Fractional Interest Is Not Just Real Estate, with Scott Rahn

0:01 Welcome to Fractional Interest podcast. Increasingly, as I do more probate, I got involved with circumstances where somebody had a portion of property and then you had all kinds of complications that came with that. And so I launched the Fractional Interest podcast to talk about real estate, but in talking to a leading attorney in Southern California, Scott Rahn, find out that and it makes sense, fractional interest is not just on real estate alone. You know, Scott, thank you so much for joining us today. Thanks for having me, Bill. It would seem to me that a fractional interest situation can only happen if there's some sort of failure in the pre-probate or pre-pre-death, pre-planning process, correct? Generally speaking, most of these issues arise from a lack of thoughtfulness in the planning process. Either because there's no planning at all and people end up with fractional interest or the plan itself is not very well thought out. Yeah, like let's leave the property to my three children and let them fight it out and then they all hire attorneys and it becomes like a battle. So, let's talk about first the definitions. In real estate, fractional interest would be the same as a tenant in common situation as far as ownership, that people own it, but they have their own individual ownership. That's correct, yes. If people are going to receive a fractional interest of a piece of real property, the family home, a vacation home, an apartment building, those are probably some of the most common examples that we all see.

1:27 They're going to receive their interest either through a probate estate if there is no will, a probate estate if there is a will that leaves it that way, or from a trust. They're going to receive their interest as tenants in common as to what their respective interests are. And so in a scenario like that where property is being granted by the probate estate to the individuals, I guess the proper deed vesting would say to Mary Smith and Bob Jones as tenants in common or each a 50% interest, each one having as tenants in common. That would be the proper way to make the deed and often times you don't see it that way. Correct, yeah. The proper way would be for whoever the administrator, whether the executor or the trustee of the estate is, to distribute that property pursuant to the percentage interest that each of the beneficiaries or heirs is entitled to in their name as tenants in common as to those interests and as to each other. So, I see fractional interest of real estate in probate come in one of two ways. One way is unplanned and the decedent passes and it turns out that maybe they thought everything would go to the second wife, but somebody didn't think through the law or understand that there's different laws of inheritance without a will and that often times a property can be given to several parties who have claims under the law. And so nobody intended it that way, but all of a sudden they just show up and that gets determined in probate.

3:01 So, explain kind of how that what that looks like. You represent a client who maybe is filing a probate and they go, "Well, my dad died." And they think they're getting the whole thing and they discover, "Well, actually there's somebody else who has a claim of some sort." Yeah, it sure can happen any number of ways and here in California we're a community property state and I know there at least eight other community property jurisdictions and then a whole number of quasi-community property jurisdictions out there as well. So, you have to factor those interests in. So, generally speaking, when somebody passes, if they haven't planned for how their estate assets are going to be distributed, then it's going to go through probate court and it's going to be a probate administration that's going to take anywhere from a year and a half to 2 years or longer and it's going to follow that state's rules of intestacy, which simply means that the state probate code is going to determine who the heirs are who are going to inherit that property and in what percentage. Here in California, getting back to the community property issue, the surviving spouse is entitled to inherit the community property of the deceased spouse and then, depending on the number of children that the deceased spouse had, then that's going to determine how much of the separate property the surviving spouse gets and how much the kid or kids get.

4:28 So, you can very easily end up in a situation where you have a surviving spouse that has a community property interest as well as a separate property interest Right. And then children who have their own percentage share of a separate property interest. So, you could end up with any number of stakeholders with any number of percentage shares owned. Yeah, I had a case one time where a man passed, he had a wife and one child who was living. So, you would think one heir, but he had another child out of wedlock. And so I don't know the law, but I think what was going on was that child had the same percentage of rights or because she was the heir of the of some other woman. Forget how it worked out, but somehow she I was entitled to 50% and these two, obviously you can imagine a child of the parent of the mother, well, they'd hate the child out of wedlock. You can just imagine the emotions possibly. Yes.

