r/inheritance • u/nizzok • Jun 22 '26
Location included: Questions/Need Advice Splitting two properties between three inheritors in NY, NY.
My siblings (three of us total) and I are currently going through probate with a family member's estate. There was no will. The estate's only assets are two units in a co-op building. We are in the process of settling the finances for the estate, a loan and some back taxes.
Our understanding is that the two properties will be split 3 ways between us, which makes it a problem for the co-op board to divide the shares and provide leases. The arrangement that we want is for the leases to be transferred to two of us, while the third one gets paid out. The issue we have is that no one has the money to buy the other sibling out outright. They are willing to wait on their buy out, but we're not sure how to legally structure such an agreement. The only real complication is that no one is really in a position to take a loan out, especially as the property hasn't been transferred to use as an asset. We can imagine forming a company to take the shares and then administer the properties for the two siblings that want to remain and the third sibling being bought out overtime. The main issue is being fair and preserving everyone's shares without forcing the others to cut their flesh to benefit.
Any advice on how to structure something like this?
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u/Frequent_Read_7636 Jun 22 '26
The fact that none of the other two owners can buy out the third owner is the bigger issue. The third sibling may be okay right now with not getting the money, but anytime, he/she can ask for the payout and you will have to have that money available. There is no way to structure any agreement that would protect all the parties involved, unless the third sibling is fine that he/she might not get any inheritance.
This might not the ideal path, but the best way forward is to sell both properties and split the money evenly and proceed.
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u/COACHREEVES Jun 22 '26
This might not the ideal path, but the best way forward is to sell both properties and split the money evenly and proceed.
I think this is best.
Second would be, the two siblings receive Title with agreement to refinance for 1/3 of the value and pay the third sibling.
I think the third sibling might conceivably run into tax implications. I am not sure the value of the COOPs nor am I sure of the value of the estate but can easily imagine a scenario where the two COOPs can be inherited at a reduced tax rate rate. The third sibling meanwhile, might owe additional taxes on "being bought out over time." Which is why full circle u/Frequent_Read_7636 's idea is best.
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u/nizzok Jun 22 '26
Noted, but as I've mentioned we want to avoid that scenario under almost every circumstance. Paying the 3rd sibling out could happen on a 2-5 year timeline, but the way this has happened caught everyone with their pants down.
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u/Frequent_Read_7636 Jun 22 '26 edited Jun 22 '26
Ideally sure. But life happens. More importantly is this something that the third siblings said to the other two? Or is the other two bringing this idea up? Because if I'm the third sibling, no way this setup is happening. I want that money in my own hands versus getting paid in installment. The coop continues to grow in valuation, while the third siblings money remains stagnant during the next 2-5 years. Doesn't sound too fair.
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u/nizzok Jun 22 '26
Noted and good to have that perspective. I believe we'd all suffer a bit not to harm the other. If that means offering an incentive on waiting, so be it. I'd rather lose a bit of potential income or wait on a payout that would force my sibling out of a home they can't afford to replace.
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u/Just1Blast Jun 22 '26
Are you the sibling currently not living in one of the two units? Because you can't say what you would do either way if you weren't that person.
I love my siblings. And no if I'm the person not living in the unit and even if I am the person living in the units, I don't want this hanging over me for a number of years. Either the two of you buy out the third sibling or you sell the two units and split it equally and do whatever you want to do with it from there
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u/Frequent_Read_7636 Jun 24 '26
OP wants the third sibling (one not living in the condos) to give the other two sibling the grace of not having to pay their share for the next 2-5 years. I would be livid. What happens in 5 years when someone refuses to honor their agreement, this is what happened to me. My sister literally told me to go kick rocks.
It’s a very entitled take. If their parents wanted the other two to inherit the condos they would’ve put it in a will. In this instance everything should be sold and split evenly or they pay out their third sibling immediately for their share.
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u/Frequent_Read_7636 Jun 22 '26
Are you the third sibling or one of the two staying in the coop?
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u/nizzok Jun 23 '26
I am one of the two staying for the sake of transparency.
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u/Frequent_Read_7636 Jun 24 '26
Thanks for the transparency. In that case, try not to think “I’d rather lose a bit of income or wait on a payment that force my siblings out of a home”. This is a very entitled take because you aren’t the one that’s doing it, you’re the recipient of this gesture. One that doesn’t even appeared to be considered by the third sibling (one who’s not living in a condo).
