Avoid Shortcuts When Addressing Inherited Property

A friend recently asked me for some legal advice. She is much younger than her partner, and they live in a house he built years ago. He has a terminal illness and has told her he wants her to stay in the house after he passes. However, he would like his grandson to inherit it once she is ready to move. What should they do?

This family needs to be intentional and open, working to avoid shortcuts when evaluating options. 

Taking a measured approach, with five concrete steps, can help create a sustainable and comprehensive resolution: identify-talk-locate-share-execute. The legal options to address the property could include drafting a will setting forth intentions, deeding a life estate, creating a trust, and executing a transfer on death deed, signing a lease for a term of years, or creating an LLC with members. However, drafting documents should not be the first step but rather the last. Before pen is put to paper, every person impacted should determine his or her goals. Then, those impacted should share them to create a resolution that satisfies all stakeholders. Where do you start? What are the positive steps to create a proactive and complete resolution?

Positive Steps

1: Identify-What are each person's goals related to the house? In my friend's situation, her partner, the grandson, and any other person expecting to inherit the property should figure out their goals. Professionals, such as mediators, mental health professionals, financial experts, or collaborative lawyers, can help identify goals.  

2: Talk-Once the potential stakeholders have identified their goals, they should meet in person or virtually. Some families benefit from including a third party or neutral to facilitate that discussion. The third party can be a friend everyone trusts or a clergy member. A professional mediator can also work to create a way to integrate the goals into a win-win proposal and may be able to help brainstorm legal options to achieve the goals.

3: Locate a lawyer-Once the stakeholders reach a consensus on shared goals, the owner of the house may begin to work with a lawyer to select the best legal structure to reach the shared goals and draft necessary documents. A lawyer trained in collaborative law may be exceptionally well qualified to integrate the stakeholder's goals into a proposed legal solution.  

4: Share-Once drafted, the documents should be shared with everyone interested in this situation, and their input should be encouraged. If any conflict arises, meet again with a neutral to revise the agreement.

5: Execute-With everyone on board, my friend's partner can execute the documents with confidence that the stakeholders will have their goals met. No one will be surprised even when a situation involves loss and pain. Everyone can move forward with the confidence that they are completing a plan that was developed together. 

What about the shortcuts?  

I can imagine any number of shortcuts to this five-step process. However, (as Washington Irving once observed) they are like most shortcuts, "… an ill-chosen route." 

Shortcut 1-No one takes any formal action. My friend doesn't want to do all this talking and meeting; after all, everyone seems okay. She comments, "We talked it over, and we just want to be flexible as time passes. I trust everyone and it will be okay." Why not? As time passes, interests may change. The stakeholders must put their intentions in writing to ensure their interests will be met. Everyone may develop unsaid expectations-- without flushing out ideas, expectations, hopes, and dreams. These unmet expectations will likely increase sadness, pain, and disappointment. 

Shortcut 2-The partner meets with a lawyer for an hour, who drafts documents he signs. Since this is a legal problem, the partner might skip the difficult conversations and go straight to meeting with a lawyer. The lawyer drafts a will encompassing the partner's intentions, and it's signed and put into the safe deposit box. What's wrong with this? For months or years, no one knows or understands what is happening. When they finally find out, the partner may have passed and can't explain his intentions or how the legal documents do not adequately reflect them. The grandchildren and my friend have little input and may need help understanding the document when they finally read it.  

There are countless other shortcuts, and sometimes, some of them may work. But families looking for security and stability should take the time to address their concerns fully. Families should not take the ill-chosen route when they place a premium on relationships and maintaining a special property. Any shortcut that does not include extensive communication and recording intentions may do more harm than good.