5:23 And so it just it was a nightmare, but that was a case where lack of planning made all this become a problem sort of sorts. Well, lack of planning and you can have planning and you can still have pretermitted or omitted children, right? The secret scion situations that you just described. And we've also seen scenarios, Bill, where you have not just secret scions, but you have secret families where the deceased father has one family in city A and another family in city B. We've seen it more frequently than I think any of us probably think it happens and you want to talk about surprise, disappointment, sadness, anger, frustration, right? There's no better way and when there's no planning or if there's competing planning, then, you know, you're going to be in a dispute. You know, I hear these stories, I think, "Who has the energy to have two families?" I can understand your response to that. That's absolutely

6:25 Don't mean to make light of it, but wow, in some regards you got to give the guy respect being able to pull that off. So Now, we've talked a little bit about the unplanned or not properly planned for circumstances, but the other thing I find is that people go and get an estate plan that creates this problem. And the common scenario I find is there's a family home and the parents leave it to equally to all the siblings, three or four siblings. And you know, the classic case is one's living in the house claiming to have been a caregiver, just classic as I see all the time. And was living there for free and at some point sometimes the siblings are okay with that, sometimes the siblings say, "Hey, we need the money, too." And so you have perhaps four different owners of a property that was, you know, through the estate planning was deeded to each of them in four parts. And so that's another case I see because of Talk a bit about in estate planning up I also there's an issue that if you know, want to give a split the state up in thirds and all you have is a real estate, how do you fund that distribution? That's another challenge, right? Cuz if you only have a million dollar house, you won't give each of them 333,000 unless one of the children have cash to buy the other out. That becomes a problem. So, talk about what are some of the estate plan I know you're foremost in estate planning or on the you know, the litigation side, you see what should have been done. What are proper steps to avoid a situation if the only asset is a million dollar house and you have three siblings? What's the proper way to distribute it so that you don't end up in a fractional interest situation?

7:56 It's a great question, Bill, and you know, we see everything, right? And some of them I would say are probably the best strategies. Some of them are probably the worst strategies, but because these situations are so fact and circumstances-dependent, it really depends on what your family dynamics are and what you're trying to accomplish, right? There may be a caregiver child who has spent more time and sacrificed more of their family time or career time or those kinds of things and you may want to reward them by giving them the family house and distributing other assets to the child the other children and other heirs. There may just be a situation where somebody is in a better position to financially maintain, you know, the properties or just be more sophisticated and you may want to give the other children other assets because they're maybe not going to be able to manage those assets, whether they're business assets, real estate assets, what have you, financial assets. But I think the reality is, going back to my point here about being very specific about what your facts and circumstances are, who your beneficiaries are, who your children are. I think the best approach often is to look through that lens and try to be very intentional, deliberately intentional as one of my friends likes to say, about what you're going to do because I think it's very easy to do what you described, which is, "I'm going to give everything to my three children equally." Well, you have one child who's been living in the home with mom or dad, they don't have the financial circumstances to do a buyout. Perhaps the family home is worth a lot more or the vacation home is worth a lot more and now you have a situation where you've got, say, three children or four children who are now co-owners of the family home and they're co-owners of the vacation home.

9:52 Two of the Two of the children never use the vacation home, have never used the vacation home, they've moved across the country. It's not accessible to them. One person wants to retain it, right? The fourth couldn't care one way or the other. Maybe can afford it, maybe not. And you just end up in a situation where you're creating a potential, at least a rub, right? Friction between your four children. And I think oftentimes we as parents like to think that our passing is going to be the Kumbaya moment, right? Where all of our children are going to come together and by the grace of our past they're suddenly going to all get along and overlook all of the all of the strife that they may have faced, you know, fighting over, you know, bikes and clothes and, you know, who's going to get to sit in the front of the car on the way to school. All of those things. And that really doesn't happen. So, I think really the best plans that we see are the ones that are intentional, deliberately intentional in identifying who their children are, what they want those children not just to get in terms of financial benefit, but really meaningful life benefit. And then specifically be questing those gifts to each of those children. And perhaps it's, you know, my two sons get along great and they've always used the vacation home, so they're going to get the vacation home. My two daughters, you know, they're near the family home. They've always been near the family home, but I want it sold and the proceeds to be split equally between them, right? I think more often than not the reality is the family home certainly is not likely to stay in the family for a long time. That's what we see.

11:40 Vacations vacation homes I think to a certain degree a bit longer. But, you know, really thinking about, you know, should this asset be liquidated? How quickly should it be liquidated? Right? And I think those plans that simply say, look, let's just liquidate everything. Let's not give the kids anything to fight over and divvy up the proceeds equally. I think is really often probably the best approach here. We're both in California where we have Proposition 13 where we have these differences in assessments. In some cases assessments can pass from parents to child, but not from child to child. And so I know there's a state planning issues where if you have a property distributed to all three, and then the one child goes all back from you guys, well, now you're kind of out of the protection of the probate transfer. You lose the assessment, perhaps tax advantage. Just talk a little bit about how to avoid or minimize the taxes or at least to at least keep your options open by proper planning. I think the best way to do it is to give your fiduciary, your trustee, etc. The option, the flexibility. As one of my mentors taught me at a very young age, always plan for maximum flexibility. Right? Give your fiduciary the ability to make adjustments, right?

