," says Philip Burke, an attorney at Woods Oviatt & Gilman LLP in Rochester. "When dealing with death, a last will and testament or living trust is required."

You can also have a separation agreement that decides where the property goes, but according to most experts, the real time to protect yourself is with the prenuptial agreement before a wedding.

Interestingly, having the documentation saying you are an owner is not always enough, especially in the cases involving death.

"If someone jointly owns their co-op or condo, the two people who own it as joint tenants with rights of survivorship, or as husband and wife, which is a form of this, then the surviving co-owner of the apartment is entitled to inherit the share of the deceased co-owner no matter what the will says," Stern says. "If the co-owner is a surviving spouse and the will leaves everything to the adult children, the surviving spouse would inherit the apartment by operation of law, even though the will says everything should be left to the adult children."

Tax Benefits

Some may think that transferring a co-op or condo apartment to a spouse or child will help with estate tax benefits, but according to Burke, you cannot generalize whether there will be estate tax benefits in these cases.

"Lifetime gifts may also be subject to a gift tax so it all depends on the situation," he says. "There are no estate taxes owed when someone leaves a property to the surviving spouse, though it's not always an elimination of tax, but a possible deferral of tax."

At the death of the first spouse, no estate tax is owed.

"Sometimes people purposely set it up so that instead of the asset going to surviving spouse, it goes to a trust called a credit shelter trust for surviving spouse to benefit during his or her lifetime," Stern says. "Or they prefer to go to adult children outright to achieve certain tax planning benefits. Under current federal law, you can transfer up to $2 million to anyone you want without there being estate tax owed."

Need for Approval

When a co-op owner dies or divorces, there could be issues that need to be addressed by the board or co-op association.

"Usually if the apartment goes to someone already living in the apartment there are no issues. That person has already been approved," Dunworth says. "If someone dies and leaves the co-op to children who want to move in, they will have to go through the usual approval process. They have to prove they have the finances to afford to live in the building and they have to go for an interview to show they will act like nice tenants."

Again, the governing documents of the proprietary lease of condo bylaws will have the rules.

"If the co-op proprietary lease requires board approval, then the children would have to submit an application just like any purchaser would," Stern says. "The co-op would have to approve them, not only their financial worthiness but at an interview. The board can grant or withhold consent for any reasons or no reason in New York and they are not required to disclose their reasons."

Executor's Song

When someone who owns a condo or co-op dies, and leaves no direction as to who gets the property, it is the responsibility of the executor to immediately check to make sure there is homeowners insurance and that the apartment is secure. Then it is their job to sell the apartment and add the proceeds to the estate.

"In New York, the court appoints the executive and they are responsible for locating and valuing all the assets, paying all the estate debts, funeral expenses, medical, administration expenses, appraisal, paying all the taxes, income taxes, state taxes, selling any property, filing all tax returns and distributing whatever is left to the beneficiaries," Stern says. "The executor is personally liable if they don't carry out duties and responsibilities and don't transfer the property to people entitled to it."

Misconceptions, Mistakes and Melodies

People may think they know what will happen in the case that they die or get divorced, but many times they are mistaken about what really goes on.

"A lot of people are under misconception that if they are left a co-op in a will that somehow it obligates the co-op to allow them to inherit it and they may not have the right to," Burke says. "If someone owns something that has strings attached, those strings get transferred to the new owner."

Dunworth has dealt with cases where children have refused to move out of the apartment after their parents die and that could cause many headaches.

"This causes problems for the other children who are not living there and would like the apartment to be sold so they can receive their share of the inheritance," he says. "You also get issues when children cannot agree over the furniture distribution even when used furniture has little value."

As a general matter, there are still a lot of people who do not have wills and are under the assumption that if they die, that certain family members will automatically inherit their property and that's not necessarily the case.

"Under New York law, if someone is survived by a spouse and children, both are entitled to a portion of the estate," Dunworth says. "Someone who thinks the surviving spouse will get it all is just misinformed."

Keith Loria is a freelance writer and sports reporter living in Larchmont, New York.

