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Monday, August 31, 2009

Any Estate Lawyers Want To Weigh In On This?

I am being pulled, kicking and screaming, into an inheritance dispute which I don't have much interest in getting dragged into. But given that I am being sucked into it anyways, I thought I would throw the question out and see if anyone has any opinions on it.

The estate in question belongs to my wife's mother's father (maternal grandfather). He lived in a two-storey house located on prime real estate with a lot of land around the house. Real estate developers are salivating at the opportunity to tear the existing building down and convert the whole thing into a multi-storey apartment building. Except for some minor details standing in the way.

My wife's grandfather had 4 children. Let us call them A, B, C and D. A and B are sons while C and D are daughters (C is my wife's mother). A has one son (let us call him E) and B has two sons (called F and G). My wife's grandfather was a learned scholar and college professor, but he was also old-fashioned. This was reflected in his final will. I have reproduced below, the relevant sections of the will as it relates to this piece of real estate.

  • Paragraph 1: The first floor of the house shall belong to and be owned in perpetuity by my son A's son, E. The second floor of the house shall belong to and be owned in perpetuity by my son B's sons, F and G.
  • Paragraph 2: The vacant land around the house (back, front and left and right side) shall belong to all my four children, A, B, C and D.

What possessed him to write the will as he wrote it is anybody's guess. But it has resulted in a big family dispute that shows no signs of being resolved anytime soon. Everybody is convinced that the best way for everyone to benefit from the value of the land would be to have developers tear down the existing structure and construct apartments on the land. There is no dispute on that issue. The dispute is in how to divvy up the proceeds of such a transaction. My wife's grandfather died about 3 years ago. The house is now sitting vacant with nothing happening because of this dispute.

To give some more background, the land measures about 7,200 square feet in total area. Out of this total area, about 1,800 square feet are occupied by the footprint of the existing building. The first floor of this building is 1,800 square feet in size and the second floor is about 1,700 square feet in size. For the sake of simplicity, we can assume that both floors are about 1,800 square feet each. The vacant land, therefore, is about 5,400 square feet.

After my wife's grandfather's death, one of the sons, B, also died. His widow represents him in the dispute. She and A are on one side of the dispute, while the two daughters, C and D are on the other side.

According to A and B's widow, the wording of Paragraph 1 in the will entitles them to the area of their respective floors. That would entitle them to 1,800 square feet each. They then want the remaining land divided up between the 4 offspring as paragraph 2 specifies. The problem is that since A and B will take over 3,600 square feet of area between them, the remaining land area is reduced to 3,600 square feet (given that the total land under consideration here is only 7,200 square feet). Dividing that up between all 4 of the offspring leaves A and B with about 2,700 square feet each, and C and D will get 900 square feet each.

Obviously, C and D have a very different interpretation of the wording of the will. According to them, Paragraph 2 trumps Paragraph 1 of the will. They want the 5,400 square feet divided up 4 ways, giving them 1,350 square feet each. They then want the remaining 1,800 square feet divided into two, giving A and B an additional 900 square feet each. So, that will give A and B about 2,250 square feet each, and C and D 1,350 square feet each.

That is where the battle-lines have been drawn and that is where they stand right now. On one end we have a split of 2700, 2700, 900, 900. On the other end we have a split of 2250, 2250, 1350, 1350. Because this issue has not been resolved, the house still stands on the land and there is no development going on. Because there is no development, nobody has been able to unlock the value of the land and make any money off it.

The daughters, C and D, have made some offers at negotiation and compromise to see if they can resolve the issue even it they don't get everything they feel they are entitled to. The first compromise they floated was to divide the entire 7,200 square feet into 6 parcels. They offered 2 parcels each to each of the sons and they would take 1 parcel each. This would result in a split of 2400, 2400, 1200, 1200. Because the will names the grandsons, E, F and G explicitly, they also proposed another compromise that would split the 7,200 square feet into 7 parcels. They would take one parcel each, give two to A and three to B (to account for B's two sons as opposed to A's one son).

That would result in a split of about 2060, 3090, 1025, 1025. B's widow is probably thrilled with this proposal, but A will hear nothing of it. C and D then said they would be happy with the 1025 square feet each that this compromise gives them, and A and B can split up the remaining 5150 square feet any way they want. But that has not been acceptable to A either.

Each side has tried to bolster their arguments with various legal opinions, etc. None of the opinions have been in written form and each side claims that the lawyers they have consulted have agreed with their interpretation of the will (huge surprise there!).

All the participants in this drama are getting old and they realize that it is important to get this resolved before more of them die. So, they have started pulling in bystanders into the dispute in hopes of convincing family members to take sides and exert pressure on the other side. My parents were approached by A for precisely that reason. My parents did not want to get involved in the dispute, so they passed it off to me.

I had never seen the will or delved into the details of the dispute before now (even though I knew my mother-in-law was involved in some dispute over the division of her father's estate). Reluctantly, I had to get a copy of the will, a copy of the land survey, etc., and start coming up with some way out of this mess.

Now, truth be told, I consider A's stand to be quite extreme and I think he should compromise to some extent. If not for legal reasons, then for purely family reasons. After all, he is in a dispute with no one except his own siblings. The wording of the will is ambiguous in an unfortunate way, so it does make for a dispute. But to come up with an extremely favorable interpretation and not budge from it seems mean-spirited to me. Unfortunately, I am not privy to all the other internal politics of my wife's family, so perhaps this is a manifestation of some other problems that have been unresolved in the past.

For my part, I did try a slightly different tack in my attempt at a resolution. The main problem, as I see it is the building itself. The land can be developed only if the building is razed. But, the building is two storeys tall and once it is razed, the land underneath it reduces the area back to just one storey instead of 2. That to me is the heart of the dispute.

I asked around if any real estate developer or anyone else could give me a value for the 5,400 square feet of vacant land, and the 2-storey house along with the 1,800 square feet it sits on, separately. I thought I would be able to then use those two values to come up with a split that would be in terms of total value.

Unfortunately, I haven't been able to get a proper valuation on the house by itself for various reasons. The most important reason for this is that the house is very old (almost 80 years old) and is not in very good shape. The house is valuable for its location, but not for its structure or the building materials or anything else that is divorced from the location itself. So, in essence, the house along with the 1,800 square feet it stands on is only marginally more valuable than the 1,800 square feet of land by itself. By some estimates, the house is not worthless, but actually has negative worth because tearing it down will cost money whereas if it weren't there that expense would be spared!

So, that is where it stands as of now. C and D are willing to take as little as 1/7th of the total proceeds, but A and B (or at least A) insists they should get only 1/8th of the proceeds. It is surprising to me given that the difference is a measly 125 square feet, but it looks like that is what is standing in the way of a resolution to this issue. I guess it should not be surprising, given that most human conflicts are about trivialities, after all!

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