How to leverage valuable asset tied up in family Trust?

[Juliette Gelbard]

I am part of a trust that owns a 1 bedroom apartment in Cambridge, MA. A realtor recently did a comp analysis and put the value around $600-$650k and it's owned free and clear. The property is held in an irrevocable trust and there are nine (9) beneficiaries in three family groups. It's currently rented and is cash flow positive about $750/mo. The kitchen needs to be renovated and then we expect it could cash flow $1,500/mo after the reno. We have enough cash on hand to do the renovations, but will need to wait for the lease to expire at the end of August. 

A lot of the beneficiaries want to sell and split the proceeds so we can be free of the trust, but the Trustee (also one of the beneficiaries) is not yet in agreement. If we cannot convince her to sell, what can we do with this asset? $15k-$20k per year net operating income isn't a lot split nine ways, but there has to be potential that we just don't know how to tap into. Would love ideas from those with more experienced in RE investing. 

[Jason Zundel]

Juliette:  Unfortunately, any activity of the irrevocable trust without the express approval/permission of the Trustee and ALL of the beneficiaries is going to be a bit of an uphill climb.  Unless the property is being wasted, mismanaged in a gross manner, or otherwise in breach of the underlying trust documents, the costs and time involved will both be high, with no reasonable expectation of a win.  Even under the best of circumstances, litigation of this sort is very expensive, time-consuming, and risky.  Your best bet is to first get a copy of the trust agreement (most beneficiaries have a right to get a report and access to underlying documents) to make sure that you don't have more influence than you might think.  One thing you said did catch my ear - most irrevocable trusts must be managed or controlled by people other than the grantor (creator of the trust) and the beneficiaries, so it may not be drafted properly, which can open the door to the remainder of the beneficiaries. Finally, peer pressure is a factor for sure, so if you can come to the current trustee with an attorney letter pointing out all the issues of the document, a letter signed by the other beneficiaries requesting either mediation or the sale of the property, and an offer in hand from a real purchaser - that's going to be a powerful combo.  I don't know you or her, so of course individual circumstances must be taken into consideration before pulling the trigger in any direction and should be discussed with a local attorney that practices in this area so all the facts can be evaluated.

Note: This information is for educational and informational purposes only and does not constitute legal, tax, financial, or investment advice. No attorney-client, fiduciary, or professional relationship is established through this communication.