Inheriting Quandary

Non-investing personal finance issues including insurance, credit, real estate, taxes, employment and legal issues such as trusts and wills
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boglemind
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Inheriting Quandary

Post by boglemind » Fri Jun 02, 2017 11:31 pm

I will soon be inheriting ~$2M interest in a large estate with siblings. $16M is net distributable after current estate taxes have been paid. The distributable estate consists of a $2M residential home, $4M apartment building & a $3M commercial building, all in California, and $7M stocks. The residential home is in good condition and the income-generating buildings are in excellent areas, but are in fair condition. The multi-unit building generates ~10K income per month. My objective is to continue living in this area, to which I am native, in a SFR, for the least cost, balancing that with a desire for the least amount of co-ownership complexity. One single sister already lives in the SFR and I have thought of moving in with her, although that would be an adjustment, mostly for her. (Other sibs may be interested as well, but probably not.) For simplicity's sake, because of how many co-owners there will be with the other properties, if they decide not to sell, I thought taking the residual in stock might be wise. I would welcome any thoughts or advice on what I should request to best achieve my objectives. Thank you kindly.
Last edited by boglemind on Sat Jun 10, 2017 3:21 pm, edited 5 times in total.

aristotelian
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Re: Inheritance Decision

Post by aristotelian » Sat Jun 03, 2017 12:22 pm

Sounds complex enough legally and financially that it might be a good idea to consult an attorney and fee only financial advisor to go over your options. I do not like the hassle of real estate and would probably take my share in cash and stock, assuming other sibs are more interested in the real estate.

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patrick013
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Re: Inheritance Decision

Post by patrick013 » Sat Jun 03, 2017 1:17 pm

Whatever you decide be sure everyone is in 100% agreement and
the "deal" can be done in say a 30 day period very currently. If there's
a holdout and distributions are made the holdout may feel that
their share was unequal and want a further option or evaluation done.
They might want a double share of building ownership or double
share of liquid assets or just plain want to hold out and not decide.

So if all agree to equal ownerships etc. that's probably the best that
can be done. And just do it then. Co-ownership for a few years might
be the best next thing to do.
age in bonds, buy-and-hold, 10 year business cycle

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gunn_show
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Re: Inheritance Decision

Post by gunn_show » Sat Jun 03, 2017 2:23 pm

aristotelian wrote:Sounds complex enough legally and financially that it might be a good idea to consult an attorney and fee only financial advisor to go over your options. I do not like the hassle of real estate and would probably take my share in cash and stock, assuming other sibs are more interested in the real estate.


I would probably do this as well. But with that large of an estate, I imagine there is a very good estate/trust attorney already involved. Why not schedule a 1:1 appt with him and run this by him since he would have the best idea of all the possible angles to take? Second option would be to set up appt with new attorney or FA. But like aristotelian, likely the least path of resistance and highest path of simple success is to take the stocks and then keep or liquidate into whatever you want (VG account, other RE assets, etc).
"I love competition. And I want to win." R. Murdoch

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celia
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Re: Inheritance Decision

Post by celia » Sat Jun 03, 2017 3:07 pm

boglemind wrote:My objective is to continue living in this area, to which I am native, in a SFR, for the least cost, balancing that with a desire for the least amount of co-ownership complexity... I would welcome any thoughts or advice on what I should request to best achieve my objectives.

Do you already live in the area where the real estate is? Have you ever owned real estate other than a condo (which is managed by a HOA)? It sounds like property maintenance and tenants may not be for you. You and your siblings should also know that all the real estate may not be excluded from being re-assessed:

2. Which transfers of real property are excluded from reassessment by Propositions 58 and 193?

Transfers of primary residences (no value limit)
Transfers of the first $1 million of real property other than the primary residences. The $1 million exclusion applies separately to each eligible transferor.
Transfers may be result of a sale, gift, or inheritance. A transfer via a trust also qualifies for this exclusion. For property tax purposes, we look through the trust to the present beneficial owner. When the present beneficial ownership passes from a parent to a child, this is a change in ownership that is eligible for the parent-child exclusion.

http://www.boe.ca.gov/proptaxes/faqs/propositions58.htm


Are any of the other assets in a retirement plan or IRA? If in a tax-deferred account or Roth, I think the trustee should take the future tax liability, or lack thereof, into account for either one.

boglemind
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Re: Inheritance Decision

Post by boglemind » Sat Jun 03, 2017 4:09 pm

celia, thank you for responding to so many aspects involved. Yes, I have lived in area entire life. Real estate prices have only gone from outrageous to stratospheric in my lifetime. I have been a landlord of a small property in a cheaper area and definitely didn't like hassle & sold it. I would like to continue living in this expensive area with more security than as a renter, however, and moving in with sib in SFR would have the particular advantage of very low property taxes along with risks associated with co-housing. I figure the PV of the advantage over 30 years is ~200K with one sib. The family would likely get all low assessments transferred since the limits you cite refer to assessed value per current rolls which are very low. (There is one IRA with 100K so I don't think that's material.) So, again, trying to balance financial, lifestyle and complexity issues.

johnra
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Re: Inheritance Decision

Post by johnra » Sat Jun 03, 2017 5:06 pm

I would take my 2M share in stock. You seem to like value and uncluttered life style so keep it simple. With this statispheric real estate market, old (but valuable) buildings could get very expensive to update or deal with, time consuming, you do not need to provide legacy, you have no major debt obligations, you have liquidity, you have a big foothold in the market with longterm continued growth, so have fun! I would probably put about 40% of my overall assets into bonds to have a stable bucket to live on if the market turns down. With so much, why are you moving in with your sister? You don't really need to be so tight.

