A common issue that families encounter is a sibling who wants to move in—or won’t move out.
“One of the problem scenarios I’ve run into in the past with clients is one of the siblings was living in the house with the parent and didn’t want to move out,” says Raul Gastesi, an attorney at Gastesi Lopez and Mestre in Miami Lakes, FL. “They felt entitled to remain living there and wanted to do so for free.”
In other cases, one sibling wants to move into the house after the death of the parents. “The issue then becomes whether this sibling will pay rent, if this sibling will buy the house from the other siblings, and if so, at what price?” Gastesi says. “This always becomes an issue, and they also need to consider the fair market value of the house.”
And if the sibling has financial problems, that just compounds the issue. “That sibling doesn’t have the ability to buy the house because they don’t have the financial wherewithal, or they don’t have the credit,” Gastesi explains. “That leaves the other siblings disappointed, because they either must finance the house or come to another arrangement.”
That’s something that needs to be discussed among the siblings, Gastesi says. Questions to consider include the following: Are we going to sell the house? Are we going to rent the house out? And if one of us moves in, what happens to the interest of the other siblings? Do we let them live there for free and eat the cost?
Advice for buying out a home inheritance
If you and your siblings do inherit property and decide to let one sibling buy out the others, Gary recommends first getting an appraisal on the property to see what the current value is as of the date of death—that last part is key. “This will help reduce capital gains taxes on a future sale,” she says. “And if one sibling decides to buy others out, it will help them come to an agreed-upon price.”
Steps you can take now to avoid future issues
Parents can help their children in advance by drawing up a will and addressing this issue within their estate-planning documents. “That can look like ‘the house goes to my kids in equal shares,’ ‘the house needs to be sold,’ or whatever other arrangement the parents wish to make,” Gastesi says.
They can even state in their will that if one of their children buys another out at fair market value, that transaction is final and the other siblings cannot go after future gains after the fact.
No matter what, be sure to put everything in writing with an attorney. “Families often think they don’t need to go through the legalities because they are family,” says Jesse Gary, an attorney in the estate planning, trust, and probate practice at Isaac Wiles in Columbus, OH. “But it can avoid a lot of issues and ensure everything is aboveboard.”
Based on content by Julie Taylor, Sept 2024
Lorie Kroeger
https://www.grassmuckrealty.com/
Leave a Reply