Inheriting lake property with 2 other siblings

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mc2
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Inheriting lake property with 2 other siblings

Post by mc2 » Tue Sep 06, 2016 11:09 am

I'm looking for advice on a situation that might happen in the next 5-10 years.

My wife's parents have a humble little cottage on a nice lake. In passing, they have made comments to their 3 kids that the place will be theirs. The problem is that the 3 siblings have different philosophies on what to do with the lake, boats, financial backgrounds, etc. While I love the place and enjoy watching my children play out there, I am nervous about problems that will develop between my family and my wife's 2 siblings. Here's the short story:

1. My wife and I=stable/good income, conservative LBYM mindset, non-jetski/fancy boaters. We acknowledge that the cottage is old and too small. We would potentially invest in a tear-down and reconstruction in lieu of fancy boats, etc. It's too small to have people eat together and there are not enough beds for everyone. Wife wants to keep this as it's been in her family since her childhood. I don't have interest in owning 2 properties by myself.

2. Sister 1-single, loves the "old place" and would rather patch problems and chalk it up to character. Would not want to tear down and rebuild. Doesn't see the inconvenience that a small place has when it's forced to hold more people. Also conservative, non-boater type. Strong and stable income and hard-worker.

3. Sister 2/husband-married-2 kids, lives 90 miles away. Less than motivated, always late, income is modest, would rather buy jetskis and wakeboats. Talks about outlandish "awesome" ways to rebuild the lake, but doesn't have the means to pull that off. Neither are handy and neither have shown sensible financial decision making skills. Cool clothes, big cars, big dreams, but trapped in their current state.

I don't want to inherit this and then be forced to buy out one or both parties at current market rate since they didn't buy it in the first place. I also am not expecting that they do that in return. Telling my wife's parents that we are not interested seems like an insult. I don't think any of us could keep our homes and this property without the help of at least one other party.

Has anyone navigated something like this?

itstoomuch
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Re: Inheriting lake property with 2 other siblings

Post by itstoomuch » Tue Sep 06, 2016 11:15 am

BTDT
Sell out or buy them out.
2 years after Mom's passing, Selling to sister, still waiting for her to close the estate and I sell to her.
I had heck of time in getting funds to do maintenance.
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Re: Inheriting lake property with 2 other siblings

Post by 123 » Tue Sep 06, 2016 11:19 am

I'm assuming this is a "2nd home" owned by the spouse's parents. If the property is seeing less use due to their advancing age perhaps they can be encouraged to sell it and therefore eliminate problems and issues concerning it for their children.
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malabargold
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Re: Inheriting lake property with 2 other siblings

Post by malabargold » Tue Sep 06, 2016 11:26 am

Wouldn't worry about problems 5-10 years out that might never
occur.
I'd be paralyzed if I did that!

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Re: Inheriting lake property with 2 other siblings

Post by Lou354 » Tue Sep 06, 2016 11:27 am

Instead of tearing down and rebuilding, you could repair and expand. It sounds like that would satisfy wife and sister 1. That said, I predict that the most likely outcome is that sooner or later either the property will be sold or somebody's going to get bought out because it'll be hard to get everyone to agree on what should be done and actually pay for it.

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Re: Inheriting lake property with 2 other siblings

Post by psteinx » Tue Sep 06, 2016 11:29 am

Some of it depends on how long it's been held in the family, how strongly folks are attached to it, etc.

That said, it SOUNDS like its been in the family for some time, and there is some attachment to it. Not sure how long you've been married and/or how much time you've spent at the place, but your level of attachment to it may be far lower than that of the 3 siblings, or their parents.

If it's that small and old, the value of it is likely low, and probably so are the maintenance costs. I'm not sure you need to do anything now to deal with this issue. If the siblings do inherit it, it may be years down the line. Family situations and finances may have changed, and the nature of the problem, if any, may have changed with it.

Depending on all the details, I'd guess a good policy may be to defer, and deal with it if and when it needs to be dealt with.

mc2
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Re: Inheriting lake property with 2 other siblings

Post by mc2 » Tue Sep 06, 2016 11:38 am

malabargold wrote:Wouldn't worry about problems 5-10 years out that might never
occur.
I'd be paralyzed if I did that!


I like to be prepared. I do realize that everyone's plans and finances can and will change, but I like to have a little knowledge for when this occurs, which also could be within 1 year if a parent becomes ill, for example.

Repairing and expanding would be difficult and expensive as it's very old, has typical cottage afflictions like mold, crooked walls, poor insulation, aging plumbing and roof, etc.

I've been with the family for 20 years and I have many fond memories there as well spanning from my young dating days all the way through kids.

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Re: Inheriting lake property with 2 other siblings

Post by jjface » Tue Sep 06, 2016 11:39 am

mc2 wrote:I don't want to inherit this and then be forced to buy out one or both parties at current market rate since they didn't buy it in the first place. I also am not expecting that they do that in return.


