Father Passed Away- Need Advice for Children About Estate

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SCCC
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Father Passed Away- Need Advice for Children About Estate

Post by SCCC » Tue Jul 31, 2012 3:13 am

Hello,

My ex-husband recently passed away in February (cancer) and he left his house to the kids (son 21, daughter 18). Both of them are in college and are getting financial aid plus scholarships. At this time they do not work but instead focusing on getting through school full time.

My son and daughter still live in my home because the cost to dorm is outrageous. Their father never supported them financially and I have been unemployed since 2010. I was actually shocked that he left the house to the kids.

The house is new construction, legal two family in Queens, New York. The area is very diverse and is in walking distance to the park, restaurants, public transportation, etc.

Their father bought the house in 2005 (when all of the house prices were inflated) for $1,015,000.

Right now since we cleaned the house and it is completely vacant the kids decided to put it on the market to see what happens. The highest offer is $1,128,000. The Real Estate wants 4% if they sell the house, which is about $45,000.

There are no liens on the property but there is a $190,000 mortgage....the monthly payment is about $1,900.00. The taxes are $6,000 a year but I think it is included in the mortgage payment (escrow?).

Also, their father does have some bills left that have to be paid such as hospital bills, credit cards, etc but so far no big THOUSAND+ dollar bill has come in the mail yet....just a lot of hundred to two hundred dollar bills that do add up.

I'd say a safe number would be $30,000 in total for all of my ex-husband's bills.

Both of them talked it over and my son and daughter both decided they want to invest LONG TERM and don't need the money right away.


Now the kids are thinking....what is the best & safest investment?

Selling the house and putting the money into the stock market or trust fund which could be risky? We would have to contact a financial adviser because none of us know about the market.

OR

Keep the house and rent it?

The first floor can be rented for $2,000/month, second floor, $2,500/month.

Since the kids are not working and have virtually no significant credit line they would never be able to buy this kind of house by themselves at least in the near future or get a good mortgage rate like the one that is already in place.

If the mortgage owed was $500,000+ then I think they should sell but since the mortgage is so low and can be paid off in 4-5 years via rental income I think they should keep the house for investment.

Please let us know your opinions. Thank you and god bless.

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damjam
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Re: Father Passed Away- Need Advise for Children About Estat

Post by damjam » Tue Jul 31, 2012 4:51 pm

My condolences to your family.

The quote that comes to mind for your situation is "Don't let the perfect become the enemy of the good."
You don't have to come up with the perfect solution for your children, you don't have a crystal ball and no course of action can be guaranteed.

My quick thoughts on your situation.
I would think that the children inheriting the house would impact their financial aid qualification. They may need to sell to pay their fathers remaining expenses and their own college expenses.
Even if they do not have to sell, I would be inclined to do so. Managing a rental property is work. How will the two of them split the responsibilities? I can easily imagine a rift forming between them over division of work.

As to how to invest the money. I would have them take their time in figuring that out. In the meantime I would put the remaining proceeds into savings accounts being sure to remain under the FDIC limits ($250,000 per account). See: https://www.fdic.gov/edie/index.html for more information on FDIC limits. Spread the money across several banks if necessary.

Once they have the money safely deposited in a bank they can take the time to study up on investing. The Boglehead WIKI:http://www.bogleheads.org/wiki/Main_Page is an excellent resource.

Of course your kids could post here for further guidance.

SCCC
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Re: Father Passed Away- Need Advise for Children About Estat

Post by SCCC » Tue Jul 31, 2012 6:06 pm

My kids are responsible young adults and they do get along well. They have talked about this issue a couple of times and both are dedicated for LONG TERM investment....whichever that maybe....renting the house or selling it.

covertfantom
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Re: Father Passed Away- Need Advise for Children About Estat

Post by covertfantom » Tue Jul 31, 2012 6:26 pm

I'm assuming that your kids are responsible for the estate - do they have the $30,000 to pay off outstanding debts? What happens if they rent it and within a week there is major damage that needs repair? My concern here is that your children may have no emergency/slush fund to work with.

