What To Do if 3 Siblings Own Property Together?
What To Do if 3 Siblings Own Property Together?
Inheriting property jointly with siblings can be a stressful experience.
More often than not, there are too many cooks in the kitchen.
Everyone has an opinion. Everyone is also looking for someone else to step up and do the hard work.
If this is where you’re at, I’ve got you covered.
Keep reading for the information you need to start building a plan to manage or sell a property you inherited jointly with your siblings.
Posted on June 12, 2024 by Katherine Fox.
What To Do if 3 Siblings Own Property Together?
First, I’m sorry for your loss.
This is a difficult time to be making decisions.
Emotions and family tension are running high and everyone is dealing with the effects of grief.
But you’re here, which is the first step to getting the answers and education you need to help your siblings make a plan for what to do with inherited property.
You might be wondering:
Should we keep the house?
Who will be responsible for paying for/overseeing maintenance and upkeep of the house?
What if I want to keep the house and my siblings want to sell?
Can we afford to keep the vacation house?
How are we going to share use of the vacation house?
I’m Katherine. I’m a CFP® and financial advisor for inheritance.
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 owning property together with three siblings.
How do you decide to keep or sell a property you own jointly with 3 siblings?
If you inherit a house jointly with siblings, the first thing you need to decide is if you want to keep or sell the property.
When making this decision, consider the following factors:
Do any of us want to live in this house?
Is this a property in a desirable vacation area?
Is there a mortgage on this property?
What is the all-in annual cost of paying for and maintaining this property?
Does this property have significant deferred maintenance that needs to be addressed?
Would this property work as a rental or investment property?
Do any of us live near this house?
If renting the property, would you need a property manager?
Will there be any tax implications if you sell the property?
It may be a cut-and-dry decision, if no one wants the house for financial, logistical, or emotional reasons, selling is an easy path forward.
The discussions become more complicated if siblings have different feelings about keeping versus selling an inherited property.
What To Do if 3 Siblings Own Property Together?
One of the largest complications siblings run into with jointly owned property is navigating a path forward when one sibling wants to keep an inherited property and the other siblings want to sell.
What happens if I want to keep the house and my 3 siblings want to sell?
If you want to keep an inherited property owned jointly with siblings and your siblings want to sell, you have limited options.
You can’t force someone to own property they don’t want to own.
That means you have two options:
Buy your siblings out of their share(s) of the property.
Convince your siblings that it is in their financial best interest to keep the house.
If you inherited a $2.1 million dollar home split equally between you and two siblings, you would need to pay each of them $700,000 for their portion of the home.
You may have access to that level of wealth from another part of your inheritance, or you may be able to take out a mortgage on the house to generate cash to buy your siblings shares.
If you don’t have $1.4 million available to buy siblings out of an inherited property, you could also try and work out a payment plan with one or both of them, in which they hold a mortgage and you pay them back. If you go this route, you will want to get an attorney involved to ensure that all contracts are correctly drafted and executed.
If you aren’t able to buy out your siblings, the only remaining option you have is to convince them of the financial viability of keeping the property.
If you want to live in the property, that means making a detailed schedule of how expenses will be covered and how much rent you would pay to them.
If you want to keep the home as a vacation property, you need to understand how much the property would cost maintain, annual rental expenses, and how much income the property would generate as a rental.
If you can’t persuade your siblings, you’re unfortunately out luck.
Can my 3 siblings and I afford to keep inherited property?
When deciding if you and your siblings can afford to keep an inherited property, you need to have a full and clear understanding of all costs associated with that property.
You need clear answers and numbers assigned to ALL of the following questions:
For an inherited property to be used as a primary residence:
Does the property have a mortgage?
How much is property tax?
How much does the house cost to insure?
What climate risks does the property face? Is insurance available for the property?
What are the annual maintenance costs for the house?
What are the expected costs of any deferred maintenance on the property?
What are the annual maintenance costs for the yard/garden/estate?
Does the property generate any income?
Do I trust my siblings to equally share expenses?
Will we be nickel-and-diming each other when making decisions about property upkeep/improvements?