That doesn't make much sense. It is worth what is is worth now. You either buy them out at market rates or they buy you out or you learn to compromise and own it together. Or you all decide to sell if no one wants it by themselves.

mc2 wrote: We acknowledge that the cottage is old and too small. We would potentially invest in a tear-down and reconstruction in lieu of fancy boats, etc. It's too small to have people eat together and there are not enough beds for everyone. Wife wants to keep this as it's been in her family since her childhood.


So which is it - your wife wants to keep it since it has been in her family or does she want to tear down and reconstruct?

I think that you need to stop looking at it as a group get together house and more as a retreat for one of the 3 families at a time. Can it hold your own family - you, your wife + kids okay?

Sister 2 hasn't the money so can dream of expansion all she wants but the others don't want it. If they like boats etc they can spend their own money on them.

Sounds like the best plan is to keep it as is and sister 2 can buy whatever boats she wants for her own family. No tear down and no expansion unless you all want to invest the money in an extension or something which seems unlikely.

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Re: Inheriting lake property with 2 other siblings

Post by psteinx » Tue Sep 06, 2016 11:45 am

While there are various potential negative downsides (somebody getting hurt there), probably the most likely negative case is that the siblings inherit and the cottage is underutilized because of its poor condition or other factors.

What's the value of the whole package (land + structure)? And the structure itself?

What's the approximate carrying cost, as things currently stand? (Maintenance, taxes, insurance...)

Is this a small private lake? If so, is it wholly contained within the property, or are there other property owners adjoining it?

How much would it cost to tear down and build a better structure?

Is there a real market for this property if sold? Would the cost to tear down the existing structure and build a better one likely be recouped, more or less, if it was sold soon after?

The property is currently owned by your spouse's two parents. How old are they and how is their health? If they lived a long time, but their health slipped slowly, how would that impact usage and maintenance of the property? Is the property a strain on their finances, so far as you can tell? I take it they like the property as is, and have no great desire to sell or substantially upgrade, correct?

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Re: Inheriting lake property with 2 other siblings

Post by NoVa Lurker » Tue Sep 06, 2016 11:49 am

Somewhat 'been there' and kind-of have 'done that.' I put our story at the bottom of this post....

It sounds like you don't need any money from your wife's inheritance, and you should keep that in mind. So there is really no problem here, unless you and your wife make it a problem. People get attached to properties that have been in their families for a long time, but that's often because, when they were kids, they weren't the ones dealing with / paying for maintenance, utilities, improvements, etc.

I'd suggest that you and your wife start looking at the property as something that, if you were to inherit a 1/3 interest, you could be easy and generous about. Plan to sell your interest for $1 to the other two sisters (or something similar - could depend on tax impact), and let the sisters decide what to do with it. Then be supportive of whatever they decide.

If you ever want your own lake cottage, buy your own. Holding a one-third interest with family members who have different priorities than you do is a terrible idea. I definitely would not ask your wife's parents to disinherit you, or try to get the other siblings all on the same page; both seem likely to offend people you care about.

Anyway, here's our similar story: A mountain lake property created a decade-long fight among three brothers in my wife's family, including my wife's dad. It was a nice place but needed a lot of work when inherited. In the post-inheritance fallout, two of the three brothers ended up not speaking again till one died recently. The brother who really wanted to keep the cabin finally bought the others out, but with 'seller financing' - so he made monthly payments to the other brothers, which was a mess. A few years later, his wife got it in their divorce, then her divorce lawyer moved in as the tenant. Then the wife finally sold it. During the 10 years of fighting about it, I think they used it for fun for maybe 20 days total. They never did the grand improvements they envisioned; instead, the wife just did minor fixes to get the property ready to sell. I was happy to learn from their experience without being directly involved. None of the three brothers needed the money or the property, so it all seemed very sad to me.

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Re: Inheriting lake property with 2 other siblings

Post by joebh » Tue Sep 06, 2016 11:54 am

mc2 wrote:I'm looking for advice on a situation that might happen in the next 5-10 years.

I don't want to inherit this and then be forced to buy out one or both parties at current market rate since they didn't buy it in the first place. I also am not expecting that they do that in return. Telling my wife's parents that we are not interested seems like an insult. I don't think any of us could keep our homes and this property without the help of at least one other party.

Has anyone navigated something like this?


In my experience (twice have seen this happen within the family), sharing an inherited place never works out.

IMHO, the only logical response is to:
- prepare to sell the place
- have the executor establish a market price
- if any siblings wish to purchase the property, they must pay at least 2/3 of the market price to the other 2 siblings
- highest bidder wins
- if nobody wants to pay the price, the place is sold and the proceeds are divided up 3 ways

If someone really wants it, they can get it. If someone doesn't, they get 1/3 of the sale price.

That said, I'd strongly advise the parents to sell the place and add the proceeds to their estate as a way to avoid hard feelings all around.
Last edited by joebh on Tue Sep 06, 2016 12:00 pm, edited 1 time in total.

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Re: Inheriting lake property with 2 other siblings

Post by dm200 » Tue Sep 06, 2016 11:59 am

You describe a very different attitude, resources and "situaitons" of the three potential heirs of the property. I do not see a "compatible" middle ground that would not lead to family discord.