boglemind
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Re: Inheritance Decision

Post by boglemind » Sat Jun 03, 2017 5:45 pm

You're probably right johnra, but here's the rub: several other sibs may want to opt for stocks only and that may force me into prop ownersip with others disinclined to liquidate their prop interest(s). Rather than be a reluctant owner of older income-generating bldgs, the SFR has the benefit of providing housing I need at a roughly $200K discount, albeit with the downside of sibling co-residency. Much of this will depend on their choices and I am sure most would like to avoid the "nuclear" option of sale partition after the fact. I do appreciate everyone's input in helping me try to reason this out. For simplicity & sanity's sake I AM inlined to take the all-stock if available. I just need to consider my best options if that is not possible.

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celia
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Re: Inheritance Decision

Post by celia » Sat Jun 03, 2017 5:53 pm

When you say you are thinking of moving in with your sister, do you mean as co-owners of the house? If you are both single, this is the ideal time to consider your own estates. If neither of you has kids, what do you plan to do with your own assets when you each die? (This doesn't need to be answered on this board.) If you get along pretty well and are in similar health, have you both considered leaving your half of the house to the survivor (ie, joint owners)? This could be in exchange for helping to take care of the person who dies first.

I have read that living with another person contributes to better health. You don't even have to be married to each other. I heard that there is some health insurance company that now asks new enrollees if they live with someone else. I think the reasoning is that another person would likely suggest when you should see the doctor. People who see the doctor earlier have a better chance of stopping/slowing down an illness than if they procrastinate.

If you are thinking of being co-owners, this could have advantages for both of you. But you should both also list the disadvantages. For example:

Advantages:
another person around for safety and when you are ill, someone to do things with
shared expenses instead of paying them all yourself
more space in a SFR than an apartment
what amenities are nearby, such as within walking distance (market, library, church, what is important to you)
family history in this house
permancy, "fixed" expenses compared to being a renter

Disadvantages:
not as much "privacy"
higher homeowner/maintenance expenses since a house is bigger
relationship issues if you don't get along
far away amenities to some places you want to go to regularly
yardwork
when one of you dies, the house may be too big for the survivor
if one of you needs Long Term Care (24/7), that person may not be able to afford care in another facility, but care could be given at home (what if you both need it at the same time?)


I don't see why it isn't possible for any/all sibs to take the all-stock option. Real estate that no-one wants can be sold. Since I already have a house, I might be interested in the 4-unit property with its good cash flow. But it would depend on which other siblings wanted to go "in" with me. I would want some agreements with them beforehand and have a management company manage it (so we all have the same relationship with the property--not one sibling being hands-on). Sibling(s) and I would decide when renovations would be done or agree to only take half the cash flow for the first two years and use the rest for renovations. And we would have to agree, in writing, up front, what the "exit" plan is, since I wouldn't want to saddle my kids with property they don't want when I die.
Last edited by celia on Sat Jun 03, 2017 6:06 pm, edited 1 time in total.

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vitaflo
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Re: Inheritance Decision

Post by vitaflo » Sat Jun 03, 2017 5:57 pm

boglemind wrote:My objective is to continue living in this area, to which I am native, in a SFR, for the least cost, balancing that with a desire for the least amount of co-ownership complexity.

For simplicity's sake, because of how many co-owners there will be with the other properties, if they decide not to sell, I thought taking the residual in stock might be wise.


My mother-in-law went through this about a decade ago. My opinion is either get property ownership outright, or take the stock. Multiple co-owners of property in a family will result in utter frustration down the road. I've seen it happen first hand, family relationships ruined over it.

My MIL was able to do some "land swaps" over the years to get it all down to one property, but it was a real pain to do (many lawyers involved).

There's just too much weirdness when you co-own with relatives. Someone always wants to sell when others don't (I want to retire now and get my cash out of this property), people put perceived value on things that don't have it (it's worth more because of sentimental family reasons), etc. All logic seems to go out the window in otherwise normal people as soon as you get the inheritance.

Stick to your own path if you can, so you can call your own shots. My MIL would have gladly taken a lot less in inheritance if it meant not co-owning so much property with her siblings. But she didn't know that at the time. For her the money hasn't been worth the hassle and family drama.

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patrick013
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Re: Inheritance Decision

Post by patrick013 » Sat Jun 03, 2017 6:08 pm

boglemind wrote:So, again, trying to balance financial, lifestyle and complexity issues.

Hopefully you can all decide to distribute the RE out of the
trust and put it up for sale ASAP. Then the sibs that really
want RE can buy their own with the proceeds.
age in bonds, buy-and-hold, 10 year business cycle

boglemind
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Re: Inheritance Decision

Post by boglemind » Sat Jun 03, 2017 6:14 pm

You make excellent points celia since I am senior citizen. To be honest, that sib would not be the easiest to live with. It WOULD, however, allow me to interact with nearby relatives, with whom I have better relations. Presumably we would be tenants in common, but having a co-tenancy agreement would be preferred to stipulate buyout first refusal and right to purchase at death. Alas, there are many factors and I am only one of many deciders trying to make a good decision. I very much appreciate your helping me "flesh this out."

boglemind
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Re: Inheritance Decision

Post by boglemind » Sat Jun 03, 2017 6:24 pm

Thank you vitaflo. You and others have warned against co-ownership despite seeming economic advantage and I take it as very wise. patrick013: selling props would guarantee fairness and maintain autonomy, but is not likely since I am sure some will not want to give up very low prop tax advantage.

ryman554
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Re: Inheritance Decision

Post by ryman554 » Sat Jun 03, 2017 7:10 pm

2M is residential home. Somebody gets it and nothing else. (likely the sister who is already living there)
3M is commercial property. Hopefully two of your sibs want this + 1M of "cash"
That leaves 6M of "cash" for three of you.