For an inherited property to be used as a rental property, ask the above questions PLUS:
How much rental income can this property generate?
How much will a property manager cost?
Do we expect this property to appreciate significantly in value?
For an inherited property to be used as a vacation home, ask the above questions PLUS:
How much will it cost to maintain the property when we aren’t there?
Will all siblings use the property equally, or will some families use the property more and pay a greater share of the expenses?
Does one sibling not want to use the vacation home? If so, how will they be compensated for their share in the property?
“Theoretically, all siblings are responsible for maintaining a jointly owned property.
In reality, it almost never works that way. ”
Who will be responsible for maintaining a property owned jointly with 3 siblings?
Theoretically, all three siblings would be responsible for maintaining a jointly owned property.
In reality, it almost never works that way.
The answer to this question depends if this house is being used as a primary residence, a rental property, or a vacation home.
Sharing maintenance on a jointly owned property used as a primary residence
If one sibling uses the property as a primary residence and pays rent to the other siblings, the sibling living in the property would bear responsibility for the logistical maintenance of the property. They would likely also bear a slightly higher cost for everyday property upgrades including broken appliances and everyday wear and tear.
Major expenses and repairs, however, should be paid for jointly by all property owners. Ideally, siblings would contribute a set amount of money on a fixed schedule to a joint account to be used solely for property improvements, expenses, and repairs.
Siblings may also set a budget for everyday appliances and wear and tear (i.e., they would jointly pay $800 for a new dishwasher) and if the sibling living in the property wanted a more expensive item, they would be responsible for covering the difference.
However siblings decide to share maintenance costs on a property jointly owned with siblings, they should have a clear contract drafted by an attorney that sets out each party’s financial and maintenance obligations.
Sharing maintenance on a jointly owned rental property or vacation home
If three siblings have equal ownership of an inherited property or vacation home, they should be responsible for splitting everyday expenses and one-time maintenance costs in equal share.
All parties should contribute equally to a maintenance fund and have a written agree to split expenses related to rental costs or property upkeep.
If one sibling performs a higher degree of logistical maintenance on the property (for example, by acting as a property manager or managing/overseeing tradespeople at a vacation home) their work should be recognized and compensated by the other owners at the going market rate.
Some siblings may also decide to split maintenance costs by time spent in a vacation property, rather than ownership percentage. In this case, a family that uses a vacation home more frequently throughout the year may be responsible for paying a higher share of the regular annual maintenance and/or utility expenses. Again, this arrangement should be clearly delineated in a contract drafted by an experienced attorney.
How can my 3 siblings and I make a plan to share use of an inherited vacation property?
If you and your siblings inherited a shared vacation property, open communication and clear expectations are essential to ensuring a positive experience for all families involved.
Your first step is to come together as a group and decide how time in the property and expenses will be split. Many families equally split time and expenses, or may allocate a larger portion of regular upkeep and utility expenses to families who spend a larger amount of time at the property.
You will also want to set a family contract with rules for the property:
How do you split high-value weekends (e.g., the 4th of July at a Lake House). Will you rotate each year? Who will keep and enforce that schedule?
How far in advance do visits need to be scheduled?
How will conflicts be handled if two families want to use the property at the same time?
Can families stay together at the property, or will it be one at a time?
If families can stay together at the property, how will rooms be allocated?
What are family rules about alcohol, drugs, and parties at the property?
If one family will not use the vacation property, how will they be compensated?
For this to work, compromise is key. No one is going to get exactly what they want, but with open discussion and communication, everyone can end up happy enough.
Once you have a family contract covering an allocation of time spent in, and expenses for, the property, you should take it to an attorney to draft your decisions into a formal legal document of shared use and ownership.
This document should include clear mechanisms for discussion/arbitration if one family or another has an issue or wants to sell their portion of the property.
Let’s take the next step together
Understanding how to manage a house inherited jointly with siblings is not easy. Families 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 fiduciary, fee-only financial planner to learn how Sunnybranch can help you build a plan to navigate inheriting a house jointly with siblings.
