Estate Planning Blog Articles

Estate & Business Planning Law Firm Serving the Providence & Cranston, RI Areas

What Should We Do with an Inherited Home?

Inheriting a house with siblings can raise some financial issues about what it means for each of you. Let’s look at some options for handling this situation and possible responses to any differences of opinion that may emerge.

NASDAQ’s recent article, “What to Do When Inheriting a House With Siblings,” says that consulting with an estate planning attorney can help untangle some of the sticky issues that can arise when a home is left to multiple people.

Several siblings can inherit the same piece of property, and when siblings inherit a home, everyone’s typically entitled to an equal share of the property. So, there are a few essential things you might need to do, including:

  • Putting the utility services in your or your siblings’ names;
  • Contacting the post office to have your parents’ mail forwarded to your address;
  • Going through your parents’ belongings;
  • Taking care of any necessary maintenance or repairs;
  • Updating payment information for the home’s insurance policy; and
  • Paying any outstanding charges associated with the home, such as HOA fees or property taxes.

After that, here’s what you might consider doing with the inherited property.

Sell. Selling is an obvious choice if neither you nor your siblings plan to live in it. Sell the home and divide the proceeds.

Buyout. If a sibling is reluctant to sell or your parents’ wills bar you from selling, you could try to work out a buyout. In that scenario, one sibling would maintain ownership of the home and pay the others an amount equal to what their share of the home is worth. Getting the home professionally appraised to determine its value is a good idea.

Renting. A third option is to rent out the home. The upside of this option is collectively sharing in the rental income from the property. This might make sense if you think you might revisit the issue of selling or a buyout in the future or if you’re obligated to keep the home in the family. If you go this route, you and your siblings will need to decide how maintenance and rent collection will be handled, and it might make sense to agree to hire a property management company to help.

Reference: NASDAQ (April 12, 2023) “What to Do When Inheriting a House With Siblings”

Estate Planning Considerations for Minor Children

Creating an estate plan with minor children in mind has a host of variables quite different than one where all heirs are adults. If the intention is for the minor children to be beneficiaries, or if there is a remote chance a minor child might become an unintended beneficiary, different provisions will be needed. A recent article titled “Children need special attention in estate planning” from The News-Enterprise explains how these situations might be addressed.

Does the person creating the will—aka, the testator—want property to be distributed to a minor child? If so, how is the distribution is to occur, tax consequences and safeguards need to be put into place. Much depends upon the relationship of the testator to the minor child. An older individual may want to leave specific dollar bequests for minor children or great-grandchildren, while people with younger children generally leave their entire estate in fractional shares to their own minor children as primary beneficiaries.

While minor children and grandchildren beneficiaries are excluded from inheritance taxes in certain states, great- grandchildren are not. Your estate planning attorney will be able to provide details on who is subject to inheritance, federal and state estate taxes. This needs to be part of your estate plan.

If minor children are the intended beneficiaries of a fractional share of the estate in its entirety, distributions may be held in a common trust or divided into separate share for each minor child. A common trust is used to hold all property to benefit all of the children, until the youngest child reaches a determined age. When this occurs, the trust is split into separate shares according to the trust directions, when each share is managed for the individual beneficiary.

Instructions to the trustee as to how much of the income and principal each beneficiary is to receive and when, at what age or intervals each beneficiary may exercise full control over the assets and what purposes the trust property is intended for until the beneficiary reaches a certain age are details which need to be clearly explained in the trust.

Trusts for minor children are often specifically to be used for health, education, maintenance, or support needs of the beneficiary, within the discretion of the trustee. This has to be outlined in the trust document.

Even if the intention is not to make minor children beneficiaries, care must be taken to include provisions if they are family members. The will or trust must be clear on how property passed to minor child beneficiaries is to be distributed. This may be done through a requirement to put distributions into a trust or may leave a list of options for the executor.

Testators need to keep in mind the public nature of probate. Whatever is left to a minor child will be a matter of public record, which could make the child vulnerable to scammers or predatory family members. Consider using a revocable living trust as an alternative to safeguard the child and the assets.

Regardless of whether a will or trust is used, there should be a person named to act as the child’s guardian and their conservator or trustee, who manages their finances. The money manager does not have to be a parent or relative but must be a trustworthy person.

Review your specific situation with your estate planning attorney to create a plan to protect your minor children, ensuing their financial and lifestyle stability.

Reference: The News-Enterprise (Sep. 10, 2022) “Children need special attention in estate planning”

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