COOPERATORNEWS: Welcome Hal.

HAL COOPERSMITH: “Thanks for inviting me.”

CN: Let’s get right to it. Educate me—why hold co-op shares in a trust rather than personally?

HC: “The principal reason to place co-op shares in a trust is continuity. A properly structured trust can allow the apartment to be managed or transferred [upon the shareholder’s passing] without waiting for a Surrogate’s Court probate proceeding, which can be slow, public, and expensive.

“A revocable trust is usually about probate avoidance, privacy, continuity of management, and orderly succession—not, by itself, about estate tax avoidance. Revocable trust assets are generally still included in the grantor’s estate for tax purposes. However with a trust, a trustee can commence renovations and sell the co-op without probate.”

CN: What are the pros of trust ownership?

HC: “One of the principal advantages of holding co-op shares in a trust is the ability to avoid probate. If the shares and proprietary lease are properly transferred to the trust during the shareholder's lifetime, a successor trustee may be able to manage, transfer, or sell the apartment without first obtaining authority from Surrogate's Court. Trust ownership also provides continuity, ensuring that maintenance payments can continue to be made, documents can be executed, and decisions regarding the apartment can be handled with minimal disruption. 

“Additionally, trust ownership is not solely an estate-planning device; it is also an effective mechanism for ensuring uninterrupted management of a valuable asset during the owner's lifetime. Trusts are valuable planning tools in the event of incapacity; if a shareholder becomes unable to manage his or her affairs, a successor trustee can often step in and administer the trust assets without the need for a costly and time-consuming guardianship proceeding.”

CN: Alternatively, what are the cons of trust ownership?

HC: “One of the primary drawbacks of trust ownership is that the process is often more complex than many shareholders anticipate. Unlike simply changing the title on a bank account, transferring co-op shares and the proprietary lease into a trust generally requires board approval, and the board's attorney will frequently review the trust documents and require additional consents, guarantees, assignments, or amendments. The transfer can also involve legal fees, board and managing agent fees, document preparation, stock certificate transfers, proprietary lease assignments, and in some cases a formal closing. 

“In addition, while a trust may own the shares, the co-op board remains focused on the individuals who will actually occupy the apartment, pay maintenance, and assume responsibility for the unit's obligations. Finally, shareholders should not view a revocable trust as a tax shelter. While it can be an excellent estate-planning tool for avoiding probate and ensuring continuity of ownership, assets held in a revocable trust generally remain part of the grantor's taxable estate for estate tax purposes.”

CN: How common is trust ownership? Do boards object?

HC: “Trust ownership is increasingly common for New York co-ops, especially among older shareholders, blended families, and estate-planning-conscious owners. Boards historically were cautious, but many now approve trust ownership when the documents are properly drafted and the building receives adequate protections. Most boards are not philosophically opposed to trusts—what they oppose is uncertainty. They want to know who controls the trust, who may occupy the apartment, who signs the proprietary lease, and who stands behind the financial obligations. In general boards have become more familiar with trust transfers, though practices vary building by building.”

CN: Who benefits most from trust ownership, and why?

HC: “In many cases, a co-op apartment is not merely a residence, but one of the family's most significant assets. A properly structured trust can provide a clear legal framework for managing, transferring, and preserving that asset, reducing uncertainty and potential disputes before a crisis arises. Trust ownership tends to be most beneficial for older shareholders seeking to spare their families the time and expense of probate, parents who intend to pass a co-op apartment to their children, and blended families looking to balance a surviving spouse's right to remain in the apartment with the eventual inheritance rights of children from a prior marriage. It is also frequently used by high net-worth families as part of a broader estate-planning strategy and by individuals concerned about the possibility of future incapacity.” 

CN: Any real-life examples you can share with our readers?

HC: “A common example is an elderly person who owns a co-op apartment. If they die owning it individually, their children may need to probate a will before they can sell the apartment. During that period, maintenance continues to be due, access may be uncertain, and the board may not have a clear authorized party. If the shares are already in a revocable trust, the successor trustee can often act more quickly. 

“Another example is a second marriage. The trust might allow the surviving spouse to live in the apartment for life, while preserving the ultimate economic value for the owner’s children from a prior marriage.”

CN: Is there anything else you’d like to add that our readers should know?

HC: “Yes. The co-op’s governing documents matter. The proprietary lease, bylaws, house rules, recognition agreement, lender requirements, and board policy must all be reviewed before any transfer.”

CN: Hal, thanks so much for spending some time with us.  This was both informative and interesting.

HC: “My pleasure!”