Author Topic: Inheritance Conundrum  (Read 1486 times)

CB in CT

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Inheritance Conundrum
« on: April 05, 2018, 06:55:14 PM »
Hello Everyone!

First time posting, but I've been a long time lurker and have really appreciated all the wisdom from this Community, and have learned a whole bunch and even grown a few whiskers in my own 'stache.  Let's get down to business.

My Grandmother passed away 10 years ago, and left the house (evenly split) to my Dad and Aunt.  This is the house that my Grandfather built by himself by hand after he returned from WWII, and my Dad and Aunt were raised there, so they have a significant emotional attachment to it.  A few details on the house:

Zillow Estimate: $187,000
3 Bedrooms, 1 Bathroom
Property Tax $4,600
Currently rented for $1,400
Located in Connecticut

So why am I here seeking advice?  My Dad and Aunt are getting up in age, and looking to pass the house along with the responsibilities of being a landlord.  All 4 Grandchildren (myself included) are not interested in living in the house since it is too far from our jobs.  We are also not interested in it as an investment as it wouldn't meet the 1% rule (let alone having our own families that take up our own personal time).  My brother is the only one slightly interested in taking it on, maybe in some sort of Property Manager Role where he can be just paid a fee to take care of maintenance and landlord duties.

So my Dad/Aunt really want to keep the house in the family, but there doesn't seem to be an "easy/clean" way to do so.  Does anybody else have any similar experience in a situation like this?  Is it possible to set up a LLC or a trust that would take ownership of the house and then allow my brother to serve as the Property Manager?

I certainly appreciate any ideas or advice you guys have, Thanks!


secondcor521

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Re: Inheritance Conundrum
« Reply #1 on: April 05, 2018, 11:32:21 PM »
The easiest way is for the brother interested in being a property manager to take the property and pay each of the other three grandkids $40K each for their share, assuming both Dad and Aunt are good with an even division of wealth.  If Property Manager Brother doesn't have $120K, he could probably get a mortgage on the place to buy you out.

You can probably just have your Dad and your Aunt leave their shares in the property to each of the kids and then do the horsetrading after they pass away so as to not ruffle their feathers unnecessarily.

If PMB decides he doesn't want it after all when that time comes, all y'all can just sell it and split the proceeds according to your ownership shares.  Again, if Dad/Aunt would be bothered by this, you could do this after they pass away.  My general rule is that deceased people don't get a vote as to what happens, so if you don't want the property, don't let their wishes be a millstone around your necks...JMHO, YMMV.

In all of the buying and selling, remember to account for the fact that these are direct sales between friendly parties so you're probably escaping real estate costs and so forth in whatever way seems reasonable among the parties.

former player

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Re: Inheritance Conundrum
« Reply #2 on: April 06, 2018, 02:47:15 AM »
I had a very similar offer once: a family member offered to leave me her (lovely, old) house if I would agree to live in it.  It wasn't where I worked and wasn't in a town I wanted to move to, so I said no.  I didn't hear anything more about it: after her death it emerged that her will split everything fairly between all the obvious heirs, including me.   The house was sold.  No regrets on turning down the £250k value of the house.

I would say tell your Dad and Aunt the truth: you all appreciate the family and sentimental value of the house but none of you live nearby and none of you (except maybe your brother) are in a good position to be long distance landlords.  You will accept whatever decision they make about the house.

sokoloff

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Re: Inheritance Conundrum
« Reply #3 on: April 06, 2018, 04:49:58 AM »
Iíll also point out that it does meet the 1% guideline if you brother effectively pays $120K or $135K for it (by being given the house and paying each of the other grandkids $40K or $45K). Thatís not exactly the most mathematically sound way to look at it, but neither is it completely ridiculous.

If heís interested in doing that, even for a while, it may keep the peace with the older generation and give him a chance to try his hand at being a landlord without a ton of commitment or risk.

CB in CT

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Re: Inheritance Conundrum
« Reply #4 on: April 06, 2018, 04:54:37 PM »
Thanks for the feedback, it is much appreciated.  The good thing is everybody's relationship is fairly good, so whatever ends up happening don't think there will be too much drama.

Iíll also point out that it does meet the 1% guideline if you brother effectively pays $120K or $135K for it (by being given the house and paying each of the other grandkids $40K or $45K). Thatís not exactly the most mathematically sound way to look at it, but neither is it completely ridiculous.

I like this point Sokoloff, it is a good way to think of it and i will run it by my Brother and see what he thinks.

I am just curious if anyone knows how difficult it would be to set up a trust or LLC that the home gets transferred to?  Would this just make it an absolute mess in terms of taxes and other legal mumbo jumbo?

secondcor521

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Re: Inheritance Conundrum
« Reply #5 on: April 06, 2018, 04:59:19 PM »
I am just curious if anyone knows how difficult it would be to set up a trust or LLC that the home gets transferred to?  Would this just make it an absolute mess in terms of taxes and other legal mumbo jumbo?

It's not particularly hard, but I can't really understand the reason to do so.  If the four grandkids own their 25% shares and you decide to hire the one brother as property manager, you can do that without needing a trust or LLC.  If you did set up a trust or LLC, it would, at the very least, probably cost you some legal fees then ongoing tax preparation fees.

Other than hiring the brother as property manager, what do you think a trust or LLC would help you accomplish?

Sibley

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Re: Inheritance Conundrum
« Reply #6 on: April 09, 2018, 09:58:02 AM »
Be careful not to mess up the tax side of this. If the property is inherited, there's a step up of basis as of the date of inheritance. Whatever you decide to do, BEFORE you do it check the impact on taxes.

Realistically, sounds like the house is going to be sold at some point. No one's really that interested in owning it. If your dad and aunt won't do it now, then it'll happen after they pass.

bognish

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Re: Inheritance Conundrum
« Reply #7 on: April 10, 2018, 10:11:09 AM »
Sell the house and leave it as fond memories of grandpa and not bitter new memories of being a 1/4 landlord on a old house. Once its sold hang onto memories and pictures but don't drive past again. New owners of my grandfathers house have done an ugly remodel and removed a lot of the hard work and features that my dad helped build as a kid. He wishes he had stayed away.

Dicey

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Re: Inheritance Conundrum
« Reply #8 on: April 11, 2018, 11:37:12 AM »
Be careful not to mess up the tax side of this. If the property is inherited, there's a step up of basis as of the date of inheritance. Whatever you decide to do, BEFORE you do it check the impact on taxes.

Realistically, sounds like the house is going to be sold at some point. No one's really that interested in owning it. If your dad and aunt won't do it now, then it'll happen after they pass.
This will sound morbid, but it is sound advice. Ask that the property be divided evenly among the grandchildren. Upon their passing, sell it, and divide the proceeds evenly. No reason to upset them with your plans, or to be saddled with an impractical pproperty. It's fine to sell it and let a new family begin creating memories there. It might be nice to create a booklet detailing the history of the house, with lots of pictures. Give one to each relative and one to the new owner.