Leaving a co-op apartment as an inheritance may prove difficult.
In Kansas City, there are some rather tony co-ops in an area generally known as the Country Club Plaza.
These various co-ops are home to professional athletes, local celebrities, and many retirees.
By the way, their view of the Country Club Plaza Lights is something to behold from Thanksgiving Day through the holidays!
Location, location, location.
Regardless where a housing co-op is located, this form of ownership can bring complexities to estate planning.
One New York couple recently discovered this.
It seems they had purchased a New York City co-op studio apartment for their adult son.
Their son has special needs and is capable of independent living with the support of an agency.
According to a recent The New York Times article titled “Can I Leave My Co-op to My Heirs?,” the parents asked the board for permission to leave the property to an irrevocable trust to preserve the use of the apartment for their son when they die.
The board said “no” to this request.
Also, leaving the co-op directly to the son through a last will and testament or otherwise is not a viable option.
Doing so would disqualify the adult son from his government benefits.
Even if the parents were to leave the apartment within a trust, its is common for a co-op board to retain the right to approve or deny the proprietary lease or transfer of shares.
If the request is denied by the board after the death of the owners, the apartment could be sold and equity distributed to the heirs.
In some cases, the lease for a co-op may limit the ability of the board to withhold consent when the transfer of an apartment is to a financially responsible family member.
Generally, trusts are not treated as a financially responsible entity.
Although the parents could take a risk and leave the co-op apartment to their son through their estate plan, the board could still refuse the transfer after death.
The parents may have more peace of mind in selling the co-op, placing the proceeds in a supplemental needs trust, and purchasing a condo for their son as an asset of that trust.
The son could live there before and after the death of his parents.
Condos generally do not require approval for the transfer of property through an estate plan.
Before purchasing the condo, it would be helpful to have an experienced estate planning attorney review the rules of the condo regarding ownership transfers.
Although uprooting their adult son from the co-op would an inconvenience now, it would provide greater security and peace of mind regarding his future living arrangements.
Reference: New York Times (Oct. 1, 2022) “Can I Leave My Co-op to My Heirs?”