Propose this and see if it's equitable. If nobody (or only one person) wants the commercial property, then it gets sold or that one person gets to take out a 1M mortgage on it and "buy out" one of you or your sibs.

If more than one person wants the house, let them work it out between themselves... don't get involved. While the idea of living with your sister seems like a good idea, don't own it. If you really want to be there, tell her you'll rent a room instead.

I agree with everybody before: co-ownership is NEVER a good idea. Agree to split it like the above and you will solve a whole host of issues. To this day, my father does not speak with one his brothers....

boglemind
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Re: Inheritance Decision

Post by boglemind » Sat Jun 03, 2017 8:19 pm

Buyouts will trigger substantial reassessment. For parent-child transfer of basis we need to decide division BEFORE distributuion. No one seems to speak of the tremendous advantage of ongoing 1/10th the property tax in very expensive California area. Monetized it would give single residence inheritor maybe 400k more than others. I find your idea about renting room intriguing. No ownership responsibility, but perhaps right to stay? Could be negotiated as "compensation" for not receiving heavy property tax discount?

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vitaflo
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Re: Inheritance Decision

Post by vitaflo » Sat Jun 03, 2017 8:41 pm

boglemind wrote:No one seems to speak of the tremendous advantage of ongoing 1/10th the property tax in very expensive California area. Monetized it would give single residence inheritor maybe 400k more than others.


While I understand what you're saying, as has been noted in this thread from those with experience, your goal shouldn't necessarily be total "fairness". I totally understand firmly considering the financial aspect, but as others have noted, this is as much (if not more) a family/relationship decision as it is a financial one.

My MIL seriously considered selling her land share for 1 dollar (land was worth over $1m) just to get out of it because it caused so much family turmoil. Greed and "getting what's mine" does weird things to people. And even low property tax on a property you co-own does little good when your sibling decides not to pay their portion of the property tax, and then you need to decide to either pay it all yourself, sue your sibling or let the state seize the property (yes this is a real example from my MIL's situation).

I wish you luck in whatever you decide.

boglemind
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Re: Inheritance Decision

Post by boglemind » Sun Jun 04, 2017 12:22 am

While I consider myself a scrupulously fair person I understand "fairness" is a relative (no pun intended) in families, and, sad to say, our family is already not close. Mostly I would like to benefit from more affordable housing in the prepostorously expensive community into which I was born. The sister in the family home has lived with parents rent-free her entire life without making any discernable contributions to my parents or the house, and they did not will it to her, but to all. Nevertheless, co-ownership IS fraught with major pitfalls and perhaps the better part of valor is to step back, let her have the house to which she feels entitled, and count my blessings.

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Re: Inheritance Decision

Post by basspond » Sun Jun 04, 2017 1:43 am

The question you should ask your siblings is if you had cash on hand would you buy the properties for investing or living in? If there is no emotional attachment divest the real estate or it could become a real problem.

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celia
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Re: Inheritance Decision

Post by celia » Sun Jun 04, 2017 4:12 am

boglemind wrote:Buyouts will trigger substantial reassessment. For parent-child transfer of basis we need to decide division BEFORE distributuion. No one seems to speak of the tremendous advantage of ongoing 1/10th the property tax in very expensive California area. Monetized it would give single residence inheritor maybe 400k more than others.

I see this differently. The property tax is a liability, not an asset. It is an ongoing expensive that the new owner(s) will have to pay each year. It doesn't add anything to the value of the house, when it is sold on the open market. Maybe it could be an "asset" if none of you had houses and all of you were competing to see who should have the house, while those who didn't get the house would buy an equivalent house with their inheritance, then pony up for the higher taxes. But that does not seem to be the case here.

Suppose this house existed in a low cost of living state with the same tax liability (not lowered due to prop 13) that the house has and the same resale value as this house. Assuming it had similar characteristics as the existing house (location relative to coast or mountains or other relatives, weather, neighborhood income, <whatever attributes you favor>), would you choose that house as your inheritance?

Or, instead, think of the existing house as having been completely converted to solar power. This is already factored into the market price, but it saves the owner 400K over the years in electricity costs. Would you take it as your inheritance?

After looking at the excess space for a single person and the larger maintenance costs, is it really a good fit for you? Or could you find a condo for under a million in the general area (near other relatives) and think that was a better "fit" for you?

I wonder if the sister living there will be able to afford the property taxes and maintenance without having a roommate since she will not be getting any cash. If not, she will need to eventually need to downsize to something else. In that case, you might be able to convince the trustee that your sister can't afford to keep the house and will need to sell it anyways. So maybe it should go to another sibling instead.