In YOUR case, how (financially) signficant is your (wife's) importance in keeping (a share of) this property? At some point (check with an attorney), I wonder if you (your wife) could just "disclaim" the 1/3 interest in inheriting this property - and then it would go to the other two siblings to sort it out. By not owning the property, you will not have the actual or potential liabilities of ownership. The two other siblings then (on paper anyway) have more assets. Maybe your wife could get an informal agreement to be able to have some degree of usage of the property in exchange for giving up actual ownership.

Good Luck!

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Re: Inheriting lake property with 2 other siblings

Post by HIinvestor » Tue Sep 06, 2016 12:11 pm

The only relatively easy way of co-owning real estate that we've experienced is when it has positive cash flow. The situation you describe sounds challenging.

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Re: Inheriting lake property with 2 other siblings

Post by prudent » Tue Sep 06, 2016 12:12 pm

Someone's going to be unhappy. Those 3 views of what to do are simply incompatible. If it was me, I'd explain it to my wife this way:
1. We're going to be the only ones paying for any upkeep. Let's face it, that's reality.
2. You don't even like it the way it is now.
3. The potential co-owners all want something different so it's certain to be a source of family friction for a long time.
4. Co-owning a property never ends well.

So instead of paying to maintain something that we don't even like, let's start our own family memories by buying a different place, and simply relinquish any claim to this one. Let the other two co-own it so we can still get along with everyone.

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Re: Inheriting lake property with 2 other siblings

Post by PVW » Tue Sep 06, 2016 12:25 pm

mc2 wrote:I'm looking for advice on a situation that might happen in the next 5-10 years.

My wife's parents have a humble little cottage on a nice lake. In passing, they have made comments to their 3 kids that the place will be theirs. The problem is that the 3 siblings have different philosophies on what to do with the lake, boats, financial backgrounds, etc. While I love the place and enjoy watching my children play out there, I am nervous about problems that will develop between my family and my wife's 2 siblings. Here's the short story:

1. My wife and I=stable/good income, conservative LBYM mindset, non-jetski/fancy boaters. We acknowledge that the cottage is old and too small. We would potentially invest in a tear-down and reconstruction in lieu of fancy boats, etc. It's too small to have people eat together and there are not enough beds for everyone. Wife wants to keep this as it's been in her family since her childhood. I don't have interest in owning 2 properties by myself.

2. Sister 1-single, loves the "old place" and would rather patch problems and chalk it up to character. Would not want to tear down and rebuild. Doesn't see the inconvenience that a small place has when it's forced to hold more people. Also conservative, non-boater type. Strong and stable income and hard-worker.

3. Sister 2/husband-married-2 kids, lives 90 miles away. Less than motivated, always late, income is modest, would rather buy jetskis and wakeboats. Talks about outlandish "awesome" ways to rebuild the lake, but doesn't have the means to pull that off. Neither are handy and neither have shown sensible financial decision making skills. Cool clothes, big cars, big dreams, but trapped in their current state.

I don't want to inherit this and then be forced to buy out one or both parties at current market rate since they didn't buy it in the first place. I also am not expecting that they do that in return. Telling my wife's parents that we are not interested seems like an insult. I don't think any of us could keep our homes and this property without the help of at least one other party.

Has anyone navigated something like this?


These are emotional and sentimental issues that can be either good or bad. I've witnessed a family house owned by 8 siblings that has caused some amount of friction, but it still provides a significant amount of enjoyment to most. With this many owners, there are a large number of differing opinions and personalities, but they have made it through.

In my opinion, the best option is to give sole ownership to whichever sibling wants to maintain it as a family cabin. All final decisions are made by this sibling, but there is an (informal) obligation to let the other siblings use it. And this sibling gets all the benefits of ownership but the other siblings get rights of refusal in a sale. If the siblings have a good relationship, this shouldn't cause any major problems.

If the siblings don't get along, the best option is to get your wife to relinquish the property and not worry about any financial gains or nostalgia associated with the property.

Either course of action should be discussed openly before the parents pass. The parents will probably enjoy knowing how their gift will be used, and they might also be able to smooth out any disagreements between the kids.

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Re: Inheriting lake property with 2 other siblings

Post by mc2 » Tue Sep 06, 2016 12:55 pm

jjface wrote:
mc2 wrote:I don't want to inherit this and then be forced to buy out one or both parties at current market rate since they didn't buy it in the first place. I also am not expecting that they do that in return.


That doesn't make much sense.


I have a problem paying a sibling market value for something that they did not buy and/or work for. As a boyfriend/in-law, my hours of work out there exceed the two others' contributions by a long shot. I don't see myself being surpassed by either man-hours of work and financial contribution to the property. Regardless, I believe that the way things work is that I would have to buy the others out at market rate, whether I think it's fair or not.

Overall, I do think it would be best for the parents to sell and keep their money for their own use. When the time is right, my wife and I can pursue lake property.

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Re: Inheriting lake property with 2 other siblings

Post by livesoft » Tue Sep 06, 2016 1:02 pm

mc2 wrote: In passing, they have made comments to their 3 kids that the place will be theirs.

This is a test. Your in-laws know that it will cause problems and want to find out how the kids will sort it out ahead of time. That's one reason why they made the comments in passing.