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  • who will pay the maintenance fee for a co-op apartment until the transfer and closing is done ,in the case that the apartment was inherited? The estate or the person that inherited that co-op?
  • what measures can a co-op board take, if any, on the estate owners of an apartment that has been vacant for four years. They are paying the maintenance regularly and we have instituted a $100 extra fee per month.
  • My brother and his wife bought a cooperative studio apartment in 1985, and the mortgage has long been paid off. Their 50 year-old son has been the apartment's sole occupant. Unfortunately, they failed to put him as a shareholder at the time of purchase. Their will stipulates that he inherit the apartment. Their concern is whether the coop board will accept my nephew when he inherits the apartment. For all 23 years, he has paid the monthly maintenance costs ($400 at first; $800 now) and has met his other financial obgliations. He's very highly educated but has always had a modest salary ($30K). Currently, however, he has been unemployed for an extended period. His liquid assets (invest-ments, mutual funds, etc.) total $500K, and he will inherit at least twice that amount. Could you comment?
  • In 2006 my husband and I created Living Trust the main purpose of which is to avoid probate in a future when our daughter or her children will have to inherit our coop apartment. I spoke with Board members and they say that governing documents of our coop do not have provision for Trusts. My question is as follows: If, as you say, the board can withhold consent for any reasons or no reason in New York and they are not required to disclose their reasons, - in case of coop shareholders death, what is the next step of our daughter or her family should be?
  • Is a stock certificate transfering from name to trust legla if never recorded? does it even need to be recorded?
  • My Father Passed and didn't leave a will; I have been trying to take ownership of his CO OP since last year, the Board and their Attorney has changed. I have been in contact with the new Attorney and still nothing. When I call the Attorney's office, I am sent to voice-mail. I don't know why they are giving me the run around. Is there anything I can do????
  • Contact the lawer by registered letter or fax. then he cannot deny that you attempted to reach him. You may need your won lawyer. Maybe this guy you are trying to contact is in conflict of interest if he talks to you.
  • My dad pasted away this July. He wrote a will and left me the co op condo. However, I have not heard anything yet. I have been told that I will not receive any money that he put in until they find a new tentate. Is this a correct statement?
  • Coop Board elections - Can they be held on a Sunday or only Mon - Fri (business days)?
  • need an answer. A daughter inherits her fathers condo. The propertty is insolvent, gives it back to the bank, the foreclose on it 13 months later. Law states you do not inherit his debt, who is responsible for the monthy maint. fee of the condo?
  • Would like an answer to the Bill need an answer also
  • My father is a co-op share owner and my mother is on medicare. He had a Life Estate with me as a Remainder Estate on his house and did not do the same thing on his new aparment. If he puts me on the certificate now as a shareholderin a life estate, can the state takethe proceeds of the sale of it from ME to pay back medicare after myfather dies? He did NOT put my mother on the co-op share. Would this be considered a Transfer?
  • I'm a single girl who owns a co-op. If I get married, will the board have to approve my husband before I can add his name to the shares? Or can I do that as of right?
  • My boyfriend and I live in a co-op apartment. The mortgage is in my name but he is listed as a co-resident of the apt. If we break up, is there a chance that we would have to sell the co-op to split the ownership of shares? What legal rights does he have with the co-op? We are not engaged or married and we've lived in the co-op for approx 2 months.
  • My mother and I jointly own her co-op apartment. She is 90 years old and still lives in the co-op. If it becomes a necessity for her to need homecare and possibly go on Medicaid, what would happen to the co-op after she passes? Will Medicaid need to be repaid her share of the co-op? Should I transfer the stock certificate into my name solely?
  • what is the answer to Shelia's question above
  • Mother bought a co-op 20 years ago. Stock certificate is in her name but the purchase application clearly indicated that I was the only occupant - I was a college student at the time. The Board interviewed me along with my mother before the purchase was approved. Mother has passed since 5 years ago but I continue to live in the co-op and pay the monthly maintenance. The stock certificate and lease was never transferred to my name. I was listed as the beneficiary in her will, but the will was not probated. The co-op is in NYC but she lived in NJ. I now need to sell the co-op - please advise on what I need to do. Thank you for your kind assistance.
