If you need help knowing how to move forward with an inheritance buyout from your siblings or other beneficiaries on a shared inheritance, we’ve got you covered. We’re discussing everything you need to know about the process, along with all the options you have to choose from, here. Keep reading to learn more, including:
What Happens When a House is Inherited with Siblings?
When multiple siblings inherit a house, all of them wind up with a share of the property. For example, two siblings would each get 50% of the property, four siblings would have 25% each, and so on. As a result, the property has multiple owners who all have a responsible share of ownership. Everyone divides the property tax, mortgage payments (if any) and ongoing maintenance of the home, unless there's an existing agreement or division of ownership in the Will.
How siblings use an inherited property depends on a few things, including:
How well they get along
What they agree on for the disposition of the house
Their willingness to engage in the ultimate disposition of the property
Whether or not they all want to keep the property
If any (or most) want out of the home
There's also the issue of how the estate was divided in the Will by the parents. Sometimes, parents give a larger portion to one sibling and divide the rest of the estate among the remaining siblings.
Any time more than one sibling receives a property inheritance, everyone needs to agree on what to do, regardless of how large or small each sibling’s share of the estate might be.
What Are My Options If I Inherit a House with My Siblings?
You have a few options available if you inherit a house with your siblings. You can all decide to keep the home in the family and use it for vacations. Or, you may want to turn it into income property and split the rental income. Perhaps one of the siblings wants to reside there.
You may also decide to do an estate buy out, where one sibling purchases the others’ shares of the home. Each option requires careful consideration by all siblings in order to ensure everyone is satisfied with what happens to the home.
Here are the most basic options you have if you’ve inherited property with siblings:
Keep it and share the property. The house may be in an ideal location for vacations, or it might be a special place that no one wants to let go of because of all the happy memories you have. Provided you’re all in agreement and it’s financially feasible, you can decide to keep the house in the family and share in the upkeep costs.
Sell the house. This is an option when siblings prefer to liquidate the property and split the cash from the proceeds. Selling the house requires all siblings to share in the expenses to get the home sell-ready and get it listed. They can then divide the income from the sale equally.
Rent the house. Renting the home is another option. Sometimes, one sibling wants to live in the home, but they may not be interested in (or have the means to) buy other beneficiaries out. In this case, they can rent the home. In the event none of the siblings actually wants to live there, but they also don’t want to sell the home, it can be rented out to a third party. In either case, the income from the rental is used to maintain the property and taxes. Any remaining money split between the heirs.
Buy out one or all other beneficiaries. When one sibling is interested in keeping the house but the others aren't, the interested sibling can look into the process of buying out a sibling. The sibling who wants the house has to do an estate buy out in order to be equitable with the remaining heirs.
Can a Beneficiary Buy Out Other Beneficiaries?
Yes, buying out beneficiaries is possible, and it can be done in a fashion that satisfies everyone involved. The following is a list of steps that will show you how to initiate an inheritance buyout.
How Do You Buy Someone Out of Inherited Property?
Buying out your siblings from an inherited property is different than just buying a home, but there are several similarities to the process. You still have to get an appraisal, come to an agreement on price, get financing and disburse the proceeds to your siblings. Here's how:
Step 1 - Get the property inventoried and valuated
Remember that any contents in the home are part of the estate's value, unless otherwise directed in an Estate Plan. Everything must be properly valued by estate appraisers in order to determine value for the contents and property of the estate. The fair market value puts a price on everything left in the estate, which then ensures that all beneficiaries get an equitable payout.
The valuation enables you to calculate how much money you'll need if you’re considering buying out other beneficiaries. It’ll help you determine if you need to take out a loan or not. Valuation can also be used for obtaining a mortgage.
Step 2 - See if you can reach an agreement with other beneficiaries
The easiest option for you and your siblings who’ve inherited a home is to come to an agreement about how to handle the property. Never assume you know what your siblings are thinking about what they want to do with the house. Talk to them so you know their goals, and discuss with them your desire to buy the house, if that’s your intention. Those with less interest in the home may decide to sell it to you instead of being responsible for the ongoing costs. Need help navigating these conversations? Check out our guide here.
Once everyone's in agreement about selling you the home, the process can move forward. If you’re able to pay your siblings in cash for their shares, they can sign over their part of the deed to you. If you don't have cash on hand to complete the purchase, you’ll need to secure financing.
Step 3 - Find a loan lender
Unless you have access to large amounts of cash, you’ll likely need to get a loan to buy the house from your siblings. That said, you can't just go to a bank and get a traditional mortgage for this process. Instead, you’ll probably need to find a lender that specializes in probate or Trust loans. The type of loan you get depends on how your parents structured the inheritance.
The main reason why you’ll need to use a probate/estate or specialized Trust loan lender comes down to the fact that the estate is technically still owned by your parents even though they’ve passed. Other factors might include an existing mortgage that still has to be paid, or the presence of a reverse mortgage.
Step 4 - Consider other inheritance loan and refinancing options
Sometimes the estate buy out doesn't go as planned in terms of finding a probate/estate loan, but that doesn't mean you can't get a loan for the home. Other options might include a home equity loan, money lender loan, credit unions, refinance loan, cash out refinance and more. There are multiple ways to raise cash for buying out siblings from inherited houses, and you should explore your options.
Start looking into your financial options for buying out other beneficiaries as soon as you can. The process can take as long as obtaining a traditional mortgage. Even though this is less time than is typically needed for settling an estate, you don't know what’ll happen during the research phase of the loan that might complicate your ability to buy the house.
Get Some Expert Help with Inheritance Buyout
Have you recently inherited property with siblings or other family members? If so, you’re probably thinking about your next steps. Understanding your options is key. If you’re planning on buying out other beneficiaries, it’s important to work with an expert to make sure you’re being smart.
Regardless, with the ownership of any new property, one thing you should always do is either make or update your Will and other parts of your Estate Plan. Trust & Will can help you get started in creating or updating your Estate Plan today.
Understanding the inheritance buyout process isn’t very difficult. Knowing your options, and how to navigate the steps, just takes a little bit of work. By now, you should have a firm grasp on what you need to do if you’re considering buying out other beneficiaries on a recently inherited property.
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