Determining Acceptable Value of Inherited Real Estate?

[Snobdds]

I would put down the options on paper and hand them out. Tell them to not decide today, but to speak amongst themselves and their council. Put a two week decision deadline on the options.

1. Sell house at appraised value
2. Improve the house with an equal share in the reno cost.
3. Let it sit and split the incurred costs to maintain equally.


If they want to treat this as a business decision, give them a business decision to consider. Make sure they all sign and date the decision on each of their copies.

Then everyone's intentions are documented.

Proceed with the majority decision.

 

[MattB4]

If Ultrarunner ends up bowing to his siblings wishes so they get extra money in the near term:

I would definitely change my own will if I were him

Sorry but what does leaving things to nephews and nieces have anything to do with how his siblings treated him during this situation? The sins of the Fathers do not need to be passed onto the 3rd generation. If those kids were worth being in the Will before now I certainly would not think they should be cut out due to this imbroglio. Funny thing though if he does that he should now know to spell out exactly how things will be distributed versus a vague equal share notion.

I get it that he wanted the family home. However it appears the other heirs are opposed to him buying it. Whether at fair market value or at a premium. Hey sometimes families have dynamics that can appear odd.

 

[ning]

He doesn’t want to sell the house for starters. And he only has 1/3 ownership. He probably can’t move forward with the sell without their signatures but that would be a big mistake even if he could.

He's the executor, and unless their names are on the deed (very unlikely) then their signatures aren't needed for anything.
He's trying to avoid a fight and trying to figure out how to make it all work smoothly, but from the 0.001% knowledge I have of them I doubt there's a "everyone's really happy" result here and I'd just make sure they get their 1/3 valuation of the estate share as spelled out in the will.
Unless the will says that the house is to be sold and the proceeds split, he's free to get an appraisal and split it based on that value - from what I know there's nothing in the will that says they literally get one third of the house (that they can sell), they most likely get one third of the estate's value and the form of that third is up to the executor unless it's specifically described otherwise.

 

[tradosaurus]

If Ultrarunner ends up bowing to his siblings wishes so they get extra money in the near term:

I would definitely change my own will if I were him to give his estate to the Church (mom would have liked that, I would guess) or someone outside the family, another charity.
At the very least, I would specifically pull the delta between appraised value and sale value out of my estate and give it to someone. If I was feeling especially salty, I would give it to the opposite political party of my brothers or something along those lines.
In our case (4 of us) parents are both 91 (dad will be 92 in early March). He is I'll and she has a slow growing cancer. We already discussed everything and the consensus is that we are all fine financially and don't NEED anything. Everything will be divided equally except for a few items...I get the piano because I suffered through lessons the longest. If it were all up to me, any of the sentimental stuff would stay in the family. Say a sibling or niece/nephew gets something sentimental and decides a year or three later to sell it, I think it should be offered to the family (gratis) first. If nobody wants it, fine sell it. Too much of our family history has been sold off. Mom was 1 of 8 and 30+ cousins pillaged the estate (farm) that took generations to build up from Homestead Act (1862) and Timber Culture Act (1873) properties by my great (2x great) grandparents. Sad.

I have 8 siblings and after my Dad died all siblings (with no spouses) met at a restaurant to discuss rules of disbursing items not in the will.
It was agreed that if an item was given to my Dad that person could get it back.
We then drew numbers from 1 to 9. #1 went first and could pick one item (or spouse could choose).

 

[2manyrocks]

I've seen a couple of very costly instances where a surviving spouse had enough of children acting selfishly and left substantial estates to charity.

Personally, I'd be inclined to change my will to say, hey bros, remember how you treated me when mom died? I direct that mom's house passes to Oakland Animal Services for the care of homeless, injured, orphaned, unwanted, lost, abandoned and mistreated animals along with the rest and residue of my entire estate.

 

[Sigarms]

I could be wrong (as usual) but I think the moral to this story is that when assetts are involved, everything should be spelled out explicitly.

I don't know if this was a will or trust, or just the wording of the document that has caused this discord.

If I spoke out of line Ultrarunner, I apologize.

 

[ultrarunner]

The Trust states the home is distributed to me along with the provision the total value of distribution be equal 3 ways.

I’m the only one interested in keeping the home so no issues there.

