What To Do If You Inherit A House With Siblings
What To Do If You Inherit A House With Siblings
A loved one died recently and you inherited their home. There’s just one catch - you inherited it jointly with your two siblings.
If you agree on what to do with the house, it may be easy to deal with your inherited house.
If not, you could be in for months or years of disagreements, hurt feelings, and potential litigation.
Wherever you’re at, if you’re struggling to figure out what happens after you inherit a house with siblings, I’ve got you covered.
Posted on May 14, 2024 by Katherine Fox.
What To Do If You Inherit A House With Siblings
After inheriting a house with siblings, your first step is to get on the same page. Several logistical items will need to be taken care of:
Secure the house and property
Clean out the house and property
Sell items family members don’t want
Get appraisals for valuable property in the house
Logistical items are the easy part. Once they are taken care of, you and your siblings need to decide what you want to do with your inherited house.
If you aren’t all on the same page, you may be in for a tense and emotional decision-making process.
If you’re going through this now and don’t know what to do after inheriting a house with siblings, I’ve got you covered.
I’m Katherine and I’m a CFP® and financial planner for inheritors.
I’m here to help you through this journey, whatever your needs are.
If you’re trying to get up to speed, check out the 20 Terms Inheritors Need to Know.
And if you’re deep in the weeds and don’t know what to do next, schedule a FREE consultation to see how I can help you navigate inheriting a house jointly with one or more siblings.
What should I do if my 3 siblings own inherited property together?
If you and your siblings own property together, you should prioritize getting on the same page.
Each sibling should focus on understanding the full range of responsibilities associated with the property you inherited.
Consider the following questions:
Does our inherited home have a mortgage?
What are the other annual expenses of our inherited home?
Who is responsible for paying those expenses?
Who is responsible for scheduling/coordinating necessary home maintenance and repairs?
Who is going to live in the home?
We inherited a vacation home, how do we set a shared visit schedule?
If we want to sell the home, when is the best time?
What repairs/maintenance need to be done before selling the home?
Who will coordinate and oversee these repairs/maintenance?
Set a time to discuss these questions with your siblings and start working through any areas of disagreement.
Owning inherited property together can be a huge blessing. It can also create logistical headaches and incredible strife between family members.
If you and your siblings own inherited property together, bring an open mind and a willingness to compromise to these discussions.
What To Do If You Inherit A House With Siblings
When multiple siblings inherit a house, each owns a portion of a home together.
Generally, between siblings, you would each own an equal share of a house. Two siblings may inherit a house 50/50 and three siblings would each inherit ⅓.
The first things you need to do after inheriting a house with siblings:
1.lUnderstand what you have inherited and the financial obligations of your inherited home.
Make a complete list of the expenses associated with your inherited home. This should include mortgage, property taxes, insurance, annual maintenance/upkeep, deferred maintenance, and necessary repairs. Discuss this list with your siblings and consider creating a shared fund to manage these expenses if you plan to keep the house.
2. Decide who will manage the house and its contents.
After inheriting a home with siblings, you all need to decide who is responsible for managing the house and its contents. This includes securing the house, selling/disposing of unwanted personal property, and managing necessary home maintenance, upkeep, or repairs. These jobs may be shared between siblings but individual responsibilities should be assigned and agreed upon.
3. Create an open discussion forum for each sibling to explain what they want to do with the house.
You and your sibling(s) may have very different ideas about what you want to do with an inherited home. Someone may want to live in the house long-term, someone may want to sell, or someone may want to keep it as a rental/vacation home. Someone may not want to deal with the hassle of a second home while someone else wants to maintain the home and property to grow long-term wealth.
What happens when multiple siblings inherit a house and one doesn’t want to sell?
The primary rule governing property when multiple siblings inherit a house is that you cannot force someone to own property they do not want to own.
If you have an inherited home split between siblings, regardless of the number of siblings who inherited, if one doesn’t want to hold the property they must be allowed to sell their share.
If you have sibling(s) who want to sell an inherited property, you may be able to work with them to find creative solutions to keep the property:
Would they be open to holding the property if they received rent payments?
Are they worried about annual maintenance costs or ongoing logistics?
Would they be willing to work out a long-term plan for you to buy out their share?
“If you and your siblings own property together, you should prioritize getting on the same page.
Each sibling should focus on understanding the full range of responsibilities associated with the property you inherited.”
Can I buy out my siblings from an inherited home?
If you can’t find a way that your sibling(s) would be willing to keep an inherited property, your last option to avoid a forced sale of the entire home is to buy your sibling out of the property.
Consider a $600,000 house you inherited jointly with three siblings. Two of you want to keep the house and the third wants to sell.
If you and your sibling who want to keep the house each have a spare $100,000 (maybe from other assets you inherited) you could pay your third sibling $200,000 to buy out their share. You would then own the house 50/50 and can move forward from there.
If you and your sibling don’t have spare cash to buy out your third sibling’s share, you can work with a mortgage broker to explore pulling out cash from the house to buy out your sibling.
The feasibility of this option will depend on if the house already has a mortgage, you and your sibling’s credit scores, and your ability to make monthly payments on the new loan.
How is the sale of inherited property split between siblings?
When inherited property is sold, sale proceeds, minus any outstanding mortgage and sale expenses, will be split equally between siblings.
Consider a $900,000 house you inherited jointly between you and two siblings. The house has a mortgage balance of $350,000 and real estate commissions are 4% of sale price.
Your profit after real estate commissions is $864,000. After paying off the mortgage, you and your siblings net $514,000 or ~$171,333 each.
Assuming the house received a step-up in basis at the death of your loved one, you would generally not be responsible for paying any taxes and you would walk away from the sale with your full proceeds of $171,300.
What should I do if I inherited a vacation home with siblings?
If you inherited a vacation home with siblings, you need to set clear rules and expectations on:
House rules
Who can use the house when
Annual houses expenses
Managing house logistics
Communication expectations
Start by opening a conversation with your siblings about what each of you want for the vacation home:
Can you all be there together or will it be one family at a time?
How long can each family stay for?
What are the house ground rules?
Who is responsible for managing house upkeep and repair projects?
How will you pay for annual house expenses?
How will you pay for one-time house repairs or expenses?
What will happen if one family wants to sell?
What happens if one co-owner dies?
I recommend working with an attorney to outline these expectations and responsibilities, along with an asset transfer plan if one sibling dies.
A shared family vacation home can be an amazing opportunity to preserve family ties across generations and build a lifetime of memories. It can also be an opportunity for resentments and grievances to fester.
Setting a precedent for clear communication and outlining rules, expectations, and an operating agreement can help keep your jointly inherited vacation home a happy place and not the source of ongoing sibling resentment.
Let’s take the next step together
Understanding what happens when you inherit a house with siblings is not easy. Beneficiaries can encounter a wide variety of different situations requiring knowledge and finesse to manage. If you need more help, you can download The 20 Inheritance Terms You Need to Know, or reach out to Katherine Fox, CFP® and CAP®, a financial planner for inheritors to learn how Sunnybranch can help you build a plan to manage and a house inherited jointly with siblings.
