6 Ways to Divide Real Property
Many estate plans provide for all assets to be divided equally between the children or other beneficiaries. This is rather simple to do with cash, stock or other fungible items, but what can an Executor do to equally divide real estate such as the home or family farm. Here are six (6) ideas:
- The property can be sold – If the property is sold to one of the beneficiaries or to a third party, the proceeds from the sale can then be divided equally.
- The property can could be divided – The property could be resurveyed and divided into three separate parcels, one for each of the children.
- Joint Tenancy – The entire property could be transferred into all 3 children’s names. Each would have equal right to use and responsibility to maintain the property. During their lifetimes each child could sell his or her interest to someone else. The creditors of each could place a lien on the property. The spouse of each would have dower interests. Upon the death of each, his or her interest would pass to his or her heirs or beneficiaries.
- Joint Tenancy with Right of Survivorship – All 3 children would have equal interests, but the spouses would have no dower interest and upon death a child’s interest would pass to the surviving children. Upon the death of the last survivor, the entire property would pass to the heirs or beneficiaries of the last survivor. If any of the children sell his or her interest, the survivorship provision would no longer apply to any of them.
- The three children can establish a trust to hold the property – The trustee(s) would be responsible for managing and maintaining the property in accordance with the terms of the trust agreement. Those terms can be very flexible or very specific as to how the property is to be handled. The terms can be changed by agreement among the children or other beneficiaries. The trust terms will dictate how the interest is to be divided upon the death of any one of the children.
- The children could establish a Limited Liability Company to hold the property – An LLC is a legal form of company established through the state. Instead of owning the property directly, each child would own an interest in the company. The manager of the LLC would deal with the company operating agreement and file the necessary company tax returns and reports to the state.
The Executrix and her attorney should discuss the various alternatives with the beneficiaries to determine the most appropriate solution for their unique situation.