Probate

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Probate

My Siblings and I Can’t Decide what to do with Inherited Property – Now What?

Probating property in texas
Are You Sure That’s What Grandpa Wanted?

Here’s a tough situation that’s not all that uncommon: siblings inherit a family property but can’t decide what to do with it. Sometimes siblings are living far away from the house in question. Sometimes there’s a sibling who wants to sell and cash out instead of hanging on to the property. Either way, there’s something preventing them from agreeing on what to do with the inherited property.

So, now what?

When you inherit a house with siblings, each of you has a split interest, but you all have the “right of use and enjoyment” of the entire house. Unless a will specified that one person had the sole right to live in the home, all siblings would have to agree to share the residence equally. This arrangement is probably better-suited to work if the house is a vacation property. Maybe you each get a certain number of weeks to use the house each year.

If that’s not the case, your siblings must find an alternative arrangement.

The easiest solution would be to sell the house and split the proceeds evenly. Selling the estate requires you to go through the probate process, in which the court gives the executor of the will the authority to distribute the estate’s assets and settle the estate’s debts. Usually, one of the siblings has been named the executor of the will, and that sibling will need the permission of the other siblings and the probate court before putting the house on the market. As long as everyone agrees, there’s no problem.

There may be a number of reasons why one sibling doesn’t want to go this route, which makes everything more complicated.

If that’s the case, consider one of these alternatives:

Buyout the Other Siblings

If you and your siblings inherit a house, you probably own it equally (unless otherwise stated in the will).

Let’s say you want to hang onto the property, and your siblings don’t. You can buyout your siblings’ shares in the house by refinancing. You’ll have equity in the home equivalent to your share and then can take out a mortgage to pay off their shares. If it’s just two of you, for instance, you would only need to finance half of the home’s value, and then the deed could be transferred into your name.

Explore a Private Arrangement

If none of you can afford to keep the home on your own, refinancing through a traditional lender might not be possible. Instead, one of your siblings (or another private party) could finance the transaction for you. For example, you might agree to pay your sibling $20,000 for the next ten years to privately buyout his share over time. This limits your out-of-pocket and upfront expenses and can be a great option for those who cannot afford or qualify for a traditional mortgage. It’s common to record a deed of trust with the local registry, which allows the person who gives you the private loan to foreclose on the property if you don’t repay according to the agreement.

Rent the Property

When you inherit a home, you also inherit the home’s debt. So if the real estate market is weak, or if there’s still a mortgage on the property, you might decide to rent the property for a while instead of selling it. If you’re able to generate some positive cash flow on the property, you and your siblings might decide to split the proceeds evenly. Formalize any arrangement to this effect to avoid disagreements down the road. If the cash flow can sustain it, you might want to hire a property manager, so no one individual is responsible for being the landlord.

Head to Court

This is the worst case scenario, of course, but sometimes it’s the only option. If you and your siblings really can’t find any arrangement that works for all of you, then you’ll probably have to involve the court. You can file a lawsuit for partition in Probate Court, asking a judge to order the sale of the home so you can terminate your co-ownership. The court will usually try to referee the situation first by assigning you a mediator. You will have to pay the mediator, but the mediator will take one last shot at helping you all come to an amicable decision. If that still doesn’t work out, the lawsuit will move forward.

Because this is a formal lawsuit, there will be a fact-finding phase and court hearings, and ultimately a judgment (or settlement) over the partition requested. Cases involving the sale of inherited property can be difficult to resolve, so you may need to hire an attorney. If the judge ultimately decides to force the sale of the property, he might ask the mediator to select a real estate broker and accountant to help with the sale. This takes the control out of any one sibling’s hands. Again, these costs fall to you and your siblings and will come out of the proceeds of the sale. It’s important to understand that a Suit for Partition, the formal name of these probate court proceedings, can be costly and will eat into any profits you and your siblings get from selling the house by going this route. If the end result is going to be a forced sale, make an appeal to your sibling’s sense of greed as a motivation to reduce expenses.

At the end of the day, you are all family. We recommend you try to work things out amongst yourselves amicably before opting for expensive court proceedings to resolve your differences. Legal battles can leave a bitter taste in people’s mouths, and it can take months – even years – for some siblings to recover.

When in doubt, hug it out.

 

 

 

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