Inheritance Q

[Anonymous]

My parents are moving and want to give one of my siblings their current house (worth a few million) which this sibling would use as their new primary residence. We all have families and all own our homes, but have mortgages. We also all work, as do our spouses. My parents have floated that if this property transfer occurred they would take the market value of the house when they deed it over to sibling out of that sibling's portion of their estate. However, I don't think that this is fair. This sibling will not only have a huge asset and no mortgage in their 30s, they will be able to take the equity from the sale of their other house and put it into the market where it will grow exponentially. When the rest of us inherit our portions of the estate, the house will be worth considerably more than it is now and the sibling's equity (if put into the market) will have also grown considerably. I have not said anything yet, but I think that if this sibling is given a home worth a few million that the other siblings should be given the same amount in stock/cash. Does this sound fair? Is there anything I'm not thinking of here?

[Anonymous]

It’s their money and their assets. Your parents are entitled to give them to whomever they want regardless if you think it’s “fair”

[Anonymous]

And what you’re not thinking about is gift taxes. Getting it through inheritance on death is 100% more tax efficient

[Anonymous]

Bringing this up would ruin a lot of my family dynamics, and so it would never be worth it to me to mention it.

If the mere presence of this solution will ruin your family's dynamic anyways, then it might be worth saying something. I can't imagine a scenario where you sound reasonable and not petty though.

[Anonymous]

Why don't they gift her with a down payment and then hold the mortgage at a market rate, which she would pay to them? And simultaneously, gift the other siblings the same amount as the down payment.

This reminds me of my BIL who thought he was doing my brother a favor by offering to buy my brother's share of a trust for four times the annual income the share generates and considering it fair market value.

Of course there could be reasonable circumstances for favoring the sister--disabled, has special needs child, etc but there are better ways to favor than this approach.

[Anonymous]

Have they asked you for your opinion?

[Anonymous]

Anonymous wrote:My parents are moving and want to give one of my siblings their current house (worth a few million) which this sibling would use as their new primary residence. We all have families and all own our homes, but have mortgages. We also all work, as do our spouses. My parents have floated that if this property transfer occurred they would take the market value of the house when they deed it over to sibling out of that sibling's portion of their estate. However, I don't think that this is fair. This sibling will not only have a huge asset and no mortgage in their 30s, they will be able to take the equity from the sale of their other house and put it into the market where it will grow exponentially. When the rest of us inherit our portions of the estate, the house will be worth considerably more than it is now and the sibling's equity (if put into the market) will have also grown considerably. I have not said anything yet, but I think that if this sibling is given a home worth a few million that the other siblings should be given the same amount in stock/cash. Does this sound fair? Is there anything I'm not thinking of here?

I do understand what you're saying from a balance sheet perspective, but the situation you're describing is one where you're already anticipating getting a significant inheritance. It's not like one sibling is draining the parents' assets and no one else gets anything - you're going to get several million at least. And if you get the money now, there are gift tax implications like a PP said. Plus if you open this can of worms, are you prepared for each sibling to start pointing out money that was spent on someone else but not them? "Larlo's lacrosse team was so much more expensive than my art classes!", etc?

The potential growth on the could-have-been-invested assets is not worth destroying any semblance of family harmony when you've already got plenty of money and anticipate significant inheritances, is my take. But maybe that's just how poor people think and if I was anticipating several million I'd also be ticked off that it could have been several point six.

[Anonymous]

Anonymous wrote:Why don't they gift her with a down payment and then hold the mortgage at a market rate, which she would pay to them? And simultaneously, gift the other siblings the same amount as the down payment.

This reminds me of my BIL who thought he was doing my brother a favor by offering to buy my brother's share of a trust for four times the annual income the share generates and considering it fair market value.

Of course there could be reasonable circumstances for favoring the sister--disabled, has special needs child, etc but there are better ways to favor than this approach.

This is an interesting suggestion. And no reasonable circumstances for favoring the sibling. I actually don't think my parents believe that they are doing anything out-of-bounds here, but it will ruin our dynamics. How could it not?

[Anonymous]

Anonymous wrote:Bringing this up would ruin a lot of my family dynamics, and so it would never be worth it to me to mention it.

If the mere presence of this solution will ruin your family's dynamic anyways, then it might be worth saying something. I can't imagine a scenario where you sound reasonable and not petty though.

How could it not?

In my very amicable family, my father helped out my brother by hiring him for certain jobs, paying large bills for his wife's psychiatric care, etc. We all thought this was good and helpful to my brother, but we would have a different view with this arrangement, and i am sure my brother would have refused it. It would be fairer if the market value of the house at the time of the parent's death, rather than at the time of transfer, were taken out of the sibling's share.

Maybe the sibling dynamic already is bad and the parents don't care if they worsen it. Sorry, OP, if this is the case.

[Anonymous]

Anonymous wrote:

Anonymous wrote:My parents are moving and want to give one of my siblings their current house (worth a few million) which this sibling would use as their new primary residence. We all have families and all own our homes, but have mortgages. We also all work, as do our spouses. My parents have floated that if this property transfer occurred they would take the market value of the house when they deed it over to sibling out of that sibling's portion of their estate. However, I don't think that this is fair. This sibling will not only have a huge asset and no mortgage in their 30s, they will be able to take the equity from the sale of their other house and put it into the market where it will grow exponentially. When the rest of us inherit our portions of the estate, the house will be worth considerably more than it is now and the sibling's equity (if put into the market) will have also grown considerably. I have not said anything yet, but I think that if this sibling is given a home worth a few million that the other siblings should be given the same amount in stock/cash. Does this sound fair? Is there anything I'm not thinking of here?

I do understand what you're saying from a balance sheet perspective, but the situation you're describing is one where you're already anticipating getting a significant inheritance. It's not like one sibling is draining the parents' assets and no one else gets anything - you're going to get several million at least. And if you get the money now, there are gift tax implications like a PP said. Plus if you open this can of worms, are you prepared for each sibling to start pointing out money that was spent on someone else but not them? "Larlo's lacrosse team was so much more expensive than my art classes!", etc?

The potential growth on the could-have-been-invested assets is not worth destroying any semblance of family harmony when you've already got plenty of money and anticipate significant inheritances, is my take. But maybe that's just how poor people think and if I was anticipating several million I'd also be ticked off that it could have been several point six.

My parents have never talked about inheritance until now and have never given any assets of this magnitude before. I understand what you're saying about this getting petty, but I see this as one sibling basically being given a life changing gift (no mortgage in your 30s and a bunch of money to put into the market is life changing), while me and my other siblings continue to slog away with much more limited financial flexibility. And yes, the idea of getting a lot of money at some point in the distant future is great. However, that doesn't help me right now while I am in the trenches with three young kids.

[Anonymous]

Anonymous wrote:My parents are moving and want to give one of my siblings their current house (worth a few million) which this sibling would use as their new primary residence. We all have families and all own our homes, but have mortgages. We also all work, as do our spouses. My parents have floated that if this property transfer occurred they would take the market value of the house when they deed it over to sibling out of that sibling's portion of their estate. However, I don't think that this is fair. This sibling will not only have a huge asset and no mortgage in their 30s, they will be able to take