'The cost of building the house is expected to be about 30% of the property's current value'

"If I were to pass away, I might leave this son a larger percentage of the trust to reflect his investment." (Photo subject is a model.)

Dear Quentin,

I own my home outright, and it is held in a trust, with my two sons as the beneficiaries.

One of my sons is planning to build a small house on the same large lot as my house. It will not have its own address, tax parcel or deed. Instead, it will be treated as an additional structure on the existing property. He will be paying for the construction in cash, so there will be no mortgage.

I plan to meet with my estate attorney to ensure that the trust adequately protects my son's investment. The cost of building the house is expected to be about 30% of the property's current value - approximately $400,000 on a property currently worth about $1.2 million.

My initial thought is that, if I were to pass away, I might leave this son a larger percentage of the trust to reflect his investment. Another possibility would be to leave the property entirely to him while giving my other son a larger share of my remaining assets.

I'm sure my estate attorney will have recommendations, but I'd also be interested in hearing from other readers who have dealt with a similar situation. What approaches worked well, and were there any pitfalls I should be aware of?

Motherland

Related: 'Please don't let this happen to you': My best friend died without a will - her neglectful family gets everything

You can email The Moneyist with any financial and ethical questions at qfottrell@marketwatch.com. The Moneyist regrets he cannot reply to questions individually.

You are placing an estate-planning nightmare in the hands of your other son.

Dear Motherland,

This is a short-term solution with a longer-term problem.

It sounds like a years-long headache in the making. My initial thought is that, unless local planning laws allow you to subdivide the property, your son will be building a house on land that you own - not on property that your son owns.

That creates a significant estate-planning issue. Unless you have enough other assets to compensate your other son for the value of the entire property - your home, the land and the house your son builds - you are sowing the seeds of a future conflict.

Those concerns don't even take your neighbors into account. Neighbors often run into disagreements about boundary lines, right-of-way easements (where neighbors might have access to property without actually owning it) and other issues related to population density.

Disputes over land are not uncommon in Maine, according to Russell Johnson Beaupain, a law firm with offices in Bangor and Millinocket. "Mainers are close to their land and value a sense of place. Unfortunately, one's sense of place can become a legal quagmire."

For all of the above reasons, I'd be very cautious about moving forward without a clear legal and financial plan in place. Your estate attorney should, I hope, be able to suggest ways to protect your son's investment while ensuring your estate is divided fairly.

The main issue here is not simply the $400,000 cost of the house. It is that your son's investment would become attached to an asset he does not own. Also, a $400,000 construction bill doesn't mean the finished house will add $400,000 to your property's market value.

If the property cannot be subdivided, his house would increase the value of your overall property, but ownership would still remain with the family trust. What's more, the value added by his investment may not exactly correspond to the amount he spends on it.

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Selling the property

What if the property has to be sold to pay for nursing-home care for you? What happens to your son then? Would you buy him out of this property? How much would you give him? Would he even want to move if he is, for example, raising his own family there?

You are also placing an estate-planning nightmare in the hands of your other son. That could test even the healthiest of sibling relationships. Even when families are strong, messy arrangements can create conflict after you are long gone.

Before your son breaks ground on this house, consult an experienced estate-planning attorney. They might suggest documenting a right for your son to receive credit or reimbursement for his investment, adjusting his distribution based on future appraisals.

Please do not rely on a verbal understanding. Before construction begins, everyone's expectations should be clearly documented, especially if it does turn out - given what you say in your letter - that you are not allowed to subdivide this land.

There are many good reasons you may not be allowed to have two homes with two separate postal addresses under local zoning rules. The town may, for example, require a larger minimum lot size than you would have after such a split.

Many towns in Maine (and other states) also require each new lot to have a certain amount of frontage on a public road or an approved private road. Shoreland rules could also prevent dividing the land if the property is near a lake, river or coastal area.

Check local ordinances. Find out why subdividing the land is not allowed. There could be other environmental or historic limitations. Wetlands, steep slopes, flood zones, contaminated soil, or any other number of issues could prevent this new home from meeting local standards.

Whatever you do, don't proceed without legal counsel.

Related: 'I'm the executor': My two siblings and I inherited an IRA. Can we just cash it out?

The Moneyist regrets he cannot respond to letters individually. Check out The Moneyist's private Facebook group, where members help answer life's thorniest money issues. Post your questions, or weigh in on the latest Moneyist columns.

More columns from Quentin Fottrell:

'It's heartbreaking': My brother claimed Social Security at 70. He died from cancer after one payment. Why wait to claim?

I'm a single 58-year-old veteran with $1.5 million in assets and a VA pension. Can I afford to retire?

'I've plenty of time on my hands': Advisers bombard me with offers of free steak dinners. Is it wrong to go for the food?

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-Quentin Fottrell