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.