Monday, June 4, 2018 / by Robert Woessner
Dealing with Inherited Homes: Best Practice for Families
licated issues to solve. It is not uncommon for the person selling an inherited home to have a sentimental attachment to the property, which makes selling it an emotionally overwhelming decision.
However, making the decision to selling it could mean an amicable settlement of the property from several angles. While deciding to sell it could be the best idea to address all the complications, some proven tips can help homeowners approach the issue in a meticulous manner, with fewer problems and satisfactory results for all the stakeholders concerned.
Here we will discuss the different aspects of splitting the property with family members and the best practices involved.
Benefits of Selling
There are several benefits to selling the inherited property. In some cases, along with the inherited property, the heirs end up inheriting a lot of unexpected difficulties, commitments, legal and financial implications as well.
No matter if you are a single heir or one of multiple heirs to the property, selling it as quickly as you can is a way to save a great amount of money, time, stress, and the tiring effort involved in the settlement process. Every situation when someone inherits a home is typically different from each other.
The traditional means of selling homes is a good option if you find that there are no outstanding mortgages and the property is in good shape, where it does not require any repairs or cleaning to sell it. If you can easily afford any necessary repairs and cleaning, while handling the selling process, then you can choose the usual ways of selling it.
When there are siblings or family members who share the property with you as legal heirs, there might be some disagreement about how the settlement should occur. Therefore, selling the property could save you hassles. Once you convert it to money, the money can be distributed among the heirs. One concern that you need to address is the amount of time required to sell the property, since it is uncertain when it may sell.
If the house is underwater, meaning that the worth of owning it is less than what is owed on it, it is recommended that you sell it as quickly as possible. A short sale of the home can come to your aid if there are mortgage payments due which you are not willing or unable to pay. If one or more heirs inheriting the property have an urgent need for cash, then a quick home sale is an option.
Sometimes, you might have some added tax benefits in selling the home. At times, you might also feel that you just want to get rid of the burdens by selling it quickly, in order to get on with your life as smoothly as possible.
If the property is located in another city or state, assuming the responsibility of maintaining a vacant house can be a real burden that you may not be prepared to endure. If the house goes to probate, then even if there are no residents, the property must be maintained.
The property taxes, insurance premiums, utilities, homeowner’s association fees and other costs to maintain must be carried on by someone. Depending on how long the probate period lasts, families need to pay for the maintenance of the home, as long with the legal and other fees connected to owning and selling the property.
Also at the end of the probate, you will have to once again incur the hassles and expenditure of repairing and selling the home. Under such conditions, if your benefits are lower than your hassles and commitments, it is advisable you sell the home to investors.
Looking at several angles, selling an inherited home appears to be the best answer to the problems associated with inheritance.
Dealing with Family Members
Disputes among the siblings or legal heirs over the settlement of the inherited property are very common. Often, disputes over a property are dominated by some past issues of sibling rivalry and are a fight for dominance. During the absence of parental guidance, adult siblings are left to face the scenario of ambiguity or disagreements over their rightful role.
Ensure that disputes and disagreements do not lead to litigation since this will worsen the situation, cause issues with family members, create uncertainty waiting for the issues to be legally settled and hassles associated with legal hearings. The tremendous cost involved in litigation is certainly a wasteful expenditure. Litigation can hardly heal the differences.
This situation can be avoided. There is always a solution that can be made for a peaceful settlement so that creative solutions to these problems can be facilitated, and there is a mutual gain for all those concerned.
One good solution is for one of the heirs to buy the property from the others. If you inherit the home with your siblings, the rule is that it is even split unless otherwise stated in the will. If one of the siblings is interested in keeping it while the other wants sell it off, then the sibling interested can buy out the property.
The cost involved in this process is minimal and includes the appraiser’s fees and the closing costs. If this will work, then you just have to pay your sibling in cash for his share and get the title of the property transferred into your sole name through a deed. A private agreement can prove useful under some normal circumstances.