WhyNotUs
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Re: Inheritance Decision

Post by WhyNotUs » Sun Jun 04, 2017 11:28 am

I would take co-ownership off the table given your previous comments. Would take my share in stocks or cash and buy a modest, low/no maintenance property and enjoy my retirement. The tax benefits will seem insignificant if there are issues when you move into a home that your sister may feel is "hers". Owning investment property with strangers has certain advantages over family members IMO as your mission is clear and there is limited baggage. Time to enjoy life and maybe have an annual outing with your family members to seek stronger ties in appreciation for what you have been given.
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Re: Inheritance Decision

Post by JGoneRiding » Sun Jun 04, 2017 12:46 pm

boglemind wrote:You're probably right johnra, but here's the rub: several other sibs may want to opt for stocks only and that may force me into prop ownersip with others disinclined to liquidate their prop interest(s). Rather than be a reluctant owner of older income-generating bldgs, the SFR has the benefit of providing housing I need at a roughly $200K discount, albeit with the downside of sibling co-residency. Much of this will depend on their choices and I am sure most would like to avoid the "nuclear" option of sale partition after the fact. I do appreciate everyone's input in helping me try to reason this out. For simplicity & sanity's sake I AM inlined to take the all-stock if available. I just need to consider my best options if that is not possible.



Unless one building is able to provide all of just one siblings share, shouldn't every sibling have the option of cash/stocks sold out?? I wouldn't allow the others to force you into sharing a building so that sibling A gets all cash/stocks. And Siblings c,d,e force you to share a building with them because that is what they want. They can buy you out at fair equity if they want the building but if you want cash/stocks and so do A, B, and F then you all four deserve to get that and real estate has to be liquidated to provide it, IANAL but generally speaking most estates allow a beneficiary to force a sale to get their share if the others aren't able to come up with cash to buy them out. (which might include the primary residence that sister lives in unless there is a life estate for her in that). It sounds like this house is huge, unless sister is taking it as her only portion of inheritance does she have a choice if you want to live there too?? Does that then mean that you both have 50% interest, what happens when one of you passes??

The simplest is going to be to force the sale of all and split evenly, unless there is a sibling that can take possession of a building in full for their full share.

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Re: Inheritance Decision

Post by JGoneRiding » Sun Jun 04, 2017 12:56 pm

boglemind wrote:Buyouts will trigger substantial reassessment. For parent-child transfer of basis we need to decide division BEFORE distributuion. No one seems to speak of the tremendous advantage of ongoing 1/10th the property tax in very expensive California area. Monetized it would give single residence inheritor maybe 400k more than others. I find your idea about renting room intriguing. No ownership responsibility, but perhaps right to stay? Could be negotiated as "compensation" for not receiving heavy property tax discount?


I get the discount BUT it is only a year on year discount, its value depends on how long you live. Things are being divided based on current value not perceived future value. Also the house is useless unless you want to live in a 2 mil house. to get any cash out you either have to refi and use your funds or sale. Much better to just get cash and buy something smaller that you yourself own alone. IF I was your sister there is NO WAY I would agree to share the house with you. so you have that to consider too. :)

boglemind
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Re: Inheritance Decision

Post by boglemind » Sun Jun 04, 2017 2:33 pm

Agree that property tax is liab, but discount is asset. 35K vs 3K. PRESENT VALUE of 30 years of that saving is quite significant. Cheapest modest house in area is $600K+ Sister can more than afford 3K given lifetime of no-rent living. JGoneRiding, fortunately, per parents' will, and pre-distribution, all sibs can occupy the property (i.e. sister cannot deprive any beneficiary of their inheritance). Getting that many peope to agree on anything is going to be challenging, but we need to forge ahead as it is in our best interest to agree to divisions BEFORE distribution to preserve prop tax basis on any retained real estate. Thank you all for your input so far.

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celia
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Re: Inheritance Decision

Post by celia » Sun Jun 04, 2017 5:31 pm

OP, I'd like to step back to get a better view of this estate and, hopefully, to help you understand possible future dynamics. This is based on observation of an on-going estate settlement that is not moving along as it should be, that is occurring in our family. (It doesn't involve me, though.)

I assume the trustee is a sibling and, thus, also a beneficiary and that he/she will be fair to all concerned.
I assume that the trustee has given each beneficiary a copy of the trust and an inventory of all the trust assets as of date of death. The value of the properties should be from a formal appraisal. Major household furnishings (say, worth over $1,000) and vehicles could have been listed separately from the SFR. In fact, the household goods can all be sold at an estate sale if more cash is needed to even out each person's share to have the same financial value.

Has the trustee given each of you a date by when your choice(s) should be given to him/her? Has the trustee said what he/she would do if multiple people want the same asset? If this has not been mentioned yet, go ahead and ask the trustee for clarification.

Part of the "problem" that I see, is that there is a time element to all of this. The stock market could go up or down. If there is property to be sold, it needs to be prepped and sold. You may not get the requested price. Suppose the 4-unit building and the commercial property are sold this year but the total value netted is a million dollars short of the appraised value. Then, everyone will get less than $2M. Does that mean, the SFR inheritor has to pony up the difference in dollar value?

There are many ways for the estate split to go wrong. Each "problem" will delay the split of the stocks, unless they are sold. Meanwhile, they fluctuate. It is not the trustee's job to invest, but to collect, protect, and distribute the assets. Retirement accounts/IRAs need to be re-titled within a year of death to the new owners since RMDs are due starting in the year after death.