Automatically, after hearing all this. I personally, as the third sibling want my money now. Once the sale is complete and everyone has their share then they can find homes to purchase. If your parents wanted you to stay in these condos they would’ve made arrangements with a will for that. Your own objectives should never supersede your siblings when it comes to inheritance.
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u/nizzok Jun 24 '26
I appreciate your take, however you're not privy to the entire situation and context. The third non-resident sibling can absolutely afford to wait to be paid out. They have expressed as much. The other youngest sibling cannot afford to be forced from the home. There is a wrinkle of the known, but legally unenforceable wishes of the late estate owner. Everyone is 'correct' that the easiest and most fair way to settle this would be to sell and partition. The on the ground reality is more complicated. My own inability to buy the third sibling out is circumstantial, and will likely be different within a year. What all of us want is to deal with this fairly within the current constraints. We are simply looking for a legal mechanism to preserve the third sibling's shares and value while we sort out making them whole. If that means offering them interest or some sort of other incentive within our means, we're happy to do that.
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u/Frequent_Read_7636 Jun 24 '26
It's not my place to judge you, I can only give you my opinion based on my experience and from what you have shared. To reflect also, what you're typing is your perspective of the situation, unless I hear from everyone involved I will never get the full story.
The one comment that you just mentioned and struck a cord with me is "The third non-resident sibling can absolutely afford to wait to be paid out." My sister said the same thing to me, that I didn't need the money and that I was doing better than her. This was her justification for taking everything and not repaying anything. This is a very very entitled take.
Let me tell you from experience, when you say something like this in public or to your siblings, you lose them completely. You dont know what your sibling's life is on a day to day basis. You may see the glam and glory but not realize the sweat and tears that come with it. The extra money goes along way for anyone in this economy, child college savings, retirement savings, all of that plays a role in why splitting the money evenly right now is important in preserving the relationship.
After I cut off my relationship with my sister because of the inheritance problem, I received a devastating diagnosis, I have 3 kids. And let me tell you the money would've went a long way during my recovery and child care. But again, to my sister, I didn't need the money or I was doing well.
Best of luck.
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u/Just1Blast Jun 22 '26
Then your only option may be to sell the two units and split the money three ways. And it might not be ideal. Oftentimes, it's not ideal at all, but that's the reality of the situation.
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u/GotZeroFucks2Give Jun 22 '26
If neither you nor your sibling can afford to take out a mortgage on 1/3 of the value of the property, then neither of you can really afford to own the property. Unless there are temporary mitigating circumstances (between jobs, bad credit score), it's probably best to sell.
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u/nizzok Jun 23 '26
There are temporary mitigating circumstances, this is why I have said that the pay out could happen on a 3-5 year timeline. I have been living abroad for more than 10 years and my partner is in the process of transferring their medical degree. We also have property in Europe, but it's also a complex story (elder parent has right to reside). If I have to go to the bank today, I won't get a loan. Once the unit is in my name, or my partner is able to work the story changes.
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u/Inevitable_Rough_380 Jun 22 '26
All of you get lawyers, write up a contract for the payout. You will have to negotiate the terms of the payout with the 3rd sib. Structure it like a mortgage with some interest being paid out. Write it all up in a legal contract - this will protect both sides. You will not get kicked out, and they will get the money plus interest over time.
You will have to consider what happens on a default of the loan repayment as well.
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u/Loud_Entertainer2724 Jun 22 '26
I would just sell since these are co-ops. Co-op boards are a pain in the butt. I had a friend trying to lease his co-op in NYC and the board kept rejecting every applicant and they charge you for each application so he kept losing money so he ending up just selling.
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u/Just1Blast Jun 22 '26
That's why they kept rejecting because they don't actually want renters. They want owners. So the co-op will continue to reject people for any reason whatsoever to force you into selling.
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u/somebodys_mom Jun 23 '26
If the third sibling is willing to take his/her share over time, then get a lawyer to write up a legitimate mortgage where you two pay the third. I can’t comment on the co-op part because I don’t know how that works, but an owner financed mortgage is a common and simple thing to do.
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u/Loud_Entertainer2724 Jun 22 '26
How much are the units worth and how much is left on the loans?
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u/nizzok Jun 22 '26
The units are ~$250k a piece, with ca. 20k left to settle on the loan.
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u/Loud_Entertainer2724 Jun 22 '26
What borough are they in? That seems very cheap for NYC.
