Anyone who’s thinking about transferring assets should consider the impact of undivided interest. When overlooked this can cause problems with distribution of property and also conflict within the family. Undivided interest refers to a concept in which multiple people hold an interest in the same property.
A divided interest, on the other hand, assigns each party a specific part of the property. But undivided interest implies that every person has a stake in the entire property. This is very challenging when the property in question is part of an inheritance.
When a property gets inherited by multiple beneficiaries as undivided interest, every single beneficiary is then a co-owner of the whole property. That means that any decision related to the entire property, such as its sale, and its use must all be agreed on by every co-owner.
It might seem like everyone can get on the same page, but most family dynamics make it hard for every possible owner to agree or want to agree on every aspect of how to manage an asset, especially when that item is a piece of property.
Particularly in the case of family members or co-owners who are not on the same page, this can lead to disagreements and disputes. Ultimately, the time spent by everyone trying to come to an agreement can cause divisions in the family or impact the value of an asset, such as if everyone can’t agree on selling it when the market is prime for maximum value.
The sale of a property held in an undivided interest also provides problems when compared with a typical property sale. For example, imagine that one co-owner with undivided interest wants to sell their share. They’re not able to simply sell their portion of the property.
Instead, they have to sell their share of the undivided interest, which then means finding someone who is willing to step into that co-owner role with the remaining parties. Finding the right way to transfer property can be an important component of your estate plan. It’s valuable to speak with an estate planning attorney in CA today to learn more.