(In our case, the trustee has never given any of the beneficiaries a list of assets and it has been over two years since death. The IRAs and a small amount of cash are the only things distributed (along with some mementos from the deceased.) No-one can figure out what the problem is. The trustee personally co-owns a small business and his partner wants "out". The trustee's other relatives are "sick". "Life" happens. But the settlement doesn't happen.) I encourage you to talk to the trustee on a regular basis to keep the settlement process moving along.

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Re: Inheritance Quandary

Post by TTBG » Sun Jun 04, 2017 6:57 pm

Cheapest modest house in area is $600K+ Sister can more than afford 3K given lifetime of no-rent living. JGoneRiding, fortunately, per parents' will, and pre-distribution, all sibs can occupy the property (i.e. sister cannot deprive any beneficiary of their inheritance).


Mostly I would like to benefit from more affordable housing in the prepostorously expensive community into which I was born. The sister in the family home has lived with parents rent-free her entire life without making any discernable contributions to my parents or the house


You sound a little stuck on the property tax savings and your sister's years of rent-free living. Maybe you need to take a step back and think about what your goals here are. If you want to live in the bay area and also enjoy the security of home ownership, you can get that with 2M!! You could buy a house for 1M and use the other 1M to pay property taxes and other housing expenses. You're 60 years old, why would you want to put yourself into what sounds like it would be an unhappy, stressful living situation, sharing space and ownership with this sister?

Personally, I would never enter into any kind of ownership/business relationship with any of my relatives, not even the ones I like :-). It just has too much potential for drama.

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Re: Inheritance Quandary

Post by Nearly A Moose » Sun Jun 04, 2017 8:46 pm

As has been said, if you want a SIngle family home (and sized for 1), $2M cash will get that, even in the Bay Area. So buy for the cash and just buy something you like. Buy for $1M and put the rest into a massive "house expense" fund or something if prop taxes are that bad. Or just rent a really awesome place. You're 60. Let's hope you live to 100. $2M / 40 yrs / 12 months is $4166 per month, and that's not even taking into account investment returns. I'm sure you can find a series of swanky places to rent even in SF for that amount. Just take the cash and run (and angle for the cash if others want it too). Also, why do you want such an illiquid asset as the single family home? You're out at least 6% right away if you ever want to convert it into cash?
Pardon typos, I'm probably using my fat thumbs on a tiny phone.

boglemind
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Re: Inheritance Quandary

Post by boglemind » Mon Jun 05, 2017 8:26 pm

Thank you all. It seems the collective wisdom is that co-ownership would be a misake, particularly in the last inning of my life. @TTBG I think you are right I have been stuck on property tax/sibling issue and it would likely lead to unhappy stressful living situation when I have other options. @celia thank you for enumerating the many pifalls of the settlement process, particularly the issue of valuation changes due to possible lags in distribution timing. I see riding herd on this is very important and will pose the questions you suggest (thanks 4 IRA tip 2). @nearly a mouse thanks for your take as well. In truth the median here is over 1M, so it really wouldn't be splurging as much as it seems, and would add diversification and be a decent store of value. I am mindful, however, that I am single and need to provide for the possibility of very expensive end of life care. So need to play my cards somewhat carefully. Nevertheless, I really appreciate the promptings to balance frugality with enjoyment of some of windfall I will receive. Life can change on a dime and there are no guarantees for any of us.

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Re: Inheritance Quandary

Post by Carefreeap » Wed Jun 07, 2017 10:18 am

boglemind wrote:Thank you all. It seems the collective wisdom is that co-ownership would be a misake, particularly in the last inning of my life. @TTBG I think you are right I have been stuck on property tax/sibling issue and it would likely lead to unhappy stressful living situation when I have other options. @celia thank you for enumerating the many pifalls of the settlement process, particularly the issue of valuation changes due to possible lags in distribution timing. I see riding herd on this is very important and will pose the questions you suggest (thanks 4 IRA tip 2). @nearly a mouse thanks for your take as well. In truth the median here is over 1M, so it really wouldn't be splurging as much as it seems, and would add diversification and be a decent store of value. I am mindful, however, that I am single and need to provide for the possibility of very expensive end of life care. So need to play my cards somewhat carefully. Nevertheless, I really appreciate the promptings to balance frugality with enjoyment of some of windfall I will receive. Life can change on a dime and there are no guarantees for any of us.


I know I'm late to the party but thought I'd throw out an option I didn't see posted.

Sell the $2M home. Not sure what county the property is in but under Prop 60 your sib could downsize to a cheaper property and maintain the lower owner occupied tax (Please read the rules carefully as it is a little complicated ). Sib might also benefit under prop 90 if she wanted to move out of the area.

At age 60 I don't think you're in the last inning of your life unless you have some serious health issues. Last time I checked aren't actuary charts estimating an 85 year life expectancy? I'm nearly 56 so maybe this a perspective thing. :wink: I sure as heck wouldn't want to be spending the last 25 years of my life living with a sib I didn't like.

If you are a single (woman?) who has rented the majority of her life I wouldn't want to take on the steep learning curve of house maintenance in my 60s. Find a nice apartment in the City which is rented controlled and enjoy your life.

With respect to the units and commercial building, I'd want to know more information since you don't know what the income stream is for the commercial property. It's possible that the Trust could continue to own these properties but with a professional property manager and professional Trustee. It's certainly possible that through renovation the rents could be increased and that could provide for a nice stream of income for all of the sibs without direct co-ownership.