In this situation, I don't see why you all don't tell the parents exactly what you think and let them decide what to do. They may even have friends that inherited places like this and know that it messed up the family.
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Re: Inheriting lake property with 2 other siblings

Post by wilked » Tue Sep 06, 2016 1:03 pm

mc2 wrote:
jjface wrote:
mc2 wrote:I don't want to inherit this and then be forced to buy out one or both parties at current market rate since they didn't buy it in the first place. I also am not expecting that they do that in return.


That doesn't make much sense.


I have a problem paying a sibling market value for something that they did not buy and/or work for.

You do realize how inheritances work, yes?

You seem to be playing both sides of the fence. If you think it is neither fair for you to sell your portion to the sisters, nor buy out their portion, you seem like a person that would be difficult to negotiate with.

It's an inheritance - you need to put aside your emotional issues that they did not earn the property.

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Re: Inheriting lake property with 2 other siblings

Post by celia » Tue Sep 06, 2016 1:08 pm

First, let's re-arrange some sentences:

mc2 wrote:I'm looking for advice on a situation that might happen in the next 5-10 years....
I don't want to inherit this and then be forced to buy out one or both parties at current market rate....

Don't worry. You won't inherit any of this. And even if you did, you aren't forced to do anything.

Wife wants to keep this as it's been in her family since her childhood.

Sounds like you and your wife have opposing views. That's ok since you aren't involved anyway.

I would suggest that instead of tearing it down and re-building, you can do that now with another property nearby. But that conflicts with your wishes:
I don't have interest in owning 2 properties by myself.


When it comes down to being practical, look at what would happen after all the siblings die. Would their kids want to continue the problems of co-owning property with others?

The practical thing to do is to sell it to the highest bidder, either a sibling or outsider. This is not "forcing" anyone to do anything, but accept their inheritance (which no-one is forced to do anyways).
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Re: Inheriting lake property with 2 other siblings

Post by Wellfleet » Tue Sep 06, 2016 1:14 pm

The Wall Street Journal has published a number of articles over the years about this issue.

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Re: Inheriting lake property with 2 other siblings

Post by celia » Tue Sep 06, 2016 1:20 pm

mc2 wrote:I have a problem paying a sibling market value for something that they did not buy and/or work for.

Do you have a problem with a sibling paying you/wife market value?

Did you volunteer your labor or do the in-laws owe you money for your labor? If they owe but can't pay, put a lien on the property so you will get paid eventually. That is a separate issue than inheritance.
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Re: Inheriting lake property with 2 other siblings

Post by TOJ » Tue Sep 06, 2016 1:26 pm

I have married into in the second generation of a similar situation to the OP. The grandparents have died, passing a property onto their 3 kids. Those 3 kids have each had 2-4 kids. I married one of those kids.

This situation is going to get ugly. The 3 original kids are now advancing in age and are actually getting more nostalgic every year. They can't possibly fathom not owning their 1/3. Some use the property more than others. The really ugly part is how those 3 kids want THEIR kids to own/use it. The fact is that most don't. But when one of the original 3 die, their heirs' votes now get thrown into the mix. Knowing my spouse, we will be buying out the other 9 stakeholders some day. Sayonara LBYM.

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Re: Inheriting lake property with 2 other siblings

Post by mc2 » Tue Sep 06, 2016 1:28 pm

celia wrote:
mc2 wrote:I have a problem paying a sibling market value for something that they did not buy and/or work for.

Do you have a problem with a sibling paying you/wife market value?

Did you volunteer your labor or do the in-laws owe you money for your labor? If they owe but can't pay, put a lien on the property so you will get paid eventually. That is a separate issue than inheritance.


Of course I give my time to the lake-it's my wife's parents-what sort of clown expects payment for that? And yes, I did state above that I would not expect them to pay me market value for the same reasons I don't want to pay them-I did not buy this land and I don't think it's mine to profit from.

Finally, I'm sure a technical document would state the inheritance will by my wife and her two sisters, but I'm also her husband and the father of her 3 kids, and the earner of 85% of our household wages. So yeah, I do need to worry about this and I think my concerns are valid.

I appreciate everyone's insight. I was hoping to get some first-hand stories of how transitions like this went with other families.

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Re: Inheriting lake property with 2 other siblings

Post by barnaclebob » Tue Sep 06, 2016 1:32 pm

celia wrote:First, let's re-arrange some sentences:

mc2 wrote:I'm looking for advice on a situation that might happen in the next 5-10 years....
I don't want to inherit this and then be forced to buy out one or both parties at current market rate....

Don't worry. You won't inherit any of this. And even if you did, you aren't forced to do anything.

Wife wants to keep this as it's been in her family since her childhood.

Sounds like you and your wife have opposing views. That's ok since you aren't involved anyway.



The view that a spouse has zero interest or say in inherited assets like houses is false unless they have completely separate financial lives which is rare. Both of their money will go to maintenance and taxes.

In any case I wouldn't worry about it. If things get really bad between the siblings the best thing to do will be to put it on the open market and let whoever wants to buy it do so.