The home is the most valuable assets by far.

The sticking point is how much is the value of the real estate held in the trust without the benefit of being liquidated to establish value.

This next part only applies to California and I will do my best to explain as it is very important if a child wishes to move into a parents primary residence.

A parent/child transfer of parents primary residence to the child for use as child’s primary residence is NOT subject to being reassessed for property tax purposes.

This is a huge deal but only in the very specific case of title passing from parent to child either through purchase, gift or inherited.

If I were to buy out my brothers… the 2/3 I buy from them would be reassessed to market as neither is my parent.

If I inherit the property in total then NO reassessment up to the statutory limit.

In real dollars inheriting means keeping the $4,000 annual property tax.

Outright purchase means the property tax goes to $16,000 (quadruples) (Based on a value of a million for illustration)

Buying my brothers out means $12,000 property tax… (8,000 more)

You say the estate isn’t worth 3 million so your screwed… the answer would be no.

Remember we are talking value here.

Say mom and Dads house is worth a million but has a 500k mortgage?

The value to a person inheriting would be 500k as the property also has 500k debt.

This is overcome by taking out a trust loan to raise the cash to payout the other beneficiaries…

It’s a lot of hoops to jump through to minimize ongoing property tax but 100% sound.

Of course if everything is liquidated it’s all moot… all that is required is to split what remains according to the trust distribution percentages.

As a side note... ten years back the home was valued at 325k and offered to me to purchase but my thought is buying then would only cause friction... Ten years later it appraised for 975k

 

[California]

My circumstances were nearly identical.

Dad had specified in writing that I should inherit the ranch and I should pay the other heirs so that everyone received equal value.

I was named executor in the trust.

On the advice of an attorney specializing in wills and trusts, as executor I deeded the ranch to myself and at the same time paid cash to other heirs so they received equal value. I funded this from estate cash, our savings, and a new small loan on our home elsewhere.

I consulted with the Sonoma County assessor (60 miles north of you) and was told that since the trust deeded the ranch to the next generation, the intent of Prop13 * was attained so I received the entire value of the Prop13 tax reduction. And I was told I didn't need to make the property my home.

This was in 2001 so I suggest consult with a specialist attorney to assure this is valid today.

I don't like the idea of your Trust taking out a loan. I expect an attorney will tell you this would prevent closing the trust timely. And it would maintain a spotlight on your administration of the trust. It would be greatly to your benefit to close the trust with finality and cut off all possibility of having your every action challenged.

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* First thing I found on Google:
"Proposition 13 rolled back most local real estate assessments to 1975 market value levels, limited the property tax rate to 1 percent plus the rate necessary to fund local voter-approved bonded indebtedness, and limited future property tax increases to a maximum of 2% per year."
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Personal comment - I voted against this ballot proposition at the time. Locking in an unreasonably low property tax rate for long-time homeowners is the essential Boomer 'I've got mine so screw you' to the next generation. When the younger generation can finally afford to buy a home it gets assessed at current market value, so they pay more than their proportional share of local taxes.

 

[Sigarms]

As a side note... ten years back the home was valued at 325k and offered to me to purchase but my thought is buying then would only cause friction... Ten years later it appraised for 975k

That tells me exactly how your parents felt about the house and where it should go.

Knowing from what I know of your parents from your written of them here over the years, they most likely thought you EARNED that right to purchase the house.

It also tells me what kind of man you are on why you didn't buy the house.

Your siblings are very lucky to have you as a brother, and apparently they don't know it.

It almost appears you have been backed into a corner, and no matter what you do, not everyone will be pleased, including yourself.

The only course of intelligent action I can suggest is be the executor and make the decisions you know what your parents would want you to do, and let the chips fall where they fall.

As I told my son the other day, as long as you give 110% of yourself and you feel that YOU made the right and fair decision, let the chips fall where they fall, and although in that moment in time after your decision those chips may not have fell where you wanted them to, down the road over the years when you look back, it will all work out like you wanted it to even though you couldn't see it at that moment in time after you made your decision.

I like California's advice better though

 

[paulsharvey]

At this point, it seems pretty cut and dry; the OP is too pay purchase the property for appraised value, and disburs 1/3 of the funds to each of the other two siblings. Our OP would have zero obligation to attempt to increase the value, which actually works directly against him