Going through probate is an incredibly stressful time for any family. The process itself is long and difficult at a time when a family is already dealing with the loss of a loved one. Unfortunately, this can put a strain on relationships between family members. If you’re inheriting a house with siblings, it’s important to understand your options if there’s a disagreement.
Who Gets a House in an Estate?
When someone dies with a will, a court will distribute their estate according to the terms of that will. This process, called probate, is a necessary step for heirs to receive assets bequeathed to them.
If the deceased person has a house in their estate when they die, ownership of that house will pass according to the terms of the person’s will just like other assets in the estate. Accordingly, the deceased person’s heirs are likely to inherit the house unless the will states otherwise.
When a deceased person has two or more children, it isn’t uncommon for them to pass a house to all of their children at the same time. When this happens, each sibling has the same ownership rights as all the others. In other words, all siblings have an equal share in that house. So what can you do when inheriting a house with siblings?
Problems When Two Siblings Inherit a House
Siblings don’t always see eye to eye, especially during the stressful probate process. Perhaps the most common problem when two siblings inherit a house is disagreement over what to do with that house. In this situation, things can get tricky; one sibling may want to sell it and split the proceeds, while another may want to keep it in the family or live in it.
Options After Inheriting a House with Siblings
There are several different ways to handle a house inherited with siblings. Which option will work best depends largely on what each sibling will agree to.
Agree to a Buyout
A buyout allows one sibling to “buy out” the others and obtain sole ownership of the house. For example, imagine three brothers inherit a townhome from their parents; the two older brothers want to sell the house, but the younger brother would rather keep it as a place to live.
After agreeing on a fair price, the younger brother can pay the two older brothers for their share of the house. As a result, the younger brother receives total ownership and the two older brothers can split the proceeds of their share.
Although it sounds simple on paper, disagreement between siblings often complicates the buyout process. On top of that, buyouts can be expensive, and the would-be buyer may have to refinance the property to make the buyout work. One common solution is for the buyer to seek a probate lender. Although similar to other loans, probate loans operate slightly differently. Rather than going directly to the buyer, the lender pays the probate loan to the deceased’s estate. This money then passes through the estate to the other heirs, while the buyer takes on the debt of the loan.
Selling the House
Another common solution is for the siblings to sell the house and split the proceeds. In doing so, siblings can realize the cash value of their inheritance relatively quickly. It isn’t uncommon for siblings to arrange a different split of the profits if one decides to take over the process of organizing the sale (such as arranging showings and working with a real estate broker).
Of course, disagreements can cause problems here as well, sometimes resulting in a lawsuit to partition the property. Suing for partition is a way of forcing the other siblings to sell by involving the courts. A partition action involves requesting a judge to order the sale of the house. In a successful partition action, the siblings split the proceeds as if they had sold the house themselves. Keep in mind, however, that an action for partition will have additional costs that reduce the total proceeds from the sale.
Rent the House
As an alternative to selling the house, siblings may agree to rent it instead. As with selling the house, one sibling may take a slightly larger share if they take responsibility for managing the property. A rental agreement can be between siblings as well if one wants to live in the house but the other does not.
Use It as a Living Space
Siblings who get along well may wish to live in the house together. Since each sibling owns the house in equal shares, each is entitled to live there if they want to.
Reach Some Other Private Agreement
Siblings are also free to reach any other private agreement that they feel benefits them. For example, they may agree to sell the house if its fair market value reaches a certain amount or after a certain amount of time.
The most important part of this option, however, is making sure any agreement is properly memorialized in a contract. Even within a family, it’s important to make sure transactions like this are properly recorded; a sibling can change their mind at any time, and a contract prevents them from unfairly backing out of the deal.
Need Help with Your Buyout?
Probate can be a long, drawn-out process. This is especially true if there are disagreements among the beneficiaries about the distribution of probate assets. That’s why we offer cash advances to beneficiaries who want to start enjoying their inheritance now. If you’re interested in learning more about Swift Inheritance Advance, contact us today.
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