Your feelings of not being willing to pay market prices have nothing to do with the legalities of the situation. All the work you have done in the past and will do in the future won't be considered unless you have some kind of contract in place.

Relevant story from friends: Friends father and brother inherited a lake property with a small old cabin that was rustic but in ok shape. They fought over it and ended up splitting the property so the brother could build their own lakehouse.
Last edited by barnaclebob on Tue Sep 06, 2016 1:38 pm, edited 4 times in total.

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Re: Inheriting lake property with 2 other siblings

Post by gunn_show » Tue Sep 06, 2016 1:33 pm

malabargold wrote:Wouldn't worry about problems 5-10 years out that might never occur. I'd be paralyzed if I did that!


This... by a landslide. For the foreseeable future this is her parents' problem.

Otherwise 1 of 2 options really:
1. the parents sell it and disperse the funds equally then anyone can go buy their own lake house
2. buy-out scenario that others have mentioned. some combo of 1 or 2 buy out the other 1 or 2. and I would be involved in the bought-out side if I were you. walk away from this aging too-small money pit. Airbnb is a great thing. or go buy your own on your own terms.
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Re: Inheriting lake property with 2 other siblings

Post by TOJ » Tue Sep 06, 2016 1:35 pm

mc2 wrote:
celia wrote:
mc2 wrote:I have a problem paying a sibling market value for something that they did not buy and/or work for.

Do you have a problem with a sibling paying you/wife market value?

Did you volunteer your labor or do the in-laws owe you money for your labor? If they owe but can't pay, put a lien on the property so you will get paid eventually. That is a separate issue than inheritance.


Of course I give my time to the lake-it's my wife's parents-what sort of clown expects payment for that? And yes, I did state above that I would not expect them to pay me market value for the same reasons I don't want to pay them-I did not buy this land and I don't think it's mine to profit from.

Finally, I'm sure a technical document would state the inheritance will by my wife and her two sisters, but I'm also her husband and the father of her 3 kids, and the earner of 85% of our household wages. So yeah, I do need to worry about this and I think my concerns are valid.

I appreciate everyone's insight. I was hoping to get some first-hand stories of how transitions like this went with other families.


Unfortunately it sounds like you will be paying. Especially if the other 2 are not as well off financially. You never specified value, but if it's a $300k property, they would certainly love to have $100k.

Another option would be for the parents to draw up a will that leaves the property to the kid who enjoys it most (and does not leave that kid cash), and divides the cash estate to the other 2. Or however the division needs to work that the property is offset by cash. Maybe that's how you "buying them out" would work. Instead of an actual mortgage, your spouse just gets no money and instead they get the property. Or something.

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Re: Inheriting lake property with 2 other siblings

Post by celia » Tue Sep 06, 2016 1:37 pm

TOJ wrote:I have married into in the second generation of a similar situation to the OP. The grandparents have died, passing a property onto their 3 kids. Those 3 kids have each had 2-4 kids. I married one of those kids.

This situation is going to get ugly. The 3 original kids are now advancing in age and are actually getting more nostalgic every year. They can't possibly fathom not owning their 1/3. Some use the property more than others. The really ugly part is how those 3 kids want THEIR kids to own/use it. The fact is that most don't. But when one of the original 3 die, their heirs' votes now get thrown into the mix. Knowing my spouse, we will be buying out the other 9 stakeholders some day. Sayonara LBYM.

It won't take long until this happens. You only need one "kid" to die before his/her children want their share. If none of the families currently live in the house full-time, I predict a sale will be forthcoming.
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Re: Inheriting lake property with 2 other siblings

Post by HomerJ » Tue Sep 06, 2016 1:42 pm

NoVa Lurker wrote:I'd suggest that you and your wife start looking at the property as something that, if you were to inherit a 1/3 interest, you could be easy and generous about. Plan to sell your interest for $1 to the other two sisters (or something similar - could depend on tax impact), and let the sisters decide what to do with it. Then be supportive of whatever they decide.


This is a decent plan, depending on how much the place is worth. Ask for 1 week a year though, in exchange for that sweet $1 price tag.

If you ever want your own lake cottage, buy your own. Holding a one-third interest with family members who have different priorities than you do is a terrible idea. I definitely would not ask your wife's parents to disinherit you, or try to get the other siblings all on the same page; both seem likely to offend people you care about.


This.

My neighbor's family has a shared place that was once owned by a grandfather or great-grandfather... All the cousins get together in the spring and figure out who gets what weeks. They handle it pretty well, but there have indeed been some fights over repairs, if they are necessary, and who is paying for them.

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HomerJ
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Re: Inheriting lake property with 2 other siblings

Post by HomerJ » Tue Sep 06, 2016 1:47 pm

mc2 wrote:
jjface wrote:
mc2 wrote:I don't want to inherit this and then be forced to buy out one or both parties at current market rate since they didn't buy it in the first place. I also am not expecting that they do that in return.


That doesn't make much sense.


I have a problem paying a sibling market value for something that they did not buy and/or work for.


The moment they inherit it, they own it. But yeah, if you already have hard feelings about this place because of all the work you've put into it, you should definitely stay far away.