13:00 Fair adjustments, right? You don't want to just disinherit, you know, the kids who want to be bought out of the house. That's not fair to them and it's certainly unlikely to be consistent with the intent. Generally, while the families don't love paying taxes or would like to minimize their taxes, the vast majority of them aren't willing to disinherit their families, you know, to avoid taxes. If they did, all we would see out there are charitable trusts. And that's certainly not the majority of them. So, I think the best way to approach that bill is to plan for maximum flexibility and look, you're hiring this fiduciary for their expertise, right? And for their ability to analyze these issues at the time they're completing the administration. So, give them the authority to look at these issues and make adjustments as needed so that you're able to minimize your tax exposure. One of the ways I got involved in fractional interest is that there'd be, let's say, a property 50% through the probate 50% transferred already or, you know, estate or community property, whatever. And to sell it 50%, you would have to sell it at a discount on the open market that nobody wants to buy a property with an unknown partner. And I've done a lot of research on this and it's about a 3% discount to the fair market value of that portion of the property that the property gets sold. And I've worked with investors who bought those properties at probate court because you're getting a discount.

14:31 And one of the things I've learned is that just because you're majority doesn't mean you get to hold the minority owners hostage. Correct.

14:39 That at least, again, I'm not an attorney. I'm just from the business side. It seems to be a very robust partition laws that empower minority owners to say, look, either pay me fair market value or we're going to sell it at under the court, you know, prescribed process. Talk a little bit about partition as a resolution of a dispute from an attorney's point of view. I think, Bill, thank you for bringing that up. I think partition is a very important tool in any estate litigator's toolbox or estate administration lawyer because of the ability of a minority or any fractional interest holder to go to court and ask the court to liquidate the property and give them their fair share. I think often times you can end up in a situation where the fiduciary, again, whether it's an administrator, an executor, or a trustee is attempting to, you know, thread the needle between each of the beneficial interest holders and trying to, you know, figure out and resolve what is best for them. But they really are never going to get to that place because of often the historical dysfunction between them. And so, depending on the facts and circumstances, it is often our recommendation that clients simply distribute the asset in its fractional interest to the beneficial interest holders and let them then decide what they're going to do. And it's usually one of the interest holders going to court to partition their interest and seek a judicial sale. And it can be very powerful because the law allows for the person who's petitioning for partition to have their attorney's fees and costs paid off the top of whatever the sale proceeds are.

16:27 So, it can be very powerful in bringing people to the table. Ultimately, and I say this often, litigation is simply a tool and the laws, the codes, the case law, they are tools in that toolbox that allow us to get clients results by creating some sort of opportunity for us to sit down with the other side and work out a deal or where that can't be done, then a judicial mechanism to get a result. Ultimately, clients simply want results, right? They want to stop fighting with their siblings or step parents or parents or other family members. And they want to move on with their lives, grieve their loss, and really be able to just be at peace and get what they're entitled to and move on. So, we are big fans of partition actions because of the leverage that it can create in giving us a path to get a result for our clients. You know, I'm not an attorney and I'm careful not to give legal advice, but from a business perspective, I've been through a few of these, it seems like the same. The majority owner has convinced the minority owner that they're being into submission. And I'll say, well, no, talk to an attorney. There are, you know, mechanisms to make you whole. And I've like I've talked them up, talked them up. And then eventually the attorney will reach out and then the attorney will write a letter threatening lawsuit and gets ignored. Then they file lawsuit and all of a sudden everybody starts to meet.

17:57 So, it seems to me that if you're going to do this, you have to be prepared to engage attorney and be prepared to file. But like you say, ultimately, the other side is risking that they're going to not just end up with only a fair percentage, but they're going to pay the legal fees of the person who's filing the case. So, is that kind of what they look like? It seems to me that like 95% of the time they don't settle until the case is filed. That seems to be my experience. Yeah, I appreciate that experience, Bill, and it's certainly far too consistent with ours. I wish what people believed in that they often believe that if they just get a lawyer to write a letter, their brother or sister, Yes. Step parent, other family member is they're just going to lay down. The magic letter. The magic letter. And look, to be fair, you know, we have oodles of those stories as well, where, you know, we've laid it out for people very cleanly what is what has happened, where we are, what's going to happen, what the paths forward are, why we're choosing to try to do this informally, more efficient, more cost effective, right? Better results sooner for less legal spend.