There's still the whole discussion of whether or not your kids are ready to be landlords or not. It takes a lot of work, and if you're not in NY, are you/they ready to pony up to fly back and forth? Or are you going to hand it off to a rental agency and let them suck up 10% of your revenue?

downshiftme
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Re: Father Passed Away- Need Advise for Children About Estat

Post by downshiftme » Tue Jul 31, 2012 6:27 pm

A rental house is a very illiquid and awkward asset for two young siblings to share. They have no reasonable source of outside funds to cover contingencies such as tenants moving out or house needing repairs. They have no experience as landlords and no experience as business partners. Their financial aid situation is changed greatly and with half a million each in assets their expected contribution just went up enough to disqualify them from all needs based aid, but they have no more cash than before.

This sounds like a good idea to sell as soon as possible.

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Aptenodytes
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Re: Father Passed Away- Need Advise for Children About Estat

Post by Aptenodytes » Tue Jul 31, 2012 6:31 pm

There are financial aspects to this decision and non-financial. People on this forum can comment on the financial; you and your children are the only ones in a position to weigh the non-stop financial.

Financially, everything points to selling the house and investing in a portfolio of index funds. Keeping the house is maximum risk -- it might work out but the chance of a big loss is quite high.

There's some chance that college financial aid considerations might alter this calculus. With half a million in the bank they would lose all financial aid, but they might still be eligible with a house. If this scenario is relevant then they may want to hang on to the house until they are done with school and then sell.

The non- financial considerations may go the other direction, in which case your children will need to weigh the tangibles and intangibles and make a tough choice.

You mention the lack of credit history as a reason not to sell the house. But I'm not sure that's relevant. If a house is what they really want at this stage in their life then with a million dollars they won't find it hard to buy one.

I know these are difficult choices. My best wishes to your family.

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Re: Father Passed Away- Need Advise for Children About Estat

Post by JDCPAEsq » Tue Jul 31, 2012 6:43 pm

AS others have pointed out, it makes little sense to retain the house. They are in no position to manage it as a rental and they don't have the financial backing to deal with potential expenses on the property. All of you will be far better off selling the property and investing in a diversified portfolio of securities rather than having their entire inheritance tied up in one piece of real estate.
John

delamer
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Re: Father Passed Away- Need Advise for Children About Estat

Post by delamer » Tue Jul 31, 2012 6:47 pm

If your children keep the home as a rental, they will need an emergency fund to deal with repairs. I speak as a homeowner who just spent $4,000 out-of-pocket on tree removal from the East Coast wind storm that occurred a few weeks ago. Is this something they can establish? What will they do if the emergency fund is spent down and yet another repair comes up?

How will they find reputable repair people? What if some renters trash the place? I assume that they will need some kind of liability insurance in case an tenant is injured and sues them.

I have sons the same age as your children. If my boys were in this situation, I would tell them to sell the house, then set aside 1) enough money to pay for their educations (why pay interest on loans when you have cash available); 2) enough for a downpayment on a home a little bit down the road (if they are so inclined); and 3) a few $1,000 to have some fun. This money could go into CD's since it is needed in the relative short term. Then put the rest into the Vanguard Balanced Index Fund until such time as they can educate themselves about investments and risks. This fund is a moderate investment - a combination of stocks and bonds - with very low costs.

earlyout
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Re: Father Passed Away- Need Advise for Children About Estat

Post by earlyout » Tue Jul 31, 2012 7:03 pm

I think trying to keep the house and rent it is too much risk at this time. You mentioned that the house was "left" to the children. Was this done through a will or did the whole estate pass to them as the only heirs? I ask because this may impact whether or not they have any responsibility to pay the outstanding bills that they are coming in.

EO

SCCC
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Re: Father Passed Away- Need Advise for Children About Estat

Post by SCCC » Tue Jul 31, 2012 7:16 pm

Their father's bills should be pay off in a few months once we sell other assets such as the car.

Once the bills are paid off then there won't be anything else owed except for the $190,000 mortgage, $2,000/month.

The house is virtually in mint condition inside and out and their father lived in one apartment while he rented the bottom apartment for $2,000/month. The tenant did move out two months ago so now the house is vacant. In the 7+ years of the tenant living there only some minor plumbing issues arose and normal maintenance for air conditioning/heat.