  • Mom dies with 3 kids. Youngest living in cooperative. Doesn't pay maintenance. Gets evicted. Other brothers don't know whats going on. Coop goes to surrogate's court 3yrs after mom dies for a Public Admin. Now kids come in to be Admin. no problem. Will sell. But can they challenge huge arrears owed to coop which continue to accrue? prop. worth about 150,000. But arrears of maintenance already 30 grand and climbing. Plus they will want additional fees and attorney's fees. How to cap. How to stop the bleeding?
  • Me and my mom are co owners of a coop without a mortgage. My mom has passed away and she never lived in the coop. What should I expect in terms of ownership in Queens, New York.
  • My husband and his mother are co-owners of the coop apt we live in. She does not luve with us. I have lived here over 10 yrs and contributed to the renovations, if my spouse dies or we divorce do I have any right to the home I helped build for us?
  • Inherited a co-op and Board rejected transfer of shares. We cannot sell the place or even clearn it out and the executor says we are responsible for the maintenance. We do not want to live in or rent this only to sell it. What is our recourse.
  • My mother purchased an apt in a cooperative for $27,000 cash. Her monthly payments were $865. This $865 is not to pay back any loan but for the carrying charges on the unit. She has now passed away and I have inherited this unit. The unit has been empty and on the market for 2 1/2 years without success to find a buyer. Every month this unit does not sell $865 is shaved from the unit's sale price. So in a few months it will be worth nothing to me. I have no intentions of living there. They are making the people who inherit pay for these monthly charges. Is this legal?
  • My father passed last month and the place he lived in was going COOP in October next month. He signed a Purchase agreement already. The mangmt company and lawyers want us out. His place is valued hig. Their lawyers said we cant purchase if we already own property and dont live in NYC. We have to remove his things by this weekend. What should we do? Do we have rights to his place as inheritance if they go coop next month?
  • It is important for Co op and condo owners to get good advice
  • Where might I find answers to posters' questions above? Thanks.
  • My brother, father and stepmother had equal shares in a NYC co-op. My father died in 2000 with no will. My stepmother died in 2011 with a will but never had my fathers shares probated before she died. In her will she left everything to my step siblings. Can we now claim 100% of my fathers co-op shares as ours, we are his natural born children. Or does 50% and the first $50,000 go into my stepmothers estate?
  • If you own a cooperative apartment and can't sell or rent it (bad area) can it be "given" back to the association and if so what kind of terms would one expect
  • Can you just move into a co op apt after a family member dies and your not on lease?
  • am i responsible for taxes on a condo willed to me? They are due soon. (the final hearing has not happened yet). Also, I had been living with my partner when he died. (my name was on the title)
  • The elderly shareholder was placed in a nursing home and she had a roomer who was arrested. His daugther moved in her apartment. A year later the shareholder died and the roomer's daugther is still there. The family want to get into the apartment and she won't give them access. What can the family do. The daugther have lived there for a year and have not paid rent.
  • 2 or 3 questions.. my daughter is 26 and has been ill ..she will be going to graduate school in Sept 2013,..I want to put her on my co-op stock certificate..I have to fill out anACRIS form and have a closing..will I have any problems? (She is in my will) ..I am not well and I am aware of the five year rule..if she is living with me and I go on gov't assistance can they take the apt. to pay back any moneys owed.? What would be the best way to go about leaving her something?
  • Hi - My mom owns a co op in Clearview Gardens in Whitestone,NY. As the executor of her estate, I am attempting to place her co op in an established trust. After reviewing her purchasing docs in 1995,there are no restrictions or stipulations that bars her from doing so. When I spoke to the attorney from the co op,he stated that they don't allow trusts. In this day and age I was shocked to find out that they won't allow something so fundamental in estate planning. How can they be so arbitrary with something so important. They won't even allow transfer of shares unless you are an occupant. In her original occupancy agreement it specifically says you can .Do the original purchasing agreements mean anything or they can change all the rules as they go along.
  • I bought my mom's Condo for cash. So now I need to know, how to put the name on the title / Deed, in my name??
  • We are the heirs to a co op estate. a proprietary lease nor an occupancy agreement has never been provided to the tenants of the co op which includes the deceased shareholder and the heirs. The co op is 60 years old. After the death of our parents the estate continued to pay the carrying charges for 6 years. Last year in 2012 we stopped paying the carrying charges because of a lack of understanding of accumulating debt on the unit when maintenance was being paid. Where do we stand as far as receiving the shares in order to sell the apt. Shouldn't we have the shares already by virtue of being the heirs through a will that has already been probated. What are the steps to selling the unit under these conditions
