A family in Brooklyn faces a common dilemma. Their parents have passed, leaving behind a valuable brownstone and an investment portfolio of nearly identical worth. One daughter has lived in and managed the building for a decade. Her brother, a successful surgeon in California, has no interest in being a landlord. If their parents’ trust mandates a simple “equal” distribution, the trustee must split everything down the middle—giving each sibling a 50% interest in the building and 50% of the stocks. This forces a sale or an awkward, cross-country co-ownership. It’s a classic case where equal is not fair, and certainly not practical.
This situation requires a more deliberate approach to estate distribution. The tool for this is a non-pro-rata distribution, one of the most effective ways we translate a client’s intentions into a practical outcome.
What “Pro-Rata” vs. “Non-Pro-Rata” Means
The default method for distributing trust and estate assets is “pro-rata.” The term means “in proportion.” Each beneficiary receives a fractional share of every single asset in the estate. If there are two beneficiaries and two assets, each gets half of both. It is simple, but often clumsy.
A “non-pro-rata” distribution allows a trustee to distribute assets of equal value, but not necessarily in equal shares. Instead of splitting the brownstone and the portfolio, the trustee could give the entire building to the daughter in Brooklyn and the entire investment portfolio to the son in California. Each receives their rightful share of the total value, but they receive the specific assets that make the most sense for their lives. The outcome is equitable without being needlessly destructive.
This approach transforms the role of a trustee from a simple divider of assets into a true steward of a family’s legacy. It allows for nuance, common sense, and the preservation of assets that hold more than just monetary value.
The Intentional Legacy: Why Plan for This?
Authorizing non-pro-rata distributions is an act of foresight. It anticipates the realities your family will face and gives your chosen fiduciary the tools to act intelligently. I have seen this become critical in several common scenarios.
Consider the family business. If one child has dedicated their career to the business while their siblings have pursued other paths, a pro-rata distribution can be catastrophic. It forces the active child to buy out their siblings or brings in co-owners who have little knowledge of or interest in operations. A non-pro-rata distribution allows the business to be given to the child who runs it, while other assets—like real estate or investments—are used to equalize the inheritance for the others.
Or consider legacy properties, like a family home or a vacation spot on Long Island. Often, one branch of the family has a deeper connection to a property. A non-pro-rata plan can pass that property intact to them, preserving it for another generation while ensuring other beneficiaries receive their fair share from the remainder of the estate.
Tax implications are also significant. Different assets come with different tax attributes, particularly capital gains tax basis. A trustee with the flexibility to make non-pro-rata distributions can work with tax professionals to allocate assets in a more tax-efficient way—for example, by distributing low-basis, highly appreciated stock to a beneficiary in a lower tax bracket.
Authority and Fiduciary Duty in New York
This flexibility is not automatic. In New York, the power to make non-pro-rata distributions must be explicitly granted in the will or trust document. Without that specific authorization, an executor or trustee is bound by the default pro-rata rule. The governing document is paramount.
A fiduciary’s authority is grounded in New York’s Estates, Powers and Trusts Law. EPTL § 11-1.1(b)(20) grants a fiduciary the power to make distributions “in kind”—that is, with property instead of cash. However, to make those distributions on a non-pro-rata basis requires clear, unambiguous language in the trust or will itself.
This power places a heavy burden on the trustee. Their fiduciary duty demands absolute impartiality. To distribute the Brooklyn brownstone to one child and the stock portfolio to the other, the trustee must first obtain formal, independent appraisals of both assets as of the date of distribution. They cannot rely on old valuations or guesswork. The values must be as close to identical as possible, otherwise the beneficiary who received the less valuable asset could sue the trustee for breach of fiduciary duty in Surrogate’s Court.
Stewardship.
This isn’t about playing favorites. It’s about being pragmatic. A well-drafted estate plan anticipates these challenges and empowers the trustee to make smart decisions that honor the family’s relationships as much as their balance sheet.
If your estate documents are silent on this power, your executor or trustee may have their hands tied, forcing outcomes you never intended. A prudent first step is to identify who you have named as your executor and trustee and ask us to review your documents to confirm they have the specific powers they will need to administer your estate with both fairness and flexibility.
