Inheriting a Home With Your Siblings? Here’s All That Can Go Wrong
From: www.realtor.com
If you and your siblings are on track to one day inherit your parents’ home, take heed of this cautionary tale.
In a Reddit thread AmITheA—le, a poster recounts how when his mom died in 2018, she left him and his two siblings her house.
“My siblings wanted to sell the house and split the money,” the anonymous poster says. “I wanted to keep the house. I asked them if I could buy them out.”
They agreed. So the siblings got the property appraised, and he paid them both a third of the home’s current value.
His brother spent his share on sports cars, nights out, and exotic vacations; his sister splurged on a boat.
In 2023, the man and his wife decided to move to be closer to her family, and they sold the house. By then, the price of the home had tripled.
“Now, both of my siblings think that I owe it to them to split the profit I made,” he writes. “This has become really toxic and most of my family is on their side. My mom’s sister says it would have broken her heart to see her kids fight like this and I should split the money with my siblings. My dad’s sister thinks I should buy them off so they shut up.”
Does this man owe his siblings anything more? We asked the experts for their take on the situation.
What the attorneys say
“The brother is not obligated to give them anything,” says Jessa Gary, an attorney in the estate planning, trust, and probate practice at Isaac Wiles in Columbus, OH. “His siblings are not the property owners—and are not legally entitled to anything—because he already bought them out.”
When their brother bought the house, he also took on all the risk, notes Jonathan Ross, managing attorney at Texas Probate Pros in San Antonio, TX.
“This house became his investment,” Ross explains. “His siblings, if they were smart, should have invested the money he paid them to buy them out. Unfortunately, they went and immediately spent that money. The bottom line is that they had every opportunity to do wise things with the money and invest.”
Long story short: They didn’t.
“If the value went down, I don’t think the siblings would be offering to pay him for the loss. He just did better, and legally, I don’t see any basis for complaint,” says Robert Steele, a partner at Schwartz Sladkus Reich Greenberg Atlas in Manhattan, where he heads the trusts and estates department.
It’s a matter of perspective.
“It is no different than selling the property to a stranger and then wanting part of the profit later when the stranger sells the property for more than he or she paid them for the property,” says attorney Don Worley, of McDonald Worley in Houston. “The siblings were more than happy to take the money when their brother offered to buy them out, but then their greed took over when he actually did something with the property and sold it for a profit later.”
Dividing or selling contents
House sales aren’t the only inheritance-related issue families fight about.
“I often work with properties where siblings are selling after a death—and over the course of my career, I have seen a variety of squabbles,” says Nikki Beauchamp, associate broker at Sotheby’s International Realty in Manhattan. “Some of the largest issues come from arguments over contents.”
To keep the peace, Ross recommends siblings flip a coin or take turns selecting one item they want to keep when dividing things up.
“But if the siblings do not get along,” he adds, “I’d recommend hiring an estate sale company to sell everything in the house and distribute the money evenly.”
Missing contents
Another frequent bone of contention among siblings is items that go missing.
“Many times, Mom and Dad had a house full of stuff, and over the years, things break or go missing without anyone being at fault,” says Brian Haran, senior associate attorney at Cona Elder Law in Melville, NY. “But in some cases, items are taken by an opportunistic child or family member.”
In these situations, Haran says it’s important to seek the assistance of an experienced elder law estate administration attorney.
“However, it’s crucial to consider whether the money spent chasing down those items is worth the potential return,” Haran warns. “Knowing that someone took some of Mom and Dad’s property and proving they took something are unfortunately two very different matters.”
When a sibling wants to live in an inherited house for free
Another common issue is a sibling who wants to move in—or won’t move out.
“One of the problem scenarios I’ve run into in the past with clients is one of the siblings was living in the house with the parent and didn’t want to move out,” says Raul Gastesi, an attorney at Gastesi Lopez and Mestre in Miami Lakes, FL. “They felt entitled to remain living there and wanted to do so for free.”
In other cases, one sibling wants to move into the house after the death of the parents.
“The issue then becomes whether this sibling will pay rent, if this sibling will buy the house from the other siblings, and if so, at what price?” Gastesi says. “This always becomes an issue, and they also need to consider the fair market value of the house.”
And if the sibling has financial problems, that just compounds the issue.
“That sibling doesn’t have the ability to buy the house because they don’t have the financial wherewithal, or they don’t have the credit,” Gastesi explains. “That leaves the other siblings disappointed, because they either must finance the house or come to another arrangement.”
That’s something that needs to be discussed among the siblings, Gastesi says. Questions to consider include the following: Are we going to sell the house? Are we going to rent the house out? And if one of us moves in, what happens to the interest of the other siblings? Do we let them live there for free and eat the cost?
Steps you can take now to avoid future issues
Parents can help their children in advance by drawing up a will and addressing this issue within their estate-planning documents.
“That can look like ‘the house goes to my kids in equal shares,’ ‘the house needs to be sold,’ or whatever other arrangement the parents wish to make,” Gastesi says.
They can even state in their will that if one of their children buys another out at fair market value, that transaction is final and the other siblings cannot go after future gains after the fact.
But Isaac Wiles’ Gary warns parents not to leave the property to one child with the idea the child will split the money with the siblings.
“They are not required to [split the proceeds] legally, and so it comes down to whether they want to give something to their siblings out of goodwill,” she says. “Unfortunately, this type of dispute is not uncommon.”
Why buying a sibling out can spell trouble
Buying out a sibling might seem fine and fair in theory, but experts warn that this can lead to a surprising number of hurt feelings or conflict.
“My recommendation to siblings who inherit a house is to sell it and distribute the sale amount evenly among them, in most cases,” Ross explains. “That way, everyone knows they were treated fairly and nobody got a better deal.”
If one of the siblings wants to use that money to buy real estate, they can do it with another house.
“This will eliminate potential jealousy from the siblings years later thinking they didn’t get as good of a deal as one sibling who bought the others out,” Ross says.
Advice for buying out a home inheritance
If you do inherit property and decide to buy out your siblings, Gary recommends first getting an appraisal on the property to see what the current value is as of the date of death—that last part is key.
“This will help reduce capital gains taxes on a future sale,” she says. “And if one sibling decides to buy others out, it will help them come to an agreed-upon price.”
If the sibling buying out the others is also the executor or trustee, be sure to consult a lawyer first, because that means the sibling is held to a “fiduciary standard of care” and must act in the best interests of the beneficiaries.
No matter what, be sure to put everything in writing with an attorney.
“Families often think they don’t need to go through the legalities because they are family,” Gary says. “But it can avoid a lot of issues and ensure everything is aboveboard.”
