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Siblings seek clarity after receiving confusing advice from estate attorney
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Siblings seek clarity after receiving confusing advice from estate attorney

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Q: I just read your recent article about how siblings should talk through their mother’s estate. I am in the same situation, but it relates to our father’s estate.

The estate lawyer we talked to about estate planning told us that you cannot get one-half of the value of the house and keep the house. In our case, there are three of us. So he said if the house is assessed at $300,000 at time of death (which it was) and only one of us wants the house, then that person would have to buy out the other two at $150,000 each. Then they’d be able to keep the house for themselves.

Is this right? It seems fairer than the way you wrote.

A: Thank you for your comment. Let’s unpack your situation.

For sake of discussion, let’s assume that the only asset in your father’s estate is his home. You indicated that your father’s home was worth $300,000 at the time of his death.

If you and your siblings sold the home to a random buyer, each of the three siblings would end up with $100,000 from the sale, less the costs of the sale. But in describing what your attorney said, you’d sell a $300,000 house to one sibling and you and the third sibling would wind up with $150,000 in cash, each.

From our vantage point, that doesn’t seem fair. While one sibling would end up with the home, the full value of the home would have gone to the two other siblings. The sibling who got the house would effectively end up with no inheritance from your father’s estate. If the property was worth $450,000, and you paid each sibling $150,000 for their share of the house, then you’d each wind up with an equal share of the inheritance.

Imagine it’s a different house you’re buying: one down the street that’s hypothetically priced at $300,000. If you bought that house instead of your father’s house, you’d be out of pocket $300,000. But, when your father’s estate sells his house, you’ll receive $100,000, or one-third of the net proceeds.

We were trying to imagine what information your estate attorney was trying to convey. Maybe he was suggesting that you pay $300,000 to the estate for the home. This way, you pay the full value of the home, but your father’s estate gets the money. This would seem right to us. Once the estate has the money, your father’s estate could distribute the funds to each sibling and each sibling would receive $100,000. You’d end up with the home and $100,000 from the estate. (You’d either have to pay cash for the property or take out a mortgage.)

We usually point out that when a sibling buys a home from the estate, there are some savings from that sale. In your particular situation, when you buy from the estate, the estate won’t have to pay a commission to a listing agent. And the estate may save other expenses on the sale of the home. You, as the buyer, may have reduced expenses as well. You, like your siblings, should profit from these savings.

At the end of the day, the last thing you or your siblings should want is any hard feelings from the sale of the home to you. But preserving family harmony requires that it also be fair to each of you.

Thanks for your question.

(Ilyce Glink is the author of “100 Questions Every First-Time Home Buyer Should Ask” (4th Edition). She is also the CEO of Best Money Moves, an app that employers provide to employees to measure and dial down financial stress. Samuel J. Tamkin is a Chicago-based real estate attorney. Contact Ilyce and Sam through their website, bestmoneymoves.com.)

Omaha World-Herald: Inspired Living

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