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Re: Inheritance Quandary

Post by boglemind » Wed Jun 07, 2017 3:24 pm

Thank you @Carefreeapp. Prop 60 is a way for older homeowners to do a lateral basis transfer from primary residence to another of equal or lesser value. In my case, if I moved in with sister just to establish primary residence, we could both sell our interests later and transfer low basis to separate props since we are both over 55. Problem is sister may not want to sell OR buy me out & suffer increase in basis on my portion. Then only option is "nuclear" partition sale OR stay in bad situation with sib. I am not close with sister but I could explore if any of this appeals to her and then get written agreement. I would like to benefit from inheritance with a more stable living situation while minimizing ownership complexity. I would imagine finding rent-controlled apartment would be difficult, but it does appeal not having to worry so much about housing "jolts." You are right homeownership may not be as desirable at this point since I would like to reduce burdens and enjoy life more.

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Re: Inheritance Quandary

Post by denovo » Wed Jun 07, 2017 3:29 pm

A good way to end up hating your relatives is to mix family and business (and co-owning real estate) is a business. I say this from experience. Take your fair share in something divisible and liquid like the stocks.
Stocks (80% of portfolio): 30% US Large, 4% Mid Cap, 6% Small Cap, 20% Emerg Market, 10% Asia Developed, 10% Europe, 5% Intl Small Cap, 10% US RE, 5 % INTL RE | Bonds (20%): US Interm Bond Index

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Re: Inheritance Quandary

Post by Carefreeap » Wed Jun 07, 2017 3:42 pm

boglemind wrote:Thank you @Carefreeapp. Prop 60 is a way for older homeowners to do a lateral basis transfer from primary residence to another of equal or lesser value. In my case, if I moved in with sister just to establish primary residence, we could both sell our interests later and transfer low basis to separate props since we are both over 55. Problem is sister may not want to sell OR buy me out & suffer increase in basis on my portion. Then only option is "nuclear" partition sale OR stay in bad situation with sib. I am not close with sister but I could explore if any of this appeals to her and then get written agreement. I would like to benefit from inheritance with a more stable living situation while minimizing ownership complexity. I would imagine finding rent-controlled apartment would be difficult, but it does appeal not having to worry so much about housing "jolts." You are right homeownership may not be as desirable at this point since I would like to reduce burdens and enjoy life more.


Just for clarification, are you and the properties located in SF? If so, most tenants are covered by SF Rent Control. You can read about it more here:
https://www.sftu.org/rentcontrol/

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Re: Inheritance Quandary

Post by celia » Wed Jun 07, 2017 3:48 pm

Carefreeap wrote:With respect to the units and commercial building, I'd want to know more information since you don't know what the income stream is for the commercial property. It's possible that the Trust could continue to own these properties but with a professional property manager and professional Trustee. It's certainly possible that through renovation the rents could be increased and that could provide for a nice stream of income for all of the sibs without direct co-ownership.

Yes, this is a new way of looking at the options. But it is still a co-owner situation. What if one owner died and wanted all their assets to go to their children and grandchildren? Then you are back to a similar situation as you started with, as to how to divide things up. I would only be interested if I didn't have a spouse or children --OR-- if my ownership was a small part of my assets, such that it could go to my siblings.

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Re: Inheritance Quandary

Post by Carefreeap » Wed Jun 07, 2017 4:00 pm

celia wrote:
Carefreeap wrote:With respect to the units and commercial building, I'd want to know more information since you don't know what the income stream is for the commercial property. It's possible that the Trust could continue to own these properties but with a professional property manager and professional Trustee. It's certainly possible that through renovation the rents could be increased and that could provide for a nice stream of income for all of the sibs without direct co-ownership.

Yes, this is a new way of looking as the options. But it is still a co-owner situation. What if one owner died and wanted all their assets to go to their children? Then you are back to a similar situation as you started with, as to how to divide things up.


Not necessarily. Depending on how the Trust is written the children (or whomever) are the contingent beneficiaries of the Trust. We had a similar situation with DH's Uncle whereby the son pre-deceased his father by about 5 months. His share went to his two children. There were some mineral rights involved and we retain fractional ownership of those rights.

I would NEVER be a co-owner of real estate with my brother because of his financial problems. But my mother's Trust situation was different whereby as Trustee I could sell one property and provide a distribution to us beneficiaries. And since the other property essentially had no equity I could quitclaim to myself and be patient until the market recovered. My brother was on board with that decision because he knew he couldn't afford to keep it. It was either going to go into foreclosure or I was going to take a gamble and keep it.

OP is in a much nicer situation in that in addition to properties that have lots of equity and positive cash-flow , there's plenty of liquid assets therefore her situation provides for some other options.

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Re: Inheritance Quandary

Post by boglemind » Wed Jun 07, 2017 5:50 pm

The SFR and I are located in Bay Area suburb. The other props are in SF. So it's double-edged sword inheriting props subject to rent control & seeking security myself. I will have to find out from trustee if properties are to be retained for income generation. There ARE a lot of possibilities here, so I appreciate everyone fleshing them out. My 1st choice may conflict with the rest of the group, so need to consider all possibilities that will help settlement. Receiving liquid distribution provides most autonomy. There are definitely advantantages to very low prop basis inheritance, but it is counterbalanced with unacceptable co-ownership. Co-beneficiary income from a trust removes co-ownership pitfalls, but makes one dependent on decisions and integrity of trustee (i.e. no autonomy).