19:16 It's what all of our clients want. It's what we strive for. But you need two willing parties, right? I can't force, no matter how strong or how brilliantly written our letter is, I can't force the other side to take, you know, the carrot and say, yeah, let's go sit down and figure this out. So, often times we will tell our client, partic- particularly if we're considering a partition action, look, what we want to do is we want to prepare this. We want to sit down and talk through it, but we want to have the partition action ready. And depending on the facts and circumstances, cuz our clients know their family members better than we do. We don't know them from Adam. We don't know them from Eve, right? And they know what their particular personalities are, right? Often they'll say, "No, I think, you know, my sibling will respond." Whether they'll come to the table or not might be another issue, but they'll at least respond to a lawyer letter. And some of them will say, you know, they're very difficult and they're never going to respond. You're going to have to file because again, we want to be the party who's initiating the partition action because of that extra leverage you get because the fees are going to come off the top. So, we just want to be very careful. We always want to make sure we're being strategic in the way we're doing things, right?

20:38 Why we're doing things the way we're doing them. So, we just we're very careful to talk our clients through all of those plusses and minuses so that they can make an informed decision. Ultimately, the client gets to decide which strategy they want to execute. But, you know, if they're listening to us and we hope they do, you know, that would be the path we would take. I'm sure one of the difficult conversations you have with your client is what can seem to be unreasonability on the part of the other attorney who sends a letter to you and your client. I you know, I'm not attorney. But, this is my area that I work in. And so, I find that night you're specialist in this area of probate and trust litigation. But, night attorneys That's all you do. And you guys are large firm and or you mid-size firm, large regional firm, and this is all you do. Versus all the other stuff that attorneys can do. And I find that 9% of the time the client engages an attorney who does a bunch of other stuff. And they went to law school 20 years ago and passed the bar 19 years ago, whatever it was. And they practice they do the CLE. They know there's a term called partition what's the partition action what it means, but they don't understand the process in depth to advise a client properly. And I feel like I'm the one saying to the attorney, "You're going to lose. At the end of the day you're going to sell and your client's going to pay the attorney's fees. You just need to look this up. I'm not here to educate an attorney or put them down and we all have our but, it just seems So, you must have this conversation with attorneys all the time.

22:09 Well, I mean, we do. Again, just doing one thing, estate disputes, right? I think we do a good job for people. There are a lot of people who dabble in this space, right? It's kind of one of those things where, "Oh, you know, my friend's dad passed and now he's got an issue with his siblings. I'll just handle it for him, right?" there's a reason we only do one thing, right? Because it allows us to be, you know, really focused and really good and really experienced in it. But, there are a lot of lawyers who come into this space and don't necessarily, you know, understand all the nuances, all the specifics, or what the ramifications of those things are. So, in those situations, you know, look, you really get better results for clients if you collaborate with whoever your opposing counsel is, no matter how sophisticated they are or are not. And we will do our best the yeoman's effort to really try to get on the same page and agree on the things we can agree on. We'll disagree on the things we disagree on and then we'll try to implement a solution for whatever that is. If it's evaluation, right? What's the process going to be? Are we going to go out and get me a broker opinions? Are we just going to sell it and agree to split? You know, all of those things, you know, there are only so many different levers and dials and buttons, right? That you can pull, turn, and push. But, we really try to and I know it can be frustrating for clients sometimes where they where they say, "Well, it seems like you're getting along too well with, you know, brother sister's lawyer." And I tell them, "Y- It's to your benefit, right?