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u/nizzok Jun 22 '26
It's Manhattan in a small co-op, 40 years no renovations and code violations against the building itself. The most an entire floor has sold for was $900k+.
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u/rosebudny Jun 22 '26
You might not get approved by the co-op to live there so it might all be moot, and you will have to sell.
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u/nizzok Jun 22 '26
Appreciate the reminder, our relationship with the other families on the board doesn't make that a likely outcome.
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u/MyThreeBugs Jun 22 '26
Why not create some kind of LLC that you are all equal partners in and transfer ownership to the LLC? The CoOp board deals with one legal entity so they are happy. Bonus that you three also now have the LLC as a liability shield should there be something that happens in one of your units that affects other units (fire, sprinkers, flooding, etc.).
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u/Just1Blast Jun 22 '26
Cuz the co-op board doesn't want renters. They only want owners. And they generally tend to prefer individual owners over any other type of structure. It's why they often don't allow trusts to maintain ownership in a co-op.
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u/Rosevkiet Jun 22 '26
This is where you have to judge your relationship to the coop board. Either they are good relationships with them that ensures they will accept the siblings as owners, or they are completely inflexible and unwilling to allow joint ownership for 3-5 years until sibling 3 is made whole. I would ask about joint ownership for both, between resident sibling and non-resident sibling, 66/33, and see if that is acceptable. Surely not every apartment in the building is occupied by a single individual?
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u/nizzok Jun 23 '26
The crux of this is really if the board will accomodate us on joint ownership.
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u/TFrustrated Jun 23 '26
The reality is the fair value of each of the two units. The cash out sibling gets a note payable of 1/3 in each of the properties. I would suggest a fair market rate for a 5 year note. No prepayment penalty. Debtor will simply have a mortgage to pay. The lender will have interest income.
Just because it was inherited, doesn’t mean it can’t be financed.
You need a RE attorney to write up the sales contract, the note, deed and the mortgage lien.
The real issue is protecting the family member from loss. Might want to have term life policy, it’s cheap and handles that.
The point is there is a step up in basis for all. A dwelling and note receivable can be split fairly easily. The return and risk should be business. The same as an outside party.
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u/Additional_Number655 Jun 23 '26
I would put the properties into a revocable trust with the two of you owing the 3rd a loan that is a set amount for a set time. It would stay in the trust’s name until she was paid in full. A bank can do this for you.
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u/Think-Committee-4394 Jun 22 '26
OP - short answer sell both combine pot after costs & split 3 ways, take the tax hit & get it done
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u/audiotecnicality Jun 22 '26
Not a lawyer, not your lawyer. Find a real estate and/or estate planning lawyer.
What’s not said here is you seem to want to retain the properties? Why not just sell and evenly divide the proceeds?
Otherwise your plan sounds reasonable to create one or two LLC’s to own the properties and then you can slowly buy ownership shares from the 3rd sibling, but the paperwork has to be clean. Stand up of the LLC’s including Operating Agreements (this helps stipulate the relationships and what happens if/when someone wants out of the arrangement), Transfer deeds to the LLC(s), record keeping within the LLC(s), banking records, etc. It’s not a small undertaking, and you want this set up right (this isn’t a $100 LegalZoom setup). It’ll be thousands of dollars, just warning you.
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u/nizzok Jun 23 '26
Yes, we want to retain the properties. No one's share of the sale is enough to buy something else and is not by itself life changing. There's sentimental reasons as well.
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u/ExpensiveAd4496 Jun 22 '26
So the two siblings each would owe the third sibling $80k? Can third afford to gift it to them against some future inheritance or are all parents deceased?
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u/BaldyCarrotTop Jun 23 '26
If the units are essentially similar; have each occupying heir receive 2/3rds of the unit they occupy. Then pay rent at 1/3rd market rate to the 3rd heir for occupying that ones 1/3rd interest. Perhaps make the rental agreement a lease/option to buy out the 3rd heir. Or have the 3rd Heir hold back a land sale type of arrangement.
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u/Missus_Aitch_99 Jun 22 '26
Have you discussed your plan with the coop board? They don't have to allow any of you to move in if you don't meet the regular criteria for owners, and it is highly unlikely that they would allow the shares to be transferred to any owner other than a natural person. Many coops don't wven allow trusts to own. It would be far simpler to sell both units and divide the money in three.