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Re: Inheritance Quandary

Post by Carefreeap » Wed Jun 07, 2017 6:37 pm

boglemind wrote:The SFR and I are located in Bay Area suburb. The other props are in SF. So it's double-edged sword inheriting props subject to rent control & seeking security myself. I will have to find out from trustee if properties are to be retained for income generation. There ARE a lot of possibilities here, so I appreciate everyone fleshing them out. My 1st choice may conflict with the rest of the group, so need to consider all possibilities that will help settlement. Receiving liquid distribution provides most autonomy. There are definitely advantantages to very low prop basis inheritance, but it is counterbalanced with unacceptable co-ownership. Co-beneficiary income from a trust removes co-ownership pitfalls, but makes one dependent on decisions and integrity of trustee (i.e. no autonomy).


Sounds like you have a good handle on the situation. :thumbsup

Good luck with your decision!

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Re: Inheritance Quandary

Post by Alan S. » Wed Jun 07, 2017 6:59 pm

Owning real estate in the bay area comes with dealing with an inevitable major damage quake at some point. You can insure part of the exposure but not the deductible and premiums are high. I believe this is a risk that should not be ignored despite the tendency of many locals to do so, and conversely the securities you own would not be affected to nearly the degree of real property directly subject to damage if the holdings are diversified similar to the S&P 500.

Not clear how much EQ retrofitting has been completed on these properties, but if retrofitted effectively the potential for damage should be materially reduced.

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Re: Inheritance Quandary

Post by boglemind » Wed Jun 07, 2017 10:28 pm

Yes, major earthquake is always possible, but real estate is good diversifier and arguably a reliable store of wealth. I have noticed many foreign nationals parking their money here because of constrained land & development opportunities. (Doesn't hurt that the area is ground zero for the global technological revolution we're undergoing either.) I just want to make that case because I would think this forum would naturally bias towards stock ownership. That said, I don't have legacy needs, so I really need to weigh all factors discussed against personal needs in making my request to the trustee. Thank you all for taking the time to help me understand things so I can put my best foot forward.

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Re: Inheritance Quandary

Post by Sandi_k » Sun Jun 11, 2017 11:51 pm

boglemind wrote:Thank you @Carefreeapp. Prop 60 is a way for older homeowners to do a lateral basis transfer from primary residence to another of equal or lesser value. In my case, if I moved in with sister just to establish primary residence, we could both sell our interests later and transfer low basis to separate props since we are both over 55.


Are you sure about *both* of you able to use Prop 60? I have a friend who is interested in leaving her husband and using Prop 60 - and my read was that only 1 person of the couple could use that loophole if they divorced. Not sure about siblings, though...but be really sure, if you're counting on it, that more than one of you could use it.

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Re: Inheriting Quandary

Post by HIinvestor » Mon Jun 12, 2017 1:27 am

When a relative died, there were some real estate and some securities left to the two close surviving siblings. We all opted to gave each of the sibs to gave have one house and share 50/50 in an apartment building that produces positive net cash flow. They also each got 50% of the cash and securities. They had been co-owners if the building previously with more owners--now there are only two co-owners remaining.

In a situation like yours, it does sound like just selling the real estate and distributing cash and securities might be the cleanest and easiest way to go, especially since the family members involved are NOT close. Living with someone you are not close to is fraught with challenges and buying or renting a place with your inheritance would likely be better for you and all concerned.

As was posted above, the executor should probably proceed to liquidate and distribute assets in a timely manner as their values can change and real estate does need management and incur expenses and liabilities.

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Re: Inheriting Quandary

Post by Pacific » Mon Jun 12, 2017 2:31 am

I would wait to see if bsteiner weighs in and then follow his advice.

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Re: Inheritance Quandary

Post by Sandi_k » Sat Jun 17, 2017 12:03 pm

Carefreeap wrote:
I know I'm late to the party but thought I'd throw out an option I didn't see posted.

Sell the $2M home. Not sure what county the property is in but under Prop 60 your sib could downsize to a cheaper property and maintain the lower owner occupied tax (Please read the rules carefully as it is a little complicated ).


I believe this is only true if sib is on the title.

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Re: Inheriting Quandary

Post by Sandtrap » Sat Jun 17, 2017 12:13 pm

Seek legal counsel representing only yourself. Inquire "partition suit" proceedings to be able to extricate yourself from building/property ownership paid fairly/appraised apportioned value, to you. The siblings have the option of buying you out with cash or selling the properties. A partition suit is based on the concept that if an joint/partial owner of property needs to sell it for funds for emergencies, or life, the other owners cannot prevent the sale. This is something to think about where there are substantial assets and beneficiaries.
Actionable advice in one area of this quandary per my personal experience with substantial R/E holdings and trust lawsuits, etc.
Good luck.

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Re: Inheriting Quandary

Post by Dottie57 » Sat Jun 17, 2017 12:21 pm

Sandtrap wrote:Seek legal counsel representing only yourself. Inquire "partition suit" proceedings to be able to extricate yourself from building/property ownership paid fairly/appraised apportioned value, to you. The siblings have the option of buying you out with cash or selling the properties. A partition suit is based on the concept that if an joint/partial owner of property needs to sell it for funds for emergencies, or life, the other owners cannot prevent the sale. This is something to think about where there are substantial assets and beneficiaries.
Actionable advice in one area of this quandary per my personal experience with substantial R/E holdings and trust lawsuits, etc.
Good luck.