23:47 Like, I'm trying to save you money. If the other lawyer, if I can spend a little bit of time educating them, right? About how this is how this is going to turn out, and it's going to save us a bunch of time, that's going to save you a bunch of money, right? And we're all going to be better off, right? Even if your fees are coming off the top like they do in a partition action, you're still going to end up paying a portion of those, right? Cuz it's coming out of the sale proceeds. So, you know, again, we really try to be, you know, cost effective by maximizing efficiencies. Can't always do that. Sometimes the lawyers don't want to listen, right? If they especially if they don't know this practice area and it's unfamiliar to them, then, you know, trusting what we say, you know, even though we're honest, forthcoming people, you know, can be difficult and they may not want to do that. They just might want to go down the path, but y- often times there are only, you know, a couple different paths, right? You can either work together or you can go down the court path and somebody else is going to make the decision. But, the reality is the court wants to push you into, you know, a mandatory settlement conference or mediation, you know, or some sort of alternative dispute resolution where you're going to have to sit down and talk anyway. So, we try to talk sooner rather than later. Again, because it gets our clients better results sooner, which saves them money and frankly just saves them a whole lot of headache, right? We often say that, you know, clients spend financial capital with us, right? We're a cost center for our clients, but they also spend emotional capital. And the more times than not, as a as a human being, you're going to run out of that emotional capital well before, you know, you start to get stressed about the financial capital.

25:28 So, we really try to work together with our clients to same page things early and often. And then, you know, with opposing counsel, you know, to figure out the things we can we can work on together and where we need some assistance, whether that's a mediator or a judge. As a listing agent, one of my strengths is I educate buyers agents typically the newer agents the nuances of probate and so on and you know, I've had to learn how to be good at that and how to train and how to how to coach. But, it's more natural in that typically they're newer agents. I've been around quite a while and I think they kind of accept that. If there's any group of people that I find difficult to share information they don't know, it's attorneys. I you know, and I'm going to put down in the whole industry cuz there obviously some great attorneys and, you know, I like anything the top 10% always, But, I would imagine that one of the challenges you have is you're trying to one hand being collegial, great. But, you're almost trying to educate an area that they don't have any legal background in. That must be a challenge. You have to kind of walk that tightrope because nobody wants to look at you as their superior. They have their own firm or their your practitioner. And yet, you know, if they research you, they'd see you're one of the top in the industry. How do you manage that tightrope? And help me understand how I should better talk to attorneys to kind of open the door a little bit to get them to open their minds as to where they're headed. Yeah.

26:55 Well, first I just want to say thank you for helping to mentor your industry. We do the same thing here, obviously. But, it is often where someone comes to us who does not have your experience, the experience specifically in probate sales. And my goodness, it is so easy for them to get the apple cart upside down and then spend oodles of time and money just trying to get the wagon upright, much less get all the apples back in it. So, thank you for doing that. It is important. And frankly, we don't work with Realtors® who don't have this specific experience because they're just traps for the weary that if you're not experienced in this space, w- you know, we're not going to spend our clients' money being the ones to educate you. It's just there plenty, you know, there people like you out there who have this experience and we'll just work with you guys because it just makes sense and it's better for our clients. But, coming to your point about the attorneys, look, we it's a difficult job being a lawyer, right? You're questioned by everyone about everything, right? Opposing counsel is necessarily ethically obligated to be adverse to you, right? And to try to get their client the best result they can get for their client, right? The judges are skeptical of everybody and what they're telling them, right? So, this is really where reputation and just consistently being an ethical operator in this space gives you the credentials that you need not only in front of the courts, in front of the judicial officers, but with opposing counsel because you can say, you know, look, I don't have to go through this, right?

28:48 With you. I can simply take it to the court and the court's going to make the same decision. But, I'm trying to be efficient. I'm trying to be cost effective for my client, which makes it cost effective for your client. If you want to check what I'm saying with another experienced probate litigator, with another trust administration lawyer, whoever it may be, right? I can give them some referrals, right? So, if people that know what they're doing and are happy to spend a half an hour or an hour with the with the attorney and help them understand or just give them some resources, right? Maybe it's a it's a ruling that we've already won on a similar issue where we can send that, provide some authority, right? That's a very easy way to do it. But, I think as you pointed out, you know, if you go to our website, if you go to, you know, all of our speaking engagements, if you look at the awards that we have been so graciously bestowed upon us, we know what we're doing, right? Importantly, but we're just we're honest operators in this space. We're here to do a good job for our client, but you know, we don't lie, cheat, or steal. There are There are ways to do things in this world, and there are ways not to do them. And the way we do it is the right way because ultimately, it does get good results, right? It allows you to come with that stick behind your back while you're holding out the carrot in the hopes that, you know, the other side will take the carrot, which again ultimately gets your client better results sooner and hopefully for less legal spend, but you know, it's really by building a relationship with the other side that allows them to rely and ask for things that, you know, perhaps they would feel uncomfortable asking for if the lawyer was a table pounder, right? Just uber aggressive. And that's just, you know, and we see those people, too, and it's unfortunate because it just increases costs. Everything has to be in writing because you say something on the telephone and then you get the letter