Again the house is newly built in 2005.

Keep your opinions coming, thank you!

SCCC
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Re: Father Passed Away- Need Advise for Children About Estat

Post by SCCC » Tue Jul 31, 2012 7:17 pm

earlyout wrote:I think trying to keep the house and rent it is too much risk at this time. You mentioned that the house was "left" to the children. Was this done through a will or did the whole estate pass to them as the only heirs? I ask because this may impact whether or not they have any responsibility to pay the outstanding bills that they are coming in.

EO
Their father had a will and it processed through probate.

billern
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Re: Father Passed Away- Need Advise for Children About Estat

Post by billern » Tue Jul 31, 2012 7:19 pm

Be careful to make sure all the bills are valid. There are scammers out there that send fairly smalls bills to the estate of recently deceased person hoping that their bills will be paid without question. Don't let it happen to you!

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Re: Father Passed Away- Need Advise for Children About Estat

Post by JDCPAEsq » Tue Jul 31, 2012 8:00 pm

Earlyout raised the valid question as to whether you or your children are at all responsible for the bills. Are you sure you should be paying these? You didn't seem to fully respond to that issue. They may have been left the house with no responsibility to pay debts of the estate.
John

Muchtolearn
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Re: Father Passed Away- Need Advise for Children About Estat

Post by Muchtolearn » Tue Jul 31, 2012 8:18 pm

OP, I am confused. You talk about "their father", his kids, your kids. Can you confirm that your husband who is deceased (I am so sorry) are the parents of these children? If so, did his will leave nothing to you and do you have a clue why?

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DiscoBunny1979
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Re: Father Passed Away- Need Advise for Children About Estat

Post by DiscoBunny1979 » Tue Jul 31, 2012 8:22 pm

While it might be nice to have low % loans for college, it's my opinion that if you have the cash to pay for it, then there is no guarantee that you will get a better return investing in taxable account. So, what's the big deal in not paying the college tuition out of the sale proceeds of the house? Wouldn't it be nice to start off a career without ANY debt?

Talking about debt, the debt is only that of the person that made the debt. Therefore if the will has gone through Probate, then what the OP is suggesting is that the 'bills' have been determined to be paid from the deceased funds or selling of the car. If that's the case and the only thing left is the house, then if the court finds that the children do inherit the house, the OP needs to make sure that an appraisal is done as of the date of death of deceased as that will be the basis in the house for each child. Then, until the house is sold, there will either be a gain or loss. I would not rent out the house because not only will they have to disclose their million dollar asset, but also the taxable income produced by it.

johnubc
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Re: Father Passed Away- Need Advise for Children About Estat

Post by johnubc » Tue Jul 31, 2012 8:33 pm

Do they want to be landlords? Do they live close by? Is either of them handy enough to fix any issues?

I would really recommend to them to sell the house, split the proceeds, and invest them wisely.

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joe8d
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Re: Father Passed Away- Need Advise for Children About Estat

Post by joe8d » Tue Jul 31, 2012 8:35 pm

billern wrote:Be careful to make sure all the bills are valid. There are scammers out there that send fairly smalls bills to the estate of recently deceased person hoping that their bills will be paid without question. Don't let it happen to you!
Definitely.I had that experience with the passing of both my parents.

At this time they do not work but instead focusing on getting through school full time.
All the more reason they do not want to take on the "job" as landlord.Sell the place.
All the Best, | Joe

sscritic
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Re: Father Passed Away- Need Advise for Children About Estat

Post by sscritic » Tue Jul 31, 2012 8:36 pm

Muchtolearn wrote:OP, I am confused. You talk about "their father", his kids, your kids. Can you confirm that your husband who is deceased (I am so sorry) are the parents of these children? If so, did his will leave nothing to you and do you have a clue why?
ex-husband
the OP

I think ex explains a lot.