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Re: Inheriting lake property with 2 other siblings

Post by joebh » Tue Sep 06, 2016 1:51 pm

mc2 wrote:I have a problem paying a sibling market value for something that they did not buy and/or work for.


All the more reason the property should be sold and the proceeds added to the estate, then divided according to the will.

Arguing over the discount you should get "because they did not buy and/or work for it" is a family problem waiting to happen. I've seen it up close and personal twice already.

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Re: Inheriting lake property with 2 other siblings

Post by jjface » Tue Sep 06, 2016 2:10 pm

So you don't think anyone in your family deserves to get it for free. So what do you think should happen to it? The whole point of inheritance is that you get something for free - it is a gift. Someone is going to get it for free. Are you against gifts in general or just big ones? Your only choice then is to sell to a 3rd party and donate to charity. Or just burn it. Not that it is really your choice as it isn't yours to inherit.

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Re: Inheriting lake property with 2 other siblings

Post by Wellfleet » Tue Sep 06, 2016 2:31 pm

You also might consider relinquishing your future position and just renting a nearby cottage. That way the house could stay "in the family" and you don't have to own 2 properties.

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Re: Inheriting lake property with 2 other siblings

Post by bubbadog » Tue Sep 06, 2016 3:08 pm

If the OP decides to buy out the other two siblings in the future, why does he think the other siblings are not entitled to fair market value? This makes no sense to me.

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Re: Inheriting lake property with 2 other siblings

Post by wanderer » Tue Sep 06, 2016 3:22 pm

I had to think about this one a while. We have been through this with a family farm (>$1.5M land value) and a "lake place" (~$250k value). More than the money, there is a lot of emotion and family history wrapped up in the property that will drive everyone's perception of the outcome.

As much as you might like to sort this out rationally ahead of time, it's the emotional processing that will drive the resolution. I don't know your wife, but suspect that this will be a more emotional roller coaster than expected. You can help her begin this process by helping her identify her feelings towards the place, what she wants it to become, how she wants to work it out with her sisters. This will help her (and you) work through the issues when the time comes.

If/when an event such as this happens it may not come down the same as you "planned" it, so be prepared to be flexible. You certainly have a voice, but remember, your ties to the place are subordinate to your wife and her sisters. When/if the time comes, support your wife's desires no matter what. No one want's their family/emotional feelings ignored or run over. Support her and encourage her to speak up for what she wants.

Having an independent 3rd-party assessment for the value helps to separate the emotional value to the place. I strongly suggest using it.

Yes, you may have some sweat equity for the work you did, but think of it as in-kind rent you paid for all the weekends and holidays you spent there instead of paying the resort fees.

In our case there were 5 siblings. Initially they proposed to work together to keep it whole. One quickly decided that wouldn't work out so asked for their "share" in farm land. After a few years, 2 other siblings felt they didn't have a fair say of what was happening and got mad at the other two. So they wanted out too. So after 5+ years, the property was eventually split. Fortunately, two sisters had the cash to buy the others out at the appraised price. The values were different on different sections of land. Since the 3rd party appraisal at the time of the last parent's death set the prices, there was no arguing over the cash value of each other's share. I believe that had a hand in keeping the sisters emotions in check and finally coming to a resolution that everyone was satisfied with.

Some sisters didn't speak to each other for over a year, but now, ~10 years on they are all close again. That is, as they say, "Priceless"!

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Re: Inheriting lake property with 2 other siblings

Post by Watty » Tue Sep 06, 2016 5:49 pm

Hopefully there will still be three of you when the time comes. With three owners when there need to be a "vote" on something then at least there will be a clear decision. If there are only two people then a difference of opinion is much harder to decide.

No one will like it but one way to handle the property is to have a family trust own it and have a professional property manager take care of it. They would be responsible for maintaining it, handling the scheduling of the use of it, charging fees for the use and annual dues to cover things like expected maintenance maintenance and repairs. You would want to accumulate significant reserves for covering large expenses. They could also rent it out when the family is not using it.

In one of the posts about keeping a family home someone mad a comment of something like "If you try to keep the family home there is a big risk that all the great memories that you have of it will be replaced by bad memories and the great memories will become bitter."

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Re: Inheriting lake property with 2 other siblings

Post by mouses » Tue Sep 06, 2016 6:01 pm

I haven't read all the replies, but why is the size a factor unless each kid has a large family - are you thinking all 3 families will occupy it at once? Why not take turns?

If you rip it down and replace it, I suspect your wife will not be happy as you are destroying the home she is emotionally attached to. Also that is not LBYM.

It sounds to me like the 3 families could share this with different times worked out by flipping a coin if necessary, don't remodel it, and the only complicated thing is arranging to pay the utility bills, insurance, property tax.

As to your affording to buy out the other two, you could (1) use money from the remainder of the inheritance, if there is any, (2) not accept your share of the property. In either event you have not lost money compared to what you now have.

Plus there is no guarantee the parents will leave the property to their kids. They may need to sell it for living expenses.

Why borrow trouble in advance.

