Two children from a first marriage, one from the second, and four rental properties. One kid wants to keep the buildings and be a landlord. The other two want the money. Whatever the trust says, one of those groups is going to be disappointed. The drafting question is how much you decide now versus how much you leave to them. Jason Gaudy of Gaudy Law in Upland, California has been drafting around this for 23 years, and he has a default.
Name the property, or split by percentage?
Both are legitimate structures, and Gaudy uses both.
Specific gifts assign a named property to a named heir. Nobody has to negotiate. This is his recommendation where he expects real conflict and the family owns multiple properties, because assigning specific properties to specific heirs removes the argument about who gets what.
A percentage split gives each beneficiary a share of the whole estate and lets the heirs and the trustee work out the mechanics: sell everything and divide the cash, or trade among themselves so one takes the fourplex and the others take value elsewhere.
For the blended-family client with the 16-property portfolio, Gaudy’s office recommended percentages. His stated reason is specific: the client could not articulate why any particular property should go to any particular child. Absent a real reason, locking in an assignment adds rigidity without adding fairness. Better to set the shares and let the children figure out what it looks like later.
Should the trust force a sale?
This is the question Gaudy walks clients through directly: do you want them to keep these properties, or do you want them sold?
His bias is toward flexibility. He describes himself as a big fan of keeping options open for the children, because there may be a reason nobody can anticipate today (a market, a development opportunity, a life change) that makes selling the right call. Instructions like this one has to stay or this one has to go there can look like clarity now and read like a straitjacket in fifteen years.
That was concrete in the 16-property case. Some of those properties were income producing. One was a possible development, which the family might well want to sell. A document that forced a hold on that parcel would have destroyed value for everyone.
The trade-off he names openly: “we’re trying to find the balance between specificity and giving them flexibility later too, which is not always easy.” More specificity means fewer arguments and less adaptability. More flexibility means the opposite. There is no setting that gives you both.
How he actually builds the plan
The process Gaudy describes is less about clauses than about interviewing for friction. He sits down with the family and asks what the points of conflict are, then designs to remove the ones that can be removed.
Some things a well-built plan genuinely handles:
– Probate avoidance. A funded living trust keeps the estate out of court, which in California he estimates saves roughly $15,000 to $20,000 in typical probate fees before the administrator’s fee and court costs. More importantly to him, it saves the year that probate tends to take. – Medi-Cal estate recovery. He notes a trust can keep the estate away from that reimbursement claim. (Medi-Cal is California’s program; other states run their own recovery rules.) – Minor and special-needs beneficiaries. His firm does a lot of special needs trusts, which protect a beneficiary’s benefits eligibility rather than dumping a lump sum on them.
And then the limit. Gaudy is direct that conflict itself is not an engineerable problem: “you can’t eliminate all conflict unless you could eliminate all humans because people are going to do people things.” He has watched families fight over items worth nothing. The plan reduces surface area. It does not change character.
Who executes it matters as much as what it says
A percentage split only works if someone credible is running the sale, the accounting, and the distribution. Gaudy says a large share of the trust litigation his office handles involves estates that had a valid trust, where the failure was naming the wrong trustee. His advice is to pick the peacemaker in the family rather than defaulting to the oldest child, and where that person does not exist, to consider naming a professional trustee instead of a family member.
He also warns against paralysis. His line to clients who stall because they cannot design something flawless: don’t let the perfect be the enemy of the good. A good plan beats no plan, because no plan means probate, and in probate any of the kids can petition to be appointed, which is its own fight.
What this means if you’re planning a 1031 exchange
The replacement property you choose is also the asset your heirs will divide. One large building is hard to split three ways; several smaller assets, or fractional interests, are easier to allocate by percentage. Because the identification and closing windows are tight, that decision gets made under time pressure. Reviewing the 45-day and 180-day exchange timelines early gives you room to weigh the estate consequences instead of just the tax ones. Gaudy’s broader point applies here: loop your CPA, your advisor, and your estate attorney in before the structure is locked, not after.
Watch: Estate Planning for Blended Families: Dividing Property Without the Fight with Jason Gaudy, Gaudy Law
Educational only. Not legal, tax, or investment advice. Jason Gaudy is licensed in California; rules vary by state. Consult your own advisors.