Letter writer wants to protect son’s investment in house on shared plot — MarketWatch
The writer of a letter to MarketWatch, whose house and large plot of land are held in a trust for the benefit of two sons, is considering building a small house for one of them. The son plans to pay for the work in cash, without a mortgage, but the plot cannot be subdivided into separate lots.
A house without separate ownership rights
The new structure will not have a separate address, cadastral lot or title document. It will be treated as an additional structure on the existing property. Construction costs are estimated at about $400,000, or roughly 30% of the current value of the property, which is estimated at about $1.2 million.
The letter writer plans to consult an estate lawyer to protect the son’s investment. Possible options include giving him a larger share of the trust after the owner’s death or leaving him the entire property while giving the second son a larger share of other assets.
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Risks of sale and inheritance
As MarketWatch writes, the son will invest money in a structure on land he does not own. If the plot cannot be subdivided, ownership of the entire property, including the new house, will remain with the family trust.
The columnist also noted that construction expenses will not necessarily equal an increase in the property’s market value. Among the possible complications, he cited a situation in which the property would have to be sold, for example to pay for the owner’s care in a long-term care facility. In that case, possible compensation to the son for his investment would have to be determined.
Before work begins, the column advises putting agreements in writing and consulting an experienced estate planning lawyer. Possible mechanisms may include the son’s right to compensation for his investment or adjusting his share based on a future property appraisal. It is also worth determining the reasons for the ban on subdividing the plot, including minimum area requirements, road access or environmental restrictions.
