Multiple family members owning property

[bluebrooks]

What is the name of your state (only U.S. law)? NJ for owners, but property resides in NY

I currently own vacation land (woods, hunting, fishing with a camp/house on it) with 50%-50% ownership (me and my uncle) as tenants in common.
My uncle would like to soon change title on his interest to his 3 sons (at 16.6% each).
Our family all gets along well, and we all use and enjoy the property. But because this is the time to alter the deeds, we would very much like to protect the land...mostly from ourselves. By that, I mean protection from bankruptcy, divorce, partition, sale outside the family, a minimum property percentage allowed.

The land has a fair value, which presents another problem. If we ever sold the property to one another, we'd like to cap a maximum on the sale price. (at current fair market value, any of us would have considerable trouble coming up with the money to buy out any other)

So I have been investigating a few avenues: a land trust, an LLC, an S-corp, or even just ways to rewrite the deed as tenants-in-common but with clauses to cover our needs.
With the exception of just writing the deeds with clauses, everything else seems costly. I thought an LLC seemed to look like the best option (because we could write an operating agreement to cover everything we want), but annual fees and accountant costs seem to make this cost prohibitive.

Anyone have advice on what would make this work best with minimum ongoing maintenance costs?

 

[tranquility]

If you are not going to make any money and the property is just for personal use, use a trust.

If there is going to be a profit, use an LLC.

Don't even dream of changing the deed to add all the protections you seem to want. Up, up, up, you just thought of it again.....stop it. Deeds need to be simple. Complex deeds cannot be fixed without tons of money and it always seems like they need to be fixed.

 

[bluebrooks]

If you are not going to make any money and the property is just for personal use, use a trust.

No profit involved, so no problem there.
So we could make a land trust that includes all the provisions we are looking for?

Specifically, the things we want are:
- no sale outside of the other owners without prior offering it to the others at a set/fixed price
- not allowed to divide any share below 16% of the total.
- naming of heirs in the trust, so that any will or lack of a will cannot go against our agreement (we're worried about each others' wives or parents getting the property, which we want to avoid)
- some provision to cover a situation where one of us just stops paying their share of taxes, where the others could buy them out forcefully (again, at a minimum set price)

With a trust, are we protected in case one of us goes bankrupt? What would happen to the property if that were to occur?

Thanks!

 

[tranquility]

Anything a person can own can be gotten to for their debts. NOTHING will prevent that. However, you can name the beneficiaries in such a way to make none of them really "own" anything but the right to see the property.

You will need an attorney and it will cost some money to do what you want. The trust will be difficult to write. (As would the LLC or other organizing documents.) Also, I'm not so sure all your goals are compatible. The law does not like encumbering property with dead hands. (In that the dead determine what one can and cannot do with it.)

 

[latigo]

What is the name of your state (only U.S. law)? NJ for owners, but property resides in NY

I currently own vacation land (woods, hunting, fishing with a camp/house on it) with 50%-50% ownership (me and my uncle) as tenants in common.
My uncle would like to soon change title on his interest to his 3 sons (at 16.6% each).
Our family all gets along well, and we all use and enjoy the property. But because this is the time to alter the deeds, we would very much like to protect the land...mostly from ourselves. By that, I mean protection from bankruptcy, divorce, partition, sale outside the family, a minimum property percentage allowed.

The land has a fair value, which presents another problem. If we ever sold the property to one another, we'd like to cap a maximum on the sale price. (at current fair market value, any of us would have considerable trouble coming up with the money to buy out any other)

So I have been investigating a few avenues: a land trust, an LLC, an S-corp, or even just ways to rewrite the deed as tenants-in-common but with clauses to cover our needs.
With the exception of just writing the deeds with clauses, everything else seems costly. I thought an LLC seemed to look like the best option (because we could write an operating agreement to cover everything we want), but annual fees and accountant costs seem to make this cost prohibitive.

Anyone have advice on what would make this work best with minimum ongoing maintenance costs?

YES! Sell the property, split the proceeds and go on your separate ways. Don't make a bad deal any worse than it already is.

If you insist on retaining joint ownership, which you will eventually rue and kick yourself over - especially when nephews and their hoard of friends begin to swarm over the property just when you would like to relax there - then you and uncle get with an attorney knowledgeable in real property law and draw up a TIC Agreement (tenants in common agreement) to include a buy and sell.

BUT don’t even think about transferring the property into a trust or to some fictitious entity. Suppose a sudden financial crisis came upon you and you need to liquidate your interest. Try doing that efficiently and in good time and cheaply when your name is not on the title.

A TIC can do everything that these other vehicles can, plus cheaper and with no “maintenance costs.!

 

[armstrong1988]

hello

I know your part. It is really hard when you have relatives claiming your property, But I think it can be part rights no less no more.

 

[bluebrooks]

YES! Sell the property, split the proceeds and go on your separate ways. Don't make a bad deal any worse than it already is.

If you insist on retaining joint ownership, which you will eventually rue and kick yourself over - especially when nephews and their hoard of friends begin to swarm over the property just when you would like to relax there - then you and uncle get with an attorney knowledgeable in real property law and draw up a TIC Agreement (tenants in common agreement) to include a buy and sell.

BUT don’t even think about transferring the property into a trust or to some fictitious entity. Suppose a sudden financial crisis came upon you and you need to liquidate your interest. Try doing that efficiently and in good time and cheaply when your name is not on the title.

A TIC can do everything that these other vehicles can, plus cheaper and with no “maintenance costs.!

A appreciate the sentiment, and I understand your stance on why the property is trouble waiting to happen. However, I am in the 4th generation of ownership. My two sons will be the 5th. A have a good relationship with the other owners (my uncle and 1st cousins). We're only in our 30's and 40's, and we all have the same interests in the property. So we're expecting the decisions we make now to last our lives, which hopefully are another 30+ years. I know it may be a long shot to think our children's generation will make it another 30+ or more. But it's worth the effort for us to try.

That said, a TIC agreement is new to me. Seems each new person I talk to has yet another idea of how to organize this. This might just solve my problem. (here's to hoping my lawyer doesn't charge us a small fortune to put it together) Thanks!

 

[tranquility]

I like latigo's suggestion, but suspect he underestimates the difficulties involved in a TIC. But, assuming he is correct, the limitation of alienation is a FEATURE of the trust which can be used to accomplish part of the OPs goals.

If the OP's goals change to easy rather than keep, a TIC may be worthwhile. However, there is going to be a substantial discount on selling any particular portion to anyone not already a member. Are there any Hatfield's who want to buy into McCoy's TIC?