Inheritance. How to divide? (real estate, sell, interest, tax)

[tesco]

I am about to inherit four properties, but I will be splitting it with my 3 brothers. What is the best way to split it if they do not want to sell? How can I get my share? I do not want to keep my share of the properties and want to liquidate. I am thinking that they can refinance my part. So if the properties are worth $4 million, then they can refinance $1 million, and give me the amount while still keeping the properties. Does anyone have any experience or better ideas?

[sunsprit]

There is never a "best way" to settle these types of family ownership problems.

There is only whatever you can agree upon between yourselves to distribute the assets.

Don't expect "fairness" to be an outcome, especially if your brothers want to keep the properties, for whatever reasons (tax, sentimental, expected cash flow/appreciation) they may have. Their situations and motivations and best interests are not necessarily the same as yours.

Your better option is to all sit down with a lawyer ... which will cost you fees ... and figure out an arrangement that comes the closest to satisfying your respective interests. Be forewarned that unless you're really close with your brothers and on amicable financial terms, any such agreement will be a compromise of each partner's needs. Some, one, or all ... may have to take a beating to get out of the joint ownership situation, or to stay in it.

I know way too many families with similar situations ... and they cannot sit down and fulfil anybody's real needs to settle an estate with multiple properties. So they all sit there, unhappy ... because they each can't have their way. One fellow I know is desperate as he enters retirement to cash out his 18% interest in a large apartment complex and a family farm and vacation housing ... and can't because his needs and that of his siblings are at such variance ... the others don't want to sell what they consider a bunch of investments at less than the market would (or might bring) in the future, and are happy with the current cash flow which they could not replicate by taking the cash out and investing it again.

In my case, it was easier to simply walk away from the assets and get on with my life than to agonize about how much my siblings got that I didn't. Was it a "screw job"? You bet it was, but to fight about it would have had only one result ... the lawyers would have had a field day over settling a few million dollars worth of stocks, bonds, securities, real estate, and other real assets. I couldn't even get a treasured picture of my Mom and Dad when they were first together to keep .... FWIW, the amount of money was a drop in the bucket compared to my relatives net worth, but they're of the "more is never enough" mentality and felt themselves entitled to whatever they wanted. So be it. I'm the one getting through life happily and they're the most miserable people ... even though exceptionally affluent and able to indugle their slightest fantasy and to rub lesser mortal's noses in their excreta. Good reason to not have any contact with them and their condescendingly obnoxious friends of the same ilk.

Good luck with your settlement, however it works out.

[M3 Mitch]

If there are 4 properties and 4 brothers, if they are separate and discrete properties like say 4 individual buildings, seems to me if they are reasonably equal in value you guys could each take one property and each do whatever he wants with his property.

That's so simple and obvious that your situation must be more complicated.

Sunsprit's right of course, you guys will eventually have to involve one or more lawyers - but if you get along reasonably well maybe you can all 4 just discuss either in person or on the phone what could be done that would meet most of everyone's objectives.

You might ask yourself why you want to be cashed out right now, when the rest of your brothers want to keep the properties.

If you have the opportunity to own a million-dollar property that generates positive cash flow, I could easily see this providing you with more than enough money for a normal life, without ever using up any of the capital (the building, property, whatever it is). This strikes me as a better deal than trying to manage the tax implications of a single 6-figure income year.

The real estate market is not exactly peaking in most of the country now, unless you have some sort of incredible opportunity that you want to take advantage of with the million - something that is way better than the existing properties (how do you know that?) - you might want to listen to your brothers' reasoning with an open mind...

Final thought - people who want to sell assets "for CASH, right NOW" typically do so at a discount. There is a reason for that.

[Ultrarunner]

One very shrewed family set-up a corp or LLC to continue managing the properties... they are in CA and there are huge tax considerations involved when inheriting parent/child real property.

There are also some simple ways to handle a buy-out... everyone silently bids what the property is worth to them to establish value and then each is paid out according to their ownership... seen it work well in partnerships where one partner wanted to retire.

Definitely want to run it by your Tax Professional... hate to make a mistake that could have been easily avoided.

Of course, the simplest method is to offer all the properties for sale with the family having the right to match the highest offer or let it go and divide the proceeds.