  • My mom just passed she has a co op in queens NY. a good will was left and everything goes to me the entire estate I am also in the will as executor. Do I still need to probate the will and should the co op board automatically change ownership to me. It has been for sale even before my mom passed.
  • My mother owns a COOP in Brooklyn, NY. The mortgage has been paid off for years and the maintenance is current and continues to be. My mother is very ill and will not be returning to her Coop and has asked us to sell it - the proceeds of the sale to be divided between my sister and I. I am currently her POA so I can execute the selling documents for her. However, my question is, with regard to the proceeds being divided between my sister and I - what, if any, legal documents and/or recordings need to take place in order to ensue this is legal and - who will be responsible for the gains tax, my mother or my sister and I - and if split between the 2 of us, does that mean that we both have to pay capital gains tax? If so, how do, and to whom, do we record our gift / inheritance monies to? Additionally, if my mother passes before we find a seller, and I am the executor of her will, and the will clearly states that the COOP is to be left to both of her children, though neither want to live there, but to sell it immediately, what steps (step 1 through _____) do we need to take? And again, if the COOP is in my mother's name, but she has already passed, how do we sell it in her name, merely by her Will that states that she is leaving it to us? And again, how to we handle any capital gains tax, if any, when splitting the proceeds. We know nothing about probating, nor do we want to. We both agree on what is in my mother's will, neither are fighting the other on it, so is a probate necessary? If so, why and how - what do we do? I would greatly appreciate your swift response. My mother suffered a horrific injury 5 months ago and is becoming quite more ill by the day. With this heart wrenching sadness in our lives, the last thing we want to have to contend with is a problem or lack of knowledge in being able to sell my mother's coop, as she wishes, and divide the proceeds between both of us / 2 daughters. We've already all been through a nightmare the likes of which is incomprehensible, regarding my mother's injury and what she has endured and continues to endure.
  • I have recently separated from my husband of only two years, and am contemplating divorce. How would I go about having his name removed from stock certificate for co op I have personally owned since 1986? There is no mortgage on the apartment and for the two years of marriage he has never paid anything toward the maintenance. Do I need his approval to remove him from the stock certificate? Thank you.
  • Is it legal for 2families to buy a co op they are brother and sister and have children
  • I have offered to buy and been approved to purchase outright a coop unit in Leisure World Seal Beach CA. I already have in place a Living Trust dated July 2012 with my 3 children as beneficiaries to my estate. I am about to sign the escrow papers this week. Will the corporation want to see my Trust document? Should I inform my estate attorney of this decision before signing? Or should I first attend this meeting and learn what the specifics are in the L.W. Corporation regulations regarding inheritance of this coop? There is no co-owner and I am a widow. Thank you.
  • Can someone please reply to all these great questions?
  • A condo put in trust in Florida do the beneficiares have rights to our meetings etc. the auditor does not list them but mother says they are tax only says trustee with her name. Her one son constantly argues over all topics
  • Question? Medicaid question My mother and I jointly own her co-op apartment. She is 90 years old and still lives in the co-op. If it becomes a necessity for her to need homecare and possibly go on Medicaid, what would happen to the co-op after she passes? Will Medicaid need to be repaid her share of the co-op? Should I transfer the stock certificate into my name solely? Answer The apartment should become legeally your and medicaid would not require you to be repaid if you are the o owner or an ault child living with yur mother at the time of her death
  • If the children of the passed away owner of the coop wish to sell the property, can they do that?
  • where are the answers to all these questions?
  • My Mom passed last December. She occupied her co-op for many years. during the early years of occupation she took in a baby girl who has lived with her in the co-op for at le4ast twenty-one years. My Mom added her name to the co-op lease as a tenant. My sisters and I would like to sell the co-op but we've been told by the co-op manager that the tenant has a right to stay as long as she wants. Without a massive amount of legal bills is there anything we can do.
  • Are these questions asked in expectation of a response from someone with expertise responsible for addressing them on this site, or do they merely get asked and not answered? I would like to be educated on many of the questions asked by others.
  • Coop shares stocks on both our names, we don't live together 5 years , how to remove his name