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Re: Inheriting lake property with 2 other siblings

Post by afan » Tue Sep 06, 2016 7:40 pm

Thus problem may solve itself. If I understand the situation, only the OP's family can afford and is willing to pay the upkeep. If the OP pays 1/3 of the taxes and the other sibs do not, then the government may foreclose for the unpaid taxes. That forces a sale and you are out.

I cannot see any way this could go well. If the OP's spouse will agree, then offer to sell it to the other sibs- at market rates. If they cannot pay, then back to selling it on the market.

There is usually a way for one tenant in common to force a separation of the property so that tenant can sell. This would likely lead to hard feelings.

Depending in how the parents view it, they might be willing to omit the OP's wife from inheriting the place and make it up to her with other assets.

I am pretty sure that a below market sale to the other sibs would be a taxable gift, would have to report it and use up lifetime exclusion.

Are you really sure the other sibs want it? Might the two responsible people convince the third age would rather have cash?
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Re: Inheriting lake property with 2 other siblings

Post by itstoomuch » Wed Sep 07, 2016 12:16 am

I got so fed up with my 2 sisters over a small sliver of property that is only worth something to our neighbors that I am willing to walk away from everything or never sell and thus tie up their estates. Even thought about going into bankrupcy to force their decision. This property is so worthless that the property taxes has been set at $25 for the last 20 years. But the worth to the neighbors is worth a couple of 10k.
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Re: Inheriting lake property with 2 other siblings

Post by hudson » Wed Sep 07, 2016 8:09 am

mc2 wrote:I'm looking for advice on a situation that might happen in the next 5-10 years.
Has anyone navigated something like this?


I have experience with the same situation as one of several heirs to like property.
We met face to face and discussed what we wanted...spouses were included. Discussions were long and all ideas and opinions were aired....we did this over and over making sure that all heirs and spouses aired their preferences.

It took many meetings (texts/emails/phone calls/conference calls) before we could agree on what the property was worth, and how we would prepare the property for sale or transfer. The rule that we adopted from the beginning was that we had to all be in agreement before we moved forward. A majority vote would not work. It was very difficult to get 100% agreement on everything...but I think that was the secret to a successful ending. There were times when we would just get stuck; we would adjourn and come back in a month and try again. Did I say that it was very difficult? Every family had a veto, but in a year or two we came together.

I think that the process we used is called consensus decision making...https://en.wikipedia.org/wiki/Consensus_decision-making

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Re: Inheriting lake property with 2 other siblings

Post by dm200 » Wed Sep 07, 2016 8:31 am

Even IF (BIG "IF") the siblings can agree on joint ownership, use and improvements - if/when one dies, presumably that share would go the the heirs and then it gets even more messy and complicated.

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Re: Inheriting lake property with 2 other siblings

Post by spammagnet » Wed Sep 07, 2016 9:02 am

mc2 wrote:I have a problem paying a sibling market value for something that they did not buy and/or work for. As a boyfriend/in-law, my hours of work out there exceed the two others' contributions by a long shot.

Your past contribution is a sunk cost, a gift to the parents. It has no bearing on your "rights" to the property.

The siblings' share is a gift from the parents. Your opinions as to the fairness of that gift has no bearing on the market value.

Parental feelings aside I see nothing but trouble in continued ownership by any or all siblings.

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Re: Inheriting lake property with 2 other siblings

Post by dm200 » Wed Sep 07, 2016 9:12 am

When you own property jointly (depending on all the details), you may end up being financially responsible for many things. So, for example, if the property needs repairs/upgrades to meet zoning - and the other joint owners do not participate financially, you may end up with the entire bill. You can also end up paying for bad decisions of the other joint owners.

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Re: Inheriting lake property with 2 other siblings

Post by msk » Wed Sep 07, 2016 9:53 am

I have been through this kind of mess and would advise very strongly not to continue with joint ownership. One owner, one payer for maintenance, one person who puts in the hours. Sisters, etc may use it for free as guests. My story. We inherited a couple of houses, 4 apartments and a good chunk of money and we decided not to distribute the inheritance as long as our mother was alive. There was plenty of cash and we decided to build a beach house, intentionally low maintenance (concrete throughout) and continued renting out the houses and apartments. I put in my labor for free overseeing the whole lot. Problems:

Beach houses do not get that much use. After the first year, somebody uses the house about once a quarter. Things break. Water heater gets corroded (all that salty air), air conditioners, fridge fails because of frequent power interruptions in rural areas. Hence every time we planned an extended family get together I had to go and check that everything works and get what has failed repaired. After 10 years I thanked the Lord that the house was expropriated by the government for a major tourist resort. Luckily, the compensation was good.

Houses and apartments for rent. After 30 years I simply got fed up and gave an ultimatum to my sisters: anyone who thought the market sales price was too low was welcome to look after the whole lot. This led to so much arguing (market will go higher as viewed by anyone who put in nil effort) to a situation that two of us decided to simply let things run down. Frankly, not worth the anguish. Finally we agreed an asking price and another family member (next generation) agreed to pay it. We are still awaiting payment.

