A trust is a distinct legal entity that holds property for the benefit of chosen individuals, such as siblings. Trust property is managed and held by a trustee, who must comply with the terms of the trust agreement regarding when to distribute the trust’s assets. Many times, a trust that is made for siblings contains a spendthrift clause, which prevents the beneficiaries from using trust assets for their own purposes. This means that a sibling beneficiary cannot promise his share of the trust assets to a third party as payment to obtain something else. In other words, the sibling can use the trust assets but cannot sell his share of the trust assets.
Many times, a trust with sibling beneficiaries automatically terminates when they reach a certain age. The trust property is then distributed to the beneficiary for them to do as they wish. The trust may also be terminated, if the purpose of the trust has been fulfilled. For example, a trust may be established for the sibling’s education. If other siblings completed their education, they could petition the court to terminate the trust and distribute the portion that remains because the trust’s purpose has been fulfilled.
Often, real estate is transferred to siblings jointly. This can either be through a will or as “heirs’ property” if the estate is intestate. In either case, the siblings are tenants in common. Each tenant in common owns a portion of the property but can use the entirety of it. A common example is a house left to four siblings. While each may individually own 25 percent of the house, they are all entitled to use the entirety of the property for their own benefit.
If one sibling wants to sell their share of the tenancy in common, things can get very complicated. If the other siblings do not want or are unable to buyout the departing tenant, the property will have to be partitioned. Partitioning is a judicial action that requires a court to either physically divide co-owned property based on each person’s ownership interest or to compel a sale and divide the proceeds among the former tenants. The sale option is likely when an asset cannot be easily physically divided, such as with a single-unit home. Any individual co-tenant can request a partitioning procedure without the other tenants’ permission.