If you or your sibling cannot qualify for a mortgage, the one who does not wish to keep the house can finance the transaction. This will mean you will not need a home loan or incur out of pocket expenses.
For a private agreement, all that you need to do is to make a promissory note to your sibling for his or her share of the value as per the appraisal. The amount due to him or her can be paid in monthly installments along with interest. With this arrangement, you can buy out the property in time. If necessary, you may also make a deed of trust that gives him the power to foreclose if you default on payments.
Selling or renting the property could be the solution if none of the siblings are interested in keeping the property. If you have a friendly relationship, meaning that you can get along for a long time period as co-owners of the property, you can rent out the property and take your due share out of the proceeds monthly.
If one of the siblings manages the collection of rental payments, then the effort can be rewarded by the other with a little increase in the share. Whatever the terms are, it is good to record them in a written agreement. However, the best arrangement under these circumstances could be to sell the property, subtract the expenses, costs involved and the commissions paid and then divide the resulting amount among you.
Selling the property as soon as you inherit also helps you save on the capital gains tax. Capital gains tax for sale of the inherited property is calculated on the property value after the death of the decedent.
Since the difference may not be much if the time period is short, then you may be left with nothing to pay in capital gains tax. A lawsuit for partition should be the last option for you to settle the inherited property if you cannot come into an amicable agreement with your sibling over the settlement.
Filing a lawsuit can ask the judge to order the sale of your home and you can terminate your co-ownership. This is a complicated process and the judge usually appoints a mediator first, to get the property ready for sale.
If you are at odds with each other, you and your sibling might not be able to do this. Therefore, you have to have an agent to sell the home and mediate between you both and you both need to be prepared for this.
Holdovers Living in Estate
While inheriting the property, you must also address the issue of holdovers living in estate. If one of your siblings or yourself is living in the property, you need to come to an agreement with all the heirs whether the concerned individual will continue to live there or vacate.
In case of continuing to live there, the terms must be clearly drafted out. If the right to remain there is mentioned in the will, then it cannot be challenged. If it has to be challenged for some reason, the necessary legal proceedings must be adhered to.
If the decision is made to sell the property, then the property must be vacated in a definite time line facilitating the sale. If the occupant wishes to continue residing in the property despite the sale, then it must be dealt with accordingly.
If you are inheriting a property with tenants living in it, you must fulfill some responsibilities from the position of a landlord. If the property is sold, the legal rights of the tenants must be given due consideration. For complicated situations like this, it is always good to consult a competent attorney.
Splitting Up Items Inside
Any decision pertaining to the settlement of the property or its contents among the legal heirs must follow the guidance given in the will. Sentimental objects are invaluable and settling them must happen out of the legal conventions in mutual agreement between the siblings.
In case there is no will enacted by the owner of the property, then the state’s laws regarding intestate succession will come into play. Depending on whether the will or the law requires the estate to be divided equally, the heirs must act accordingly.
A few problems will arise, regarding the value of the estate and how it will be split up. However, since the value of sentimental objects are often subjective and cannot be decided by an appraiser, the real challenge would ensue if the different siblings wish to claim a particular item for themselves. In this case, the right solution would be to auction the personal items and distribute the sale value among the siblings equally.
A real estate agent can be appointed to decide the value of the property. The challenge here may be how to divide the real estate among the heirs in an acceptable way.
The two approaches that the siblings could take include either selling the property to divide the proceeds or keep the property and share the use. If the estate also features assets that cannot be distributed on pro-rata basis, an equal division of value is the solution.
If a sibling wants to hold the property, then the others can get the cash equal to their share of the property or other assets as it may be decided. Ultimately, everyone involved in the deal walks away with his or her share of the property in the right proportion.
Dealing with the left over items in the estate could be a laborious task and a bothersome job while attempting to settle a property. In this situation, you might need to categorize the items as those to keep, those to sell, those to donate and those to throw away.
Remember that during an estate sale, people may be ready to buy even the oddest things. Therefore, make some effort to see that as many things as possible are sold or auctioned away to be converted into cash and distributed among the heirs.