Honobob
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Re: Father Passed Away- Need Advise for Children About Estat

Post by Honobob » Tue Jul 31, 2012 8:45 pm

http://www.neighborhoodscout.com/ny/que ... 2nd/#rates

Long term, I think I'd take the over $90,000 appreciation every year. Plus the positive cash flow! :moneybag
It's slowly dawned on me that we won the real estate lottery!

thebogledude
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Re: Father Passed Away- Need Advise for Children About Estat

Post by thebogledude » Tue Jul 31, 2012 9:35 pm

I think what it comes down to is what legacy do you want to impart to your kids and grand kids (real estate or money management - both have downside risk and upside reward).

In my opinion, if they were my kids, I would let my kids become the landlords since I want them to learn entrepreneurship and real estate.

That's how Donald Trump got started and also you have some experience in renting out the place.

Either way, I wish you the best of luck and my condolences.
Last edited by thebogledude on Tue Jul 31, 2012 11:25 pm, edited 3 times in total.

mptfan
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Re: Father Passed Away- Need Advise for Children About Estat

Post by mptfan » Tue Jul 31, 2012 9:43 pm

earlyout wrote:You mentioned that the house was "left" to the children. Was this done through a will or did the whole estate pass to them as the only heirs? I ask because this may impact whether or not they have any responsibility to pay the outstanding bills that they are coming in.
Exactly. You (the OP) are assuming that the kids are responsible for your ex-husband's debts, but that may not be true.

http://www.early-retirement.org/forums/ ... 26181.html

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Re: Father Passed Away- Need Advise for Children About Estat

Post by harrylime » Tue Jul 31, 2012 10:47 pm

mptfan wrote:
earlyout wrote:You mentioned that the house was "left" to the children. Was this done through a will or did the whole estate pass to them as the only heirs? I ask because this may impact whether or not they have any responsibility to pay the outstanding bills that they are coming in.
Exactly. You (the OP) are assuming that the kids are responsible for your ex-husband's debts, but that may not be true.

http://www.early-retirement.org/forums/ ... 26181.html
How many times are you going to point people to a post that contains erroneous information?

Specifically, this is incorrect:
Now, you say, what if the person had assets? Well, the credit card company would only have a claim against assets that pass THROUGH PROBATE. In most cases, assets pass outside of probate. The most common examples are bank accounts or other accounts with beneficiary designations. Those accounts pass to their beneficiaries without going through probate. Therefore, no unsecured creditor has any claim against them whatsoever. Unsecured creditors only have claims aganst assets that pass through probate. But since most people don't (or shouldn't) have a need for probate, then in most cases, unsecured creditors have no claim against anything.

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Re: Father Passed Away- Need Advise for Children About Estat

Post by Bfwolf » Tue Jul 31, 2012 11:36 pm

Honestly, the only reason I could see for keeping the house is if the scholarships are need based and turning the house into cash would make them ineligible. Even then, it may be worth it to sell the house if the scholarships are not a huge amount.

Being a landlord is a job, and not a great one to split between two young siblings. Sell the house, put the money in savings accounts (staying under FDIC limits), and have everybody in the family read The Bogleheads Guide to Investing. There's no need to invest the money right away. Leave it in the savings accounts for 6 months or a year--this is generally recommended advice for a windfall like this. This gives you and your kids time to do some reading on how to invest--you may decide you don't need a financial adviser.

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SuzyC
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Re: Father Passed Away- Need Advise for Children About Estat

Post by SuzyC » Tue Jul 31, 2012 11:59 pm

Is the mortgage assumable? If neither the OP nor the kids are working I wonder what bank will give these new young owners with no other assets, credit history, or landlord experience a mortgage or line of credit. Maybe that is possible, maybe not.

Also, what happens to the property taxes now that no portion of this property will be owner-occupied? Do they increase?

I also think the property should be sold. If/when the kids are older, and want to invest in real estate, they can take the seed money from this sale and do so when they are out of school and have jobs and liquid savings to manage a rental property. Right now, leaving the entire inheritance tied up in this one property, to be managed by kids with zero experience in being landlords who have no cash to maintain the property, seems a big risk to take with the only inheritance they may get. Why take on that risk? It's unnecessary.

harrylime
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Re: Father Passed Away- Need Advise for Children About Estat

Post by harrylime » Wed Aug 01, 2012 5:58 am

SuzyC wrote:Is the mortgage assumable? If neither the OP nor the kids are working I wonder what bank will give these new young owners with no other assets, credit history, or landlord experience a mortgage or line of credit. Maybe that is possible, maybe not.
The mortgage does not have to be assumed. Since relatives of the deceased are inheriting the property, the lender cannot call the loan.