30:50 That says the opposite of what you just talked about, right? And it's just it's not We're not here for that, right? We're here to counsel our clients, and we're here to judiciously utilize the laws that exist for the benefit of our clients, and I think that's how you get better results sooner for less legal spend. I think those looking for attorneys in this space, you know, I think there's a misperception. I know when I started podcasting, I was concerned I wouldn't get good attorneys to share, and I found the opposite. The better the attorney are, the more likely they want to share because it's something for them to kind of counsel, coach, collaborate with other attorneys as well as real estate agents, and it makes their job a lot easier at the end of the day, right? And so, I think that if I was picking an attorney, I'd always want to be able to see their work online. It's so easy now. There's a video, speeches, blog posts, something that tells me that they're active in the field and they're educating the marketplace and you know, willing to able to because I don't know how you would do your job effectively if you weren't able to. Like if you can't speak publicly about your thing your area of expertise cuz you're nervous about it, how can you possibly practice it? Makes no sense at all to me. So, again, I'm just going to on behalf of the industry, I thank you for, you know, educating us and the so many resources your you and your firm offer and of course, being on my podcast like is my favorite.

32:15 I really appreciate the time you make available. Yeah, no, it is my honor and pleasure to do it. But we love what we do, Bill, like you love what you do, right? And I think, you know, having the honor of being able to share, you know, what we've picked up over the past, you know, now we're in our third decade of practice, and to be able to help educate people, you know, do things like this, share on your podcasts, and you know, post videos and content that just helps educate people because, look, especially in this space, as you know, people come to us because they're in some sort of strife, right? They've either lost somebody they love or somebody they love is compromised, and they need help, right? And they're in an unfamiliar situation. If they're coming to us, it's because they're embroiled in some sort of estate administration issue, or there's a dispute over who's supposed to get what, there's litigation going on, there's breach of fiduciary duty claims, there are contests, there are secret scions, secret families, all these kinds of things, and they're scared, right? Most people haven't been trapped in a litigation before, and they don't know which way is up, and for us, it's really it's an honor to be able to hold their hand, right? Let them know that there's a process, and we've wielded it judiciously over the years, and we have a plan, a strategy, and we'll deploy it for them, and it'll get them an outcome, and I think the single biggest compliment we get, you know, even after that first conversation is people will just say, "I'm so relieved, right? Just to know that, you know, you're going to help us through this." And that's really, I mean, how rewarding is that?

34:01 So, what topic that has nothing to do with my business at all, but I'm just interested, and we talked about at the beginning I teased a little with fractional interest of non-real estate. So, you can have a family business, let's say, where the founding or the you know, the decedent had a business run on his own, and it has to distribute that, or, you know, collectibles, art, or baseball cards, or it could be anything. Yeah. I guess nowadays, cryptocurrencies, NFTs are also an area that people hold Bitcoin. So, talk about the difference in those areas where the law is not as developed. I imagine, I mean, there's a there's some catchall, but there's no specific real estate partition action law that I'm aware of. Talk a little bit about the differences in fractional interest of non-real estate assets as well. Yeah, I'm just going to pick out a couple of them, and I think the two that I'm going to pick out, NFTs, and then looking at minority interest or fractional interest in closely held companies, I think are two areas probably that are most ripe because you have valuation issues. We'll start with the NFTs, right? You get an NFT, it's a piece of art. You can relate it just to a general historical piece of art, which you might think of a Picasso or et cetera, where you've got one painting, one NFT, one person can hold it, right?

35:21 But it's owned by four or five or three or how many, you know, fractional interest holders you have. And what do you do with that, right? Most often in that circumstance, unless the family's going to agree to move it from this person for this period of time and then that person and then that person, I'm sure, you know, all of the art collectors in the world would not want to see the Mona Lisa, you know, transferred monthly to the 12 or every 2 weeks to the 24 different beneficiaries who have an interest in her. Same thing for NFTs, right? Although they're electronic and these are more easily transferable, the reality is you just don't want to pass it around like that. So, you know, I think that's something that you can very easily see causing problems. When you get into Bitcoin and crypto and those assets, those can be either distributed in kind like you know, shares of stock, or, you know, they can be liquidated and the cash proceeds distributed, so that's not as much of an issue, but getting to minority interest in closely held businesses, I think is a much bigger issue, and I think it's a much more complicated issue, and I think far too often the planning community and the family are not aligned on what needs to happen postmortem because you have a situation where the matriarch or patriarch who started that family business and was really the wealth driver for that family, one or two, maybe more of the children stay in the business, the rest of them, you know, flit off, and they're doing whatever they're doing and getting their degrees and starting their own careers, or you know, in the arts or any of those kinds of sorts of things, and then you have a situation where the matriarch or patriarch is managing that business with the family members who are involved in the business, but then the matriarch or patriarch passes, and then what happens? Because you have and Murdoch's almost a perfect example, right? He's Murdoch has not passed yet, but the litigation that's