There will always be an imbalance between the one who puts in the effort and the ones who wish to continue having a place by the water. We did not have any money problems to pay for maintenance and I do not see how a family can possibly co-own if there is no separate fund to pay for maintenance. Make a collection each time? No way. Single owner, everyone else as a guest.

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Re: Inheriting lake property with 2 other siblings

Post by blueberry » Wed Sep 07, 2016 9:58 am

OP: "Telling my wife's parents that we are not interested seems like an insult."

Are you sure about that? My parents were fine with kids' decision to have property go to one and cash equivalent to the other.

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Re: Inheriting lake property with 2 other siblings

Post by ImaBeginner » Wed Sep 07, 2016 9:59 am

My parents have created a trust which will own their lake home and is funded to be able to pay all typical fees (and some atypical ones) for what they feel is ~2 generations. At that point, the trust will either A: Reassess and redo terms to allow families to obtain money, while home remains in hands of the rest (essentially buy out those who want out), or B: Force sale on open market if terms are not agreed on, with proceeds split evenly among all living relatives.
I am totally ok with this arrangement, and it takes care of a lot of stress. It is nice that they have set it up to not cost anyone money for maintenance for a long time, and provided a framework for dissolving the "family cabin trust." It would not be worth the taxes on it for the amount my family would use it, but it will be fun to have a gathering place.

Another person I know has made a similar trust, and has written into their trust documents that all families must gather at the home for 1 week every year or they lose x% of the ownership in the trust. I think that is a problem waiting to happen.

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Re: Inheriting lake property with 2 other siblings

Post by dm200 » Wed Sep 07, 2016 10:10 am

dm200 wrote:When you own property jointly (depending on all the details), you may end up being financially responsible for many things. So, for example, if the property needs repairs/upgrades to meet zoning - and the other joint owners do not participate financially, you may end up with the entire bill. You can also end up paying for bad decisions of the other joint owners.


One approach that might "work" (if one sibling/family was willing/able) is for one sibling to buy and take full control of the property. With full ownership/control, no agreements would then be necessary and the owner would not be subject/liable for the actions or inactions of others. The owner sibling/family could, then, allow use by others (perhaps for some kind of financial contribution).

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Re: Inheriting lake property with 2 other siblings

Post by blueberry » Wed Sep 07, 2016 10:18 am

I think a lot of responders to the OP are not noticing the OP does not currently have ownership in this property so any solution that can be done in the present will have to do with the parents and how they choose to handle their estate.

If the parents have 'mentioned in passing' to all kids that they'll leave the property equally to all, I'd guess they were possibly bouncing the idea off the kids to see their reaction and are open to suggestions.

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Re: Inheriting lake property with 2 other siblings

Post by renue74 » Wed Sep 07, 2016 10:27 am

I've seen this happen with older family members concerning a lake house.

What this set of family members did was divvy up the estate before they died...at least the real estate part. That way, the parents can still maintain some control over their kids who may or may not try to be an a$$ about things.

They actually asked the kids who really wanted the lake house and that kid got it, while other parts of the estate went to other kids. I think there was money exchanged to offset some of the values of estate items. Maybe the kid who got the lake house had to pay the other kids $XXXXX amount. I'm not really sure about that.

In the end, everybody got what they wanted and there was no co-ownership of anything.

I would never want to be in this situation....I can't agree on what to do with my own house renovations with my wife...much less a family member I see a few times a year!

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Re: Inheriting lake property with 2 other siblings

Post by Rupert » Wed Sep 07, 2016 10:30 am

ImaBeginner wrote:My parents have created a trust which will own their lake home and is funded to be able to pay all typical fees (and some atypical ones) for what they feel is ~2 generations. At that point, the trust will either A: Reassess and redo terms to allow families to obtain money, while home remains in hands of the rest (essentially buy out those who want out), or B: Force sale on open market if terms are not agreed on, with proceeds split evenly among all living relatives.
I am totally ok with this arrangement, and it takes care of a lot of stress. It is nice that they have set it up to not cost anyone money for maintenance for a long time, and provided a framework for dissolving the "family cabin trust." It would not be worth the taxes on it for the amount my family would use it, but it will be fun to have a gathering place.

Another person I know has made a similar trust, and has written into their trust documents that all families must gather at the home for 1 week every year or they lose x% of the ownership in the trust. I think that is a problem waiting to happen.


+1. This is how to do it. If the parents want the house to stay in the family and be jointly owned by the siblings, they should place it in trust and fund the trust sufficiently to maintain the property for the foreseeable future. Alternatively, if it's a rentable property, then you can rent it for a portion of each year and use the rental proceeds to maintain the property. Hire a property manager to take care of the details.

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Re: Inheriting lake property with 2 other siblings

Post by Ged » Wed Sep 07, 2016 10:33 am

mc2 wrote:
Has anyone navigated something like this?


My father had a beach cottage. We had a LOT of great memories of the place from when we were children. When we grew up and moved away he sold it. The good thing was that it didn't become a problem, the bad thing was that it appreciated by about a million dollars between when he sold it and when he passed away.
Last edited by Ged on Wed Sep 07, 2016 10:39 am, edited 1 time in total.

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