If the kids would want to re-finance or get a line of credit, then they would have to qualify.

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Re: Father Passed Away- Need Advise for Children About Estat

Post by harrylime » Wed Aug 01, 2012 6:09 am

earlyout wrote:I think trying to keep the house and rent it is too much risk at this time. You mentioned that the house was "left" to the children. Was this done through a will or did the whole estate pass to them as the only heirs?
EO
That is a distinction without a difference. Whether the decedent had a will or not, the property (from what the OP has stated) is an asset of the decedent's probate estate. Until the probate estate's administrator satisfies legitimate creditor claims, the property can't be transferred to the kids' ownership.

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Re: Father Passed Away- Need Advise for Children About Estat

Post by JDCPAEsq » Wed Aug 01, 2012 7:37 am

harrylime wrote:[...the property (from what the OP has stated) is an asset of the decedent's probate estate. Until the probate estate's administrator satisfies legitimate creditor claims, the property can't be transferred to the kids' ownership.
I don't see where the OP stated the real estate was included in the probate estate. You don't know that it was from the facts given. Also, the state may have a statute specifiying priority of claims with real estate being last in line.
John

harrylime
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Re: Father Passed Away- Need Advise for Children About Estat

Post by harrylime » Wed Aug 01, 2012 8:17 am

JDCPAEsq wrote:I don't see where the OP stated the real estate was included in the probate estate. You don't know that it was from the facts given.John
Yep, that is true. She did not explicitly state that. But, since the OP mentioned a will and probate and did not mention a trust or joint ownership or an earlier transfer/life estate, and NY does not recognize Transfer on Death deeds, I figure that it is a good bet that the property is/was a probate asset.
Also, the state may have a statute specifiying priority of claims with real estate being last in line.
True (and it does appear that there are other assets sufficient to pay the creditors). But, if there were not...

Maybe I did not express it well, but my point was that the existence of a valid will or lack thereof does not make a difference if there are probate assets and legitimate creditor claims.

mptfan
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Re: Father Passed Away- Need Advise for Children About Estat

Post by mptfan » Wed Aug 01, 2012 11:10 am

harrylime wrote:
JDCPAEsq wrote:I don't see where the OP stated the real estate was included in the probate estate. You don't know that it was from the facts given.John
Yep, that is true. She did not explicitly state that. But, since the OP mentioned a will and probate and did not mention a trust or joint ownership or an earlier transfer/life estate, and NY does not recognize Transfer on Death deeds, I figure that it is a good bet that the property is/was a probate asset.
You are assuming things that you do not know. If the property passed to the children outside of the probate estate, and there are no assets in the probate estate, then the unsecured creditors are out of luck.

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FabLab
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Re: Father Passed Away- Need Advise for Children About Estat

Post by FabLab » Wed Aug 01, 2012 11:26 am

Methinks harrylime deserves some slack here.

Per the question put to SCCC on how the house was "left" to the children:
earlyout wrote: You mentioned that the house was "left" to the children. Was this done through a will or did the whole estate pass to them as the only heirs?
EO
SCCC responded:
Their father had a will and it processed through probate.
Save any further clarifying information from SCCC, seems to me that for harrylime to conclude that it passed through a probated will passes the reasonable-person test.
The fundamental things apply as time goes by -- Herman Hupfeld

harrylime
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Re: Father Passed Away- Need Advise for Children About Estat

Post by harrylime » Wed Aug 01, 2012 12:02 pm

mptfan wrote:You are assuming things that you do not know. If the property passed to the children outside of the probate estate, and there are no assets in the probate estate, then the unsecured creditors are out of luck.
Even disregarding the reasonable conclusion that the property passed through probate, your reliance upon an anonymous poster on another forum to assert that the unsecured creditors are out of luck is sadly misguided. That poster's bold, blanket assertion that "Unsecured creditors only have claims aganst assets that pass through probate" is simply untrue.