37:25 Currently ongoing on appeal out of Nevada deals with who is going to control that empire, who's going to control that business postmortem, right? Because he has very distinct ideas currently as to who he wants to manage the empire after he passes, but the estate planning that he put in place, and this is really the nature of the dispute, perhaps it does or does not have the flexibility to make those kind of appointments, right? So, you have a class of shareholders who now wield a tremendous amount of power because they're the equity owners, they're the stakeholders, and you have one member of the family who's been anointed who perhaps, well, we don't It's not perhaps, we know that the other shareholders are not interested in managing that business and pushing them aside, and I think that is an issue where you can very easily end up with various camps of shareholders, right? The more dynastical the family structure, the more dynastical the family wealth, the more fractured that wealth becomes. And I think this is where, you know, the planner that you work with needs to have a certain, I'll say a very high level of sophistication where they're not only looking at your estate plan, right? But they're really able to understand and have a strong corporate background to understand what additional documentation is necessary to ensure the stability of the governance of your entity or entities after you pass to make sure that it's going to be managed the way that you want it to be, you know, whether that's some sort of shareholder agreement, right? If somebody's going to object, then they're going to be bought out, and how they're going to be bought out, and where the liquidity is going to come from for that, and all these governance issues that really are, you know, they're not the tail that wags the dog, they're

39:28 Really the dog when you get into the meat of these issues. But this planning needs to be very thoughtful, or, you know, you can end up in a situation very similar to what we're seeing right now with the Murdoch family. Yeah, I've been through two of these as an employee in companies like this and the thing that strikes me is the founder usually is a very dynamic, unusual person who built this business and while he attempts to bring in his family members and train them up and get them involved, they're just not as special as he is most commonly. And I don't mean to put anybody down, but the opposite is to really hold up the founder who launched this thing and they don't they sometimes understand their mortality and that you know, their legacy isn't as strong as they like it to be. Whose is? And it gets difficult and business is challenging and so you turn over business to a less than superstar team and they're in a competitive market and have some tough hole and I know I was in the business of electronic at time that business was under you know, manufacturing of electronics was under severe difficulty and maybe the founder could have worked his way through it or not, but certainly anybody less than exceptional got wiped out in the last couple years. These are difficult things that to get somebody's attention, get them to acknowledge their mortality is especially those people.

40:46 The people who build these things they just see themselves as immortal. I'm not saying it in a in a sense that's not psychologically correct. I'm just saying they just see themselves bigger than you or I do or maybe that's the case with you and your firm. You know, I don't know enough to know the background, but I just find the founders of these big companies are always exceptional people and very rare and it's just so difficult to replace them. Agreed and having a thoughtful succession plan I think is critical to not just the survival but the continued thriving of any organization, right? We here at my firm, my partner Shawn and I and our team, we've been working for the past many years on our succession plan because look, we deal with these issues all the time and we don't want to be the plumber with the leaky pipes, right? Like God forbid something happens to one or both of us, then what happens to the firm? What happens to our families and our you know, interest in the firm and all of those things, but you have to be intentional about it and frankly you have to you have to admit your own mortality to really face all of the different issues that may come up post mortem because or even if you get sick, right? I mean, the television show Succession is a great example and really does a I think a fairly good job of demonstrating some of these difficulties, right? Where you get the power plays and you get the factions and you know, it might be a temporary situation, it might not and you capacity issues and you know, and you get the fidelity, right? I think this is one of the biggest issues that I often see is that people have fidelity for however the family wealth was created, right? It's kind of like the fidelity they get for the vacation home where they memories were created and you know, we used to always go down to the factory or we used to go to the office and you know, we worked in this and I did this in the summer and I made copies and I took out the trash and these kinds of things and so they really they want to

