You own six rentals, or sixteen. You have children from a previous marriage, and you have remarried. Everyone gets along right now. The question you are actually trying to answer is not how to save tax. It is how to keep these people from ending up on opposite sides of a courtroom after you’re gone. Jason Gaudy, an estate planning attorney at Gaudy Law in Upland, California, works this problem constantly, and he is candid about what a document can and cannot fix.
The 16-property case: when the issue isn’t taxes
Gaudy describes a recent client with a large real estate portfolio, several children from separate marriages, and a current spouse. Sixteen properties in all. Some were income producing. One was a possible development site the family might want to sell.
The central issue, he says, was not the tax and not the dollar amounts. It was minimizing conflict, because certain kids wanted certain properties.
So the work was a sit-down inventory: which of these do you want the family to keep? Which should they sell? Where do the children’s preferences collide? In that particular family the conflict risk was low, because the kids genuinely got along. The exercise was still worth doing, because the goal was to leave behind a document that was as clear as it could possibly be while still letting the next generation adapt.
Does naming which child gets which property prevent fights?
It helps, and Gaudy says it is a good tool when you expect conflict and you own multiple properties. Property A to Timmy, property B to Sally, and so on: each heir knows what is theirs, and there is nothing to negotiate.
Then he names the flaw immediately. Parents almost always want to leave things equally to their children, and the properties are not equal in value. A duplex and a fourplex are not the same gift. A stabilized rental and a vacant lot are not the same gift. So the clean-looking assignment quietly creates a new inequality, and someone is going to notice.
That tension between naming names and splitting evenly is the whole design problem. The mechanics of resolving it are covered in dividing property between heirs without the fight: specific gift versus a straight percentage split, and whether the document should direct a sale.
Why the family home is the hardest asset in the estate
The recurring scenario in Gaudy’s practice: one of the children wants to live in the primary residence, and the other children want to know how they are supposed to get their share.
There is no clean answer, because the asset itself will not cooperate. He puts it plainly: “there’s no way to divide a house five ways or three ways.” A rental portfolio can be sliced. A single home cannot, and the same is true of any indivisible item, right down to a classic car in the garage.
He is equally unsentimental about the plan people often propose instead: the children will simply own the house together, forever. Gaudy’s response is to ask the follow-up questions. What happens when they die? What happens when one of them stops getting along with the other? He calls the idea of passing properties down through the generations a romantic one, and says that most of the time now, it does not happen.
The tax bill that decides it anyway
Even when a child genuinely wants to keep the family home, California’s property tax rules can make the decision for them. Gaudy points to a client he met with who was paying about $1,000 a year in property taxes on a home worth roughly $800,000. That gap comes from a Proposition 13 assessed value locked in decades ago. Part of that property had to transfer, and the reassessment would hit roughly two-thirds of it. The taxes were going up, and there was no clever way around it.
Proposition 19 narrowed this further. Gaudy explains that before Prop 19, specifically designating a property to a child could let the child keep the parent’s property tax basis; now that treatment is essentially limited to the primary residence, which he says hit investment property owners hard. Prop 13 and Prop 19 are California rules. Other states handle inherited-property assessment completely differently.
The result is a choice he describes having to deliver more often than he’d like: keep the property and pay taxes you can’t afford, or sell it and take the money. That is worth modeling before you write anyone’s name next to a house. A carrying-cost and equity calculator is a reasonable place to start the math.
What this means if you’re planning a 1031 exchange
If you exchange into one large replacement property, you have concentrated the estate into exactly the kind of asset Gaudy says cannot be divided cleanly. Some sellers with several heirs deliberately structure the replacement side to be more separable (multiple smaller properties, or fractional interests). The DST vs. other 1031 replacement options comparison lays out how those choices differ in control, liquidity, and how easily an interest can be split among beneficiaries. Divisibility is an estate design input, not just an investment one.
Watch: Blended Families & Real Estate: Heading Off 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.