Each state has its own probate code and probate case law. One has to look at the code and the case law in a particular state to determine what rights unsecured creditors have against the recipients of non-probate transfers. However, the Uniform Probate Code deals with this in Section 6-102. And something on the order of 30 states have adopted the UPC in whole or part. At least some of the other states have their own statutes dealing with the liability of non-probate transferees to creditors.

As an example, here is Arizona, which did adopt the UPC:
http://www.azleg.state.az.us/FormatDocu ... ocType=ARS
A. Except as otherwise provided by law, a transferee of a nonprobate transfer is subject to liability to the decedent's probate estate for allowed claims against the decedent's probate estate and statutory allowances to the decedent's spouse and children to the extent the decedent's probate estate is insufficient to satisfy those claims and allowances. The liability of a nonprobate transferee may not exceed the value of nonprobate transfers received or controlled by that transferee.
...

mptfan
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Re: Father Passed Away- Need Advise for Children About Estat

Post by mptfan » Wed Aug 01, 2012 12:24 pm

harrylime wrote:your reliance upon an anonymous poster on another forum to assert that the unsecured creditors are out of luck is sadly misguided.
So you are saying I would be sadly misguided to rely on an anonymous poster on another forum, but wise to rely on an anonymous poster on this forum? :wink:

In any event, your cite shows that the recipient of non-probate assets in Arizona would be subject to liability to the estate for allowed claims against the estate, but it does not say that the recipient is liable to the creditor. Does this support the proposition that the recipient of non-probate assets is responsible to pay the unsecured debts of the decedent?

Batousai
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Re: Father Passed Away- Need Advise for Children About Estat

Post by Batousai » Wed Aug 01, 2012 12:45 pm

I'll add another to the sell the house, split the proceeds, and let each individual child invest as they see fit. If they want to invest in real estate, they can do that without owning this house. The last thing I'd want to do while struggling through college would be a land lord.

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FabLab
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Re: Father Passed Away- Need Advise for Children About Estat

Post by FabLab » Wed Aug 01, 2012 12:47 pm

Maybe it would be useful to return to the OP's original question: Sell the house and invest (& seeking advice) or have the children, now in college, become landlords?

My advice would be that they sell it, once the process (probate, etc.) enables them to do so and invest the proceeds for their futures. Now, there are any number of ways to effect a suitable investment portfolio, but, here on bogleheads, I can't imagine there'd be any debate on the specific investment choices to make ... :D
The fundamental things apply as time goes by -- Herman Hupfeld

harrylime
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Re: Father Passed Away- Need Advise for Children About Estat

Post by harrylime » Wed Aug 01, 2012 12:47 pm

mptfan wrote:So you are saying I would be sadly misguided to rely on an anonymous poster on another forum, but wise to rely on an anonymous poster on this forum? :wink:
Some are more credible than others...

In any event, your cite shows that the recipient of non-probate assets in Arizona would be subject to liability to the estate for allowed claims against the estate, but it does not say that the recipient is liable to the creditor. Does this support the proposition that the recipient of non-probate assets is responsible to pay the unsecured debts of the decedent?
As a non-probate transferee, do I care whether it is the probate estate's administrator or a creditor who is trying to reach into my pocket?

While I believe that there are states that would allow a creditor to take action directly against non-probate transferees, my guess is that the majority of states place the responsibility on the administrator of the probate estate. And, if the other interested parties decline to open probate and administer the probate estate, a creditor can choose to do so.

mptfan
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Re: Father Passed Away- Need Advise for Children About Estat

Post by mptfan » Wed Aug 01, 2012 1:18 pm

harrylime wrote:While I believe that there are states that would allow a creditor to take action directly against non-probate transferees, my guess is that the majority of states place the responsibility on the administrator of the probate estate. And, if the other interested parties decline to open probate and administer the probate estate, a creditor can choose to do so.
Ok. But as a practical matter, isn't it rare for a creditor to open and administer a probate estate?

mptfan
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Re: Father Passed Away- Need Advise for Children About Estat

Post by mptfan » Wed Aug 01, 2012 1:21 pm

harrylime wrote:As a non-probate transferee, do I care whether it is the probate estate's administrator or a creditor who is trying to reach into my pocket?
Yes, you do, because the estate administrator is likely to be a family member or an heir, and certainly not a creditor, so they have little or no incentive to "reach into my pocket" for the benefit of a creditor.

