When estate planning, it’s common for parents to leave their primary residence or a vacation home to their children. While your parents’ wills or trusts may specify who gets what percentage of the home, typically, you and your siblings will receive equal shares in the property.
This can result in potential problems. For example, perhaps you and your siblings have different financial needs or can’t agree on what to do with the home. Let’s take a look at how to best approach the situation.
Determine what to do with the house
The first step is to sit down with your siblings and have an open, honest discussion about your wishes for handling the inherited home. Generally, the options are:
- Keep the home and share it among family members,
- Rent out the home and share the rental income,
- Sell the home and divide the profits, or
- Arrange for one sibling to buy out the others.
If you decide to share the home, have a written agreement drafted by your attorney that outlines rules regarding scheduling, allowable uses, and responsibility for maintenance and expenses. If you choose to sell the home or arrange a buyout, obtain a professional appraisal to avoid disputes over the home’s value.
Other considerations
If you rent out the home, determine how you’ll handle rent collection, maintenance and other rental activities. One option is to engage a property management company to handle the day-to-day management.
Another issue to consider is how the title to the property will be held. For example, if you and your siblings own the home as tenants in common, then your respective interests will pass to your heirs according to your individual estate plans. But if you hold the property as joint tenants, then when one sibling dies, the surviving siblings receive his or her share.
Keep in mind that each of the options described above has different tax implications. Contact us with questions.
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