42:49 Hold on to that, right? Whether they should or not is a is a completely different issue and I think there's a certain cottage industry that has sprung up over the last you know, decade plus kind of around the softer science if you will of family and managing family wealth and succession and you know, why it's not appropriate for everyone, but I think a lot of it really evolves around having these family meetings, right? Having family board meetings if you will and talking through you know, what people's expectations are what the kids' expectations are what the kids' spouses' expectations are because sometimes it's not the kids who are the problem. It's those whom they brought into the family dynamic that can be very important and disruptive. But just having an understanding and everybody being able to hear from the matriarch or patriarch or both about what the expectation is, right? Wealth essentially as you know, a dynastical obligation responsibility, right? To manage it not only for their generation but for successive generations. You know, and having a family constitution about what things are and why right? The family why and it can at least be a guiding light in decision making as to how things are going to happen you know, down the road whether it's a capacity issue or a post mortem issue. So, you know, again I just think a lot of this needs to be a lot of this just needs to be out in the open and talked about and I think far too often I think people are hesitant to talk about it. One to your comment I think a lot of the people who've made significant wealth, created significant businesses to a certain degree you know, they don't see their mortality or don't want to face it or both and that makes things very difficult and you know,

44:51 Pretty near impossible if somebody's unwilling to meet it. I had a client years ago who built a very nice business and a very nice life for him and his family and sitting down with him and his wife and he said, you know, what do I care? I'm going to be dead. Right? And I just thought, well, is this the legacy that you want to leave for your family, right? Where they're all you know, at each other's throats or you know, trapped in a long probate administration publicly in the courts and you know, after talking through it, no, that isn't what he wanted, but you know, he really you know, he was hesitant to think about you know, what's going to come and it's coming for all of us, so ignoring it doesn't make it go away. Like a lot of things denial is not just a river in Egypt, so and I often think if we just if we could if you or I could be empowered to force a customer to go to probate court for one day and just see what that looks like, they go, okay, I don't want that. Right, I'll be dead, but I want that happening with my name on it for sure. Yes. I mean, just sitting there for one day as you suggested, right? Clients will say, why did it take so long, right? Why was that hearing so long? It was a simple little thing. Well, we were number 35 on the docket, right? Number 35 of 40, 60, whatever the number is for that day and the court had to hear all of these people, right? And we had to be there cuz we don't know when the court's going to call you know, lucky number 35 and it's it can be and you see just how you know, slow some of these processes can move and this is not to besmirch the judicial officers or the courts.

46:34 They are wonderful our we have such a very deep and talented probate bench throughout the state frankly. Really kind, caring, smart, efficient people, but there's just you know, we live in a very populous part of the country and there just there are a lot of cases and a lot of people don't have you know, wills, trusts you know, structures and you know, they just end up you know, mired in these situations and a lot of times you know, they don't they have a hard time if they're smaller estates particularly finding lawyers right? Who understand these processes, so that just further bogs down the system unfortunately. Yeah, very much of finding the right attorney I saw and that's why I did this podcast originally people would reach out to me and I would ask them questions because they would just want an attorney and a number and I'd go, well, no, that doesn't work that way. That's the problem. What's your problem and then let's get you to the right attorney who can solve that. And Scott, for so many of those problems you or your firm are the answer. I've gone a little bit over. I really appreciate Like I said to you when we started today, we go as long as I'm interested and I'm still interested, but at some point I got to recognize your time. You get you got to get some billable hours in. We're not paying you enough to make this I appreciate being able to do it. Like I said, I love this stuff. I know you do as well. I'm always it is an honor truly to be able to be here with you and to be able to talk about these things cuz they're important, right? Because they affect people.

48:03 Well, thanks. Thanks so much. And if you want to get in touch with Scott or his firm, Scott Rahn is at RMO LLP and the website is rmolawyers.com. There's a contact information there. We have a banner down below with the contact information more easy to see. Feel free to reach out to him and his team and again, they specialize and limit to probate administration and trust administration and probate and related litigation. Scott, thank you again so much for your time today. I always learn so much in talking to you. I really appreciate you. Thank you again for having me, Bill. And for that you this is the Fractional Interest podcast we talk about all things related to fractional interest in real estate and probate and non-real estate. I hope you got a lot out of today. It was interesting. If I can help any way, I'm at Bill Gross Probate on social media. As always, make today your best day ever. Thanks for watching.