Q&A: Will vs. Trust

Q&A: Will vs. Trust
Q I have been a shareholder in my Brooklyn co-op since 1986, and am facing a problem that has come up since my husband’s death almost 18 months ago. My husband was an active participant on our board of directors—past president, vice president, committee chairperson, and a proactive director for our co-op. Shortly after he passed away, a directive was issued from our board that for a $25 fee, shareholders could add or change a name on a lease. I considered doing this and adding my daughter’s name, but by the time I was ready to do so, I learned that the policy had changed and that new names could not be added. However, for a $50 fee, my husband’s name could be deleted from our lease, and—to guarantee my children the right to sell the apartment without difficulty upon my death—I would have to draw up a “living trust,” because a living will is not sufficient to insure the proper handling of my estate. Is this really the case?

-Willing Shareholder in Brooklyn

A According to Joseph G. Colbert and Richard H. Lewis of the Manhattan-based law firm of Kagan Lubic Lepper Lewis Gold & Colbert, LLP, “if you would like your children to be able to sell the apartment after your death without surrogate’s court proceedings, you may have several options, depending upon what your proprietary lease and cooperative board permit.

“You propose adding your daughter’s name to the apartment so that you and she own it jointly. Such a change may require the consent of the co-op board. With joint ownership, if your daughter survives you she will be the sole owner of the apartment after your death by law. Although no court proceedings would be necessary with respect to the apartment, your other children would not inherit any share of the apartment. Presumably, you desire to have all your children share your entire estate equally, and so this arrangement would defeat your estate plan. The daughter you named as joint owner could, of course, sell the apartment and give a portion of the sale proceeds to your other children, but she can’t be forced to do so, and if she chooses to do so the amount that she gives them would be a taxable gift. There is also the possibility that the daughter you named as joint owner will die before you. In that case, you will have accomplished nothing. Since you would then be the sole owner, surrogate’s court proceedings would be necessary at your death.

“You could perhaps add all your children as joint owners, but if any of them die before you, the deceased child’s surviving descendants would be disinherited. And even if you manage to avoid probate with regard to your apartment, if you have any other property besides the apartment in your own name, court proceedings would nevertheless be required to administer that other property.

“You could establish a Revocable or Living Trust during your lifetime and transfer your apartment to the trust, naming yourself and perhaps a child as trustees. You would retain the right to reside in the apartment during your lifetime and to have any other property you add to the trust distributed to you at any time. You would direct in the trust how the trust property is to be distributed at your death, such as to your descendants who survive you, per stirpes. Per stirpes is a stipulation that, should a beneficiary predecease the testator, the beneficiary’s share of the inheritance will go to his or her heirs.

The trust would be subject to revocation or amendment by you during your lifetime. If executed in the manner required by law, the trust will be effective upon execution and funding. Since the trust itself directs how the trust property is to be distributed at your death, no probate proceedings would be necessary as to any property owned by the trust (but if you inadvertently fail to transfer all your probate property to the trust during your lifetime, probate or administration proceedings will be necessary after your death to administer all such property not so transferred). Also, revocable trusts, unlike certain other trusts (such as Qualified Personal Residence Trusts) provide no estate tax advantages.

“Some cooperative corporations do not allow co-op units to be transferred to trusts, although many do. Also, you should expect to pay all the legal expenses of the cooperative corporation for reviewing the trust and for preparing any documents the board will require as a condition to the co-op board’s consent.

“If your co-op corporation will not consent to the transfer of your apartment to a trust, your interest in the apartment will pass under your will or, if you don’t have a will, it will pass to your heirs under the law of intestacy. In either case, probate or estate administration proceedings will be necessary to determine the validity of your will (if any) and to have the court authorize your estate fiduciary to administer your estate. Generally, these proceedings are completed within weeks, though disputes among beneficiaries/heirs can, of course, cause delays and add legal expense – but that is true of trusts, too. (A “Living Will,” which you mentioned in your inquiry, is not used to dispose of property, but rather to express your intentions about health care choices.)

“Lastly, if your co-op stock certificate is dated earlier than January 1, 1996 and if it does not designate your husband and you as “joint” owners, then your husband would be deemed to have had a 50 percent “tenancy in common” interest in the apartment. Probate or estate administration proceedings would be needed with regard to his interest in the apartment. If, by contrast, your co-op stock certificate is dated after that date and lists you both as owners without designating you as tenants in common, then you became the sole owner of the apartment at your husband’s death by reason of your surviving him. In that case, estate proceedings would be unnecessary as to the apartment. This different result is due to a change in the law that became effective January 1, 1996.”

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  • Excellent explanation. Tell that to Legal Zoom.THEY KNOW NOTHING ABOUT COOPS
  • My husband and I bought a coop apt in the Bronx in 2004, but only my name was put in the stock certificate, his ommitted for reasons pertaining to his estate. In 2009 I created a Living Trust with both our names as co-trustees, and I asked the management to charge the ownership to the Trust instead of mine alone. They refused. They claim my husband has to apply like any applicant buyer, pay $400 non returnable fee for processing application and $600 to the coop lawyer to "review". No garantee that the board will approve. Is this correct? I thought a spouse doesn't need board approval. $1000 seems too much, since its non-returnable if the board rejects him.
  • I am in contract to purchase a coop in NYC. I just found out the building requires that you pay $1000 to the management company and $5000 to board attorney for review. Now that is ridiculous.