Again, if the major assets pass to the heirs outside of probate, there will not be a probate estate, and therefore, no estate administrator.

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Re: Father Passed Away- Need Advise for Children About Estat

Post by JDCPAEsq » Wed Aug 01, 2012 2:04 pm

Nothing like a bunch of lawyers or wannabe lawyers squabbling in public. :happy
John

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Re: Father Passed Away- Need Advise for Children About Estat

Post by Alex Frakt » Wed Aug 01, 2012 3:20 pm

This thread is going increasingly far from the OP's questions. Let's get back on topic please.

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Re: Father Passed Away- Need Advise for Children About Estat

Post by JDCPAEsq » Wed Aug 01, 2012 3:58 pm

However the law shakes out on creditors' claims, we all agree that you should be certain these are your obligations to pay. Debts of a decedent are not always the obligations of the beneficiaries of the estate and in nearly all states certain procedures must be followed to validate claims against the estate.

Also, there seems to be a general agreement by the majority that it would be unwise to retain this real estate for the children. Too much risk involved and too little experience on their part. IMO, no one should have 100% of their net worth tied up in a half interest in a rental property and certainly not two college students.
John

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Re: Father Passed Away- Need Advise for Children About Estat

Post by nonnie » Wed Aug 01, 2012 5:27 pm

A good estate administrator lawyer *should* be able to settle the debts (especially if they are legal claims against the estate) for less than 100%. In some cases it can be as little as 50%--whatever the amount it is certain worth trying. Never, ever should decedent's bills be automatically paid without verification AND negotiation.

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Re: Father Passed Away- Need Advise for Children About Estat

Post by JDCPAEsq » Wed Aug 01, 2012 5:41 pm

nonnie wrote:A good estate administrator lawyer *should* be able to settle the debts (especially if they are legal claims against the estate) for less than 100%. In some cases it can be as little as 50%--whatever the amount it is certain worth trying. Never, ever should decedent's bills be automatically paid without verification AND negotiation.

Nonnie
Could you please explain how this is done, particularly when there are valid claims and sufficient estate assets? I've only seen this accomplished on the rare occasion when the amount of the debt was in dispute.
John

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Re: Father Passed Away- Need Advise for Children About Estat

Post by nonnie » Wed Aug 01, 2012 6:11 pm

JDCPAEsq wrote:
nonnie wrote:A good estate administrator lawyer *should* be able to settle the debts (especially if they are legal claims against the estate) for less than 100%. In some cases it can be as little as 50%--whatever the amount it is certain worth trying. Never, ever should decedent's bills be automatically paid without verification AND negotiation.

Nonnie
Could you please explain how this is done, particularly when there are valid claims and sufficient estate assets? I've only seen this accomplished on the rare occasion when the amount of the debt was in dispute.
John
I'm most familiar doing it with hospital bills-- my lawyer called up the hospital and offered to settle the debts for 50% and it was accepted. It was a small estate and but there were sufficient assets. I think the offer of immediate payment probably helped. In the OP's case I do NOT recall any cash or other assets being mentioned so that certain could help with negotiation. It never hurts to ask/make an offer. I've personally settled credit card debts, albeit several years ago, for friends at $.50 - $.70 cents on the dollars with a promise of immediate payment.

I don't know what the real estate laws are in the OP's state but in CA if you put a house on the market for a certain price-- say $1 million, receive a full price offer or offer over asking and DON'T accept it--you owe the commission!

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Re: Father Passed Away- Need Advise for Children About Estat

Post by JDCPAEsq » Wed Aug 01, 2012 6:46 pm

nonnie wrote:I don't know what the real estate laws are in the OP's state but in CA if you put a house on the market for a certain price-- say $1 million, receive a full price offer or offer over asking and DON'T accept it--you owe the commission!