OP should At least get $ for for himself. A different living situation for person who wants to live in $2m house really ties OP down. Best to sell and let everyone do what they want with their share. Gives a lot more freedom to all. A partition suit would certainly help.

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Re: Inheritance Quandary

Post by Carefreeap » Sun Jun 18, 2017 11:13 am

Sandi_k wrote:
Carefreeap wrote:
I know I'm late to the party but thought I'd throw out an option I didn't see posted.

Sell the $2M home. Not sure what county the property is in but under Prop 60 your sib could downsize to a cheaper property and maintain the lower owner occupied tax (Please read the rules carefully as it is a little complicated ).


I believe this is only true if sib is on the title.


Right; it's a two step process. Property transfers to sib who inherits Prop 13 basis. Sib then uses Prop 60 to transfer basis to cheaper property in same county OR can possibly transfer basis to a reciprocating county under Prop 90. As I mentioned above, the rules are a little complicated and the OP needs to read the rules carefully.

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Re: Inheriting Quandary

Post by Carefreeap » Sun Jun 18, 2017 11:22 am

Dottie57 wrote:
Sandtrap wrote:Seek legal counsel representing only yourself. Inquire "partition suit" proceedings to be able to extricate yourself from building/property ownership paid fairly/appraised apportioned value, to you. The siblings have the option of buying you out with cash or selling the properties. A partition suit is based on the concept that if an joint/partial owner of property needs to sell it for funds for emergencies, or life, the other owners cannot prevent the sale. This is something to think about where there are substantial assets and beneficiaries.
Actionable advice in one area of this quandary per my personal experience with substantial R/E holdings and trust lawsuits, etc.
Good luck.



OP should At least get $ for for himself. A different living situation for person who wants to live in $2m house really ties OP down. Best to sell and let everyone do what they want with their share. Gives a lot more freedom to all. A partition suit would certainly help.


Well it probably won't help the relationships!

The sibs need to have some discussions with the estate attorney about options and then a discussion about what they would like to do. No need to throw around the threat of partition lawsuits until some time passes. The sib in the house will be losing two things; parent + the home they have lived in for a very long time. There needs to be some consideration and time given. Otherwise, sib is likely to act out like a wounded animal and fight the process. And everybody loses.

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Re: Inheriting Quandary

Post by Dottie57 » Sun Jun 18, 2017 12:59 pm

Carefreeap wrote:
Dottie57 wrote:
Sandtrap wrote:Seek legal counsel representing only yourself. Inquire "partition suit" proceedings to be able to extricate yourself from building/property ownership paid fairly/appraised apportioned value, to you. The siblings have the option of buying you out with cash or selling the properties. A partition suit is based on the concept that if an joint/partial owner of property needs to sell it for funds for emergencies, or life, the other owners cannot prevent the sale. This is something to think about where there are substantial assets and beneficiaries.
Actionable advice in one area of this quandary per my personal experience with substantial R/E holdings and trust lawsuits, etc.
Good luck.



OP should At least get $ for for himself. A different living situation for person who wants to live in $2m house really ties OP down. Best to sell and let everyone do what they want with their share. Gives a lot more freedom to all. A partition suit would certainly help.


Well it probably won't help the relationships!

The sibs need to have some discussions with the estate attorney about options and then a discussion about what they would like to do. No need to throw around the threat of partition lawsuits until some time passes. The sib in the house will be losing two things; parent + the home they have lived in for a very long time. There needs to be some consideration and time given. Otherwise, sib is likely to act out like a wounded animal and fight the process. And everybody loses.



You are right. I was thinking this was a different thread with a different inheritance problem which has been going for 5 years.

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Re: Inheriting Quandary

Post by Carefreeap » Sun Jun 18, 2017 3:38 pm

Dottie57 wrote:
Carefreeap wrote:
Dottie57 wrote:
Sandtrap wrote:Seek legal counsel representing only yourself. Inquire "partition suit" proceedings to be able to extricate yourself from building/property ownership paid fairly/appraised apportioned value, to you. The siblings have the option of buying you out with cash or selling the properties. A partition suit is based on the concept that if an joint/partial owner of property needs to sell it for funds for emergencies, or life, the other owners cannot prevent the sale. This is something to think about where there are substantial assets and beneficiaries.
Actionable advice in one area of this quandary per my personal experience with substantial R/E holdings and trust lawsuits, etc.
Good luck.



OP should At least get $ for for himself. A different living situation for person who wants to live in $2m house really ties OP down. Best to sell and let everyone do what they want with their share. Gives a lot more freedom to all. A partition suit would certainly help.


Well it probably won't help the relationships!

The sibs need to have some discussions with the estate attorney about options and then a discussion about what they would like to do. No need to throw around the threat of partition lawsuits until some time passes. The sib in the house will be losing two things; parent + the home they have lived in for a very long time. There needs to be some consideration and time given. Otherwise, sib is likely to act out like a wounded animal and fight the process. And everybody loses.



You are right. I was thinking this was a different thread with a different inheritance problem which has been going for 5 years.


Yeah, that's a sad situation. It not unusual for sibs to fight over the house. My hairdresser is in a situation like that where bro is in the family house and won't give her share. Her attorney has advised her to give him a year after Mom's death. Then the attorney will write a letter making a formal demand. Then it's off to court after that. House is a simple 1950s rancher but you know what that means in our area...$1M asset.

5 years is way to long to let a situation like that fester. After a while the non-paying sibs develop the "why change" entitlement attitude. "You're rich and you can afford it". :oops:

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