All you need to know when two siblings inherit a house
If you recently lost a parent, you may be dealing with the dispersal of their estate between you and your siblings. This situation can be quite challenging, especially if you’re inheriting house with your siblings. Further complications arise if one of you doesn’t agree on what should happen next with the house or if siblings force sale of inherited property.
Probate is a legal process for distributing the estate’s assets and paying off any debt held by the deceased person. Most estates must go through probate, especially if they include real estate. If the heirs cannot agree on what happens with the house, the courts will likely need to be involved.
Can Anyone Live in the Home?
If you and your sibling inherit the house together, you each have equal say unless the will states otherwise. For one person to live in the home, the other person would have to agree. While it is often impractical for both siblings to live in the house together, it’s not unheard of in certain scenarios. You will have to decide how you want to handle the situation if only one person will reside in the house. The one can buyout the other sibling or pay them a rent for the other person’s portion if they choose to live in the home.
Options Available for the Heirs
Several options exist for what can be done with the house. Before you make any decisions, you will need to know if the house has a mortgage attached to it. If this is the case, that will need to be taken care of before you can make any other decisions about who gets to keep the home or what will happen to it. In this situation, you will probably need to pay off the mortgage or assume it and continue to make payments on the property.
If you are inheriting a house with no mortgage, you have more flexibility in what you can do with the house. However, you will need to have your siblings in agreement if each is an equal heir to the property.
If one sibling wants to keep the house and the other wants to sell, they can buyout the inheritance of the other person(s). They would have to determine the value of the property and come to an agreement on its worth. If the one sibling pays the other for their share, then they will become the sole owner.
Private Arrangement to Share
Another option if neither of you want to sell the property is to share it. You can make your own private arrangement and put both of your names on the deed as equal co-owners. This may be the best option is both of you have nostalgic reasons for keeping the property. Your next decision is on how you will split the use of the property. In many cases, it is used as a vacation home and either of you can spend time there whenever you like. You also have to decide who is responsible for upkeep, the cost and the decision-making or maintenance work.
Sell and Split the Profits
If neither of you are particularly attached to the house, you could sell it and split the profits. This is the best option is you want to get out from under the responsibility and move forward with your lives. You will have to come to a decision on whether you will hire a real estate agent or sell by owner. Decide who will be responsible for putting the house on the market and showing it. This may be more challenging if neither of you live close by.
Rent and Split the Profits
If you don’t want to sell the house but don’t want to live there, you could turn it into an income-producing property. Rent it out and split the profits between you. This is an ideal option if you like the thought of having an income every month. Just be aware that you will have to maintain the house, find the tenants and collect the rent. Make sure one of you is up for the challenge of being a landlord and that you can agree on responsibilities.
Renovate for Living Space for Two
Another valid option for the family property if both of you need a place to live is to make it a home for each sibling. Many houses can be converted into apartments, which would give each of you individual space. You would have to agree on who gets which part of the house and how costs of renovation would be divided. For example, one person could get the kitchen, but the other person would need to add a second kitchen for their living space.
Suit for Partition
If you and your sibling can’t agree on what happens to the house, you may need to file a lawsuit for what is known as partition. This is a process where you request the judge to order the house to be sold. Someone will be appointed to get the house ready for sale, which you and your sibling will need to pay for. The profit from the sale will be reduced, and you’ll get less than if you both just agreed to sell in the first place.
Can a Sibling be Forced to Sell?
The short answer to this question is yes. If two siblings can’t agree on how to handle the property, one of them can file a partition suit in court. The court will decide what to do with the property. In most cases, the house will be sold with the proceeds being split between the siblings. If one person wanted to keep the house, they could buy it back at the sale or through a real estate listing.
Since many states require estates to go through probate if real estate is involved, an inherited house would likely go through the formal court process. However, most courts will not get involved in the distribution of property as long as the will is followed, and everyone agrees. On the other hand, the court will be involved if the two siblings can’t agree on what should be done with the house.
Whatever you decide to do with the home, make sure you put it in writing. Written agreements can lessen conflict because everything is in black and white. One person can’t change their mind or claim someone told them something other than what is written. If you choose to keep the property, a written agreement is critical to reduce the chance of misunderstandings. Make sure you list out each person’s responsibilities and obligations.
You will need to consider the inheritance tax on the house if you live in a state that still has such a tax in place. The tax is based on the difference between what you sell the home for and how much it was worth when the owner died. If you sell the house for less than the value, you won’t pay an inheritance tax. If the house brought more than the value, both you and your sibling will owe a tax on the profit.
Inheriting a house with your sibling can be quite challenging. You have several options on what to do with the house, and you can talk to an estate attorney to help you make the best decision for your situation.