Nonnie
I think you can be confident that would be the law in all states. The agent has fulfilled the agent's duty under the listing agreement and is entitiled to a commission.
John

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Re: Father Passed Away- Need Advise for Children About Estat

Post by damjam » Wed Aug 01, 2012 7:00 pm

JDCPAEsq wrote:
nonnie wrote:I don't know what the real estate laws are in the OP's state but in CA if you put a house on the market for a certain price-- say $1 million, receive a full price offer or offer over asking and DON'T accept it--you owe the commission!

Nonnie
I think you can be confident that would be the law in all states. The agent has fulfilled the agent's duty under the listing agreement and is entitiled to a commission.
John
When did the OP indicate it was a full price offer? I must have missed something.

Regarding an earlier poster's reference to property taxes increasing. In NYS this is absolutely possible. There is something called the STAR program, which is a reduction in school taxes for owner occupied properties where the owner makes less than 500k. If the property were taken over by the children and used solely as an investment property the STAR exemption would expire (if the father had previously qualified) and the property taxes would rise. In addition the property might have been given an abatement under a NYC program for new construction of multifamily housing. If the property qualified, that abatement would expire after a certain number of years, possibly as little as 10. So the OP needs to look into those possibilities when running numbers.

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Re: Father Passed Away- Need Advise for Children About Estat

Post by nonnie » Wed Aug 01, 2012 7:44 pm

damjam wrote: When did the OP indicate it was a full price offer? I must have missed something.
You missed nothing except my misreading of the post. :oops: I misread the original purchase price for the listing price. Listing price was not, um, listed in the OP.

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Re: Father Passed Away- Need Advise for Children About Estat

Post by dmcmahon » Wed Aug 01, 2012 9:32 pm

It's unlikely the two children's financial needs will move in lockstep in future years. What happens if, sometime down the road, one of them gets married and needs cash to buy a house of his/her own? Or if one of them decides to get an expensive graduate education in law or medicine? I could go on with examples but you get the idea.

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Re: Father Passed Away- Need Advise for Children About Estat

Post by Muchtolearn » Thu Aug 02, 2012 10:11 am

sscritic wrote:
Muchtolearn wrote:OP, I am confused. You talk about "their father", his kids, your kids. Can you confirm that your husband who is deceased (I am so sorry) are the parents of these children? If so, did his will leave nothing to you and do you have a clue why?
ex-husband
the OP

I think ex explains a lot.
thanks ss, I blew it.

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Re: Father Passed Away- Need Advice for Children About Estat

Post by Honobob » Thu Aug 02, 2012 10:21 am

Financially the best thing to do is to rent the property.

I think your children have been handed the goose that lays the golden eggs. Anticipated appreciation of $90,000 a year PLUS over $30,000 net annual cash flow.

The alternative is to give up the $30,000 and spend $45,000 to have $900,000 to do what with? A 4% withdrawal would only give you $36,000 a year.

Do you really want to be driving by the place with the kids in the next 5-10 years when it's worth $2,000,000? True they need to be aware of risks with being a landlord but they are both college students and it's not rocket surgery. This is not a ghetto property that attracts less than ideal tenants. I would suggest a property manager until they are ready to take over active management. Real life experiences are the best.

They should also have an agreement in writing of how to deal with the property. I think dad made a very good purchase that will keep giving to the kids for years. The building equity and cash flow will give them many options in the future.
It's slowly dawned on me that we won the real estate lottery!

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Re: Father Passed Away- Need Advice for Children About Estat

Post by TA_Lurker » Thu Aug 02, 2012 10:37 am

I would sell the place. Your children have neither the cash flow, the time, nor the experience to manage this asset.

Yes, given the market and the cash flow this asset could potentially be very valuable in the long run. But it could also potentially cause a lot of problems. Taking the cash now and managing it wisely simplifies your lives.
Last edited by TA_Lurker on Thu Aug 02, 2012 10:40 am, edited 1 time in total.

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