One of the most expensive estate assets for many families is their home, usually coming in second only to retirement accounts in terms of value. When the house ends up being far and away the most valuable asset in the estate, there are multiple children who are to be treated equally… BUT one of the children wants the home, then there can be logistical complications in making that happen. In this review of a Reddit question, I cover different potential options as well as the ONE method that may sound good at the start, but would probably lead to family disintegration as time passes on.
What are the options?
Per the Reddit Post: Trying to figure out how to handle this in advance. This is in Idaho. My in-laws own a home which is their main asset. They will end up leaving it to their three daughters equally (one being my wife) when they die. We already have a house and do not personally want the house for ourselves, though one of the sisters certainly will. We wouldn’t want to force a sale just to get her “fair share,” but night do we want her to have to give up her share simply because the other cannot afford to buy her out? So we are looking for a way to keep the home in the family with whoever wants it and be equitable for all three. The issue is that neither of them would have enough money to buy out the other two nor would I anticipate enough of the other assets in the estate to be able to equalize their inheritances any other way. The house is paid off so all of the equity is available. I’m just wondering if there is a way for the person who wants the house to cash out some of the equity somehow to buy out the other two. It seems like that must be a common enough scenario that there must be ways to do it. One other complication is that the house is a mobile home and so it’s not real property. It is on acreage without buildings as well. So in the current market and location, it is probably currently valued at $500,000+. But since there’s not a real property residence on it, traditional residential mortgage products may not be an option.
Yes, that is a little bit of a twist and complication that it’s actually a mobile home but the fact is that the property is worth half a million dollars. If that’s the value, you should be able to get some kind of mortgage or loan in order to handle this buy-out. Let’s just say that’s all it is. That’s all of it, the house – half a million dollars.
Three siblings and one of them wants to keep it. They already have one-third of the equity in it that they can put up as part of collateral to get a loan and pay off the other two. Now it is just handling the mortgage. Whatever other assets they have should be able to go to the other two sisters to help with the buy-out. Let’s just say the house and real estate are worth $600,000 and there is $900,000 total in the estate. That will be $300,000 per sister, $150,000 cash, and $150,000 worth of real estate for one. The other sister who doesn’t want it gets $150,000 cash or other assets. So that now means that of the $600,000 only half needs to be mortgaged to buy out the other two. So she’ll need to get $150,000 for each sister.
Also, can they get a home equity loan for one-third of the value of the property? This brings me back to my initial suggestion to just get a home equity loan or try to get a traditional mortgage on the property to buy out the other two. It’s possible.
Here is what someone else has to say about buying out the siblings that got quite a bit more complicated and another option that I suggested here.