Co-ops and Trusts: Essential Knowledge for NYC Residents

We often encounter questions about co-ops and trusts, particularly in the context of New York City real estate. Here's a comprehensive guide to help you navigate these complex topics.

What is a Co-op?

A co-op, short for cooperative housing, is a unique form of property ownership prevalent in New York City. When you purchase a co-op:

You're buying shares in a corporation that owns the building, not the actual apartment.
Instead of a deed, you receive stock certificates and a proprietary lease.
Approximately 70% of buildings in New York City are co-ops.

Key aspects of co-ops include:

Governed by bylaws that define terms, rights, and responsibilities of shareholders
Require board approval for subleasing
Decisions are made at shareholder meetings

Co-ops and Trusts: A Complex Relationship

A trust is a fiduciary arrangement allowing a third party to hold assets on behalf of a beneficiary.

When it comes to co-ops and trusts:

Each co-op apartment can typically only be owned by one person.
Transferring co-op shares and proprietary lease to a trust requires board approval.
Some boards allow apartment transfers to trusts, while others don't.

Estate Planning for Co-op Owners

If parents who own a co-op pass away:

Their child would typically have to go through probate.
This can be problematic if bank accounts freeze, as co-ops rely on regular maintenance payments.
To avoid these issues, consider putting the co-op in a trust.

Benefits of placing a co-op in a trust:

- Smoother asset transfer to beneficiaries

- Maintains regular maintenance payments even after an owner's death

- Clarifies how and when assets pass to beneficiaries

Governing Documents for Co-ops

Co-ops are governed by several important documents:

1. Bylaws: The most crucial document, outlining regulations and procedures

2. Articles of incorporation: Along with bylaws, these form the foundational documents

3. Policy Manual: Clarifies expectations for board, members, and staff

4. Terms of Reference: Outlines committee composition and duties

Changing co-op bylaws requires a board meeting, vote, and usually a majority approval. Amended bylaws must be filed with the appropriate state agency if required.

At Sammartino & Sultan, we specialize in navigating the complexities of co-op ownership and estate planning. If you're considering purchasing a co-op or need assistance with estate planning for your co-op shares, don't hesitate to contact us for expert guidance.

About the Author

Leslie has been practicing law since 2009 and is the host of the estate planning podcast 'Legacy Purse'. She has a long history of representing family members struggling to inherit property and/or wealth from deceased family members through the Probate Courts. Knowing how time-consuming and expensive the probate process is, Leslie takes great pride in helping her clients learn how to plan and protect their families during their lives so they can avoid the probate court process and save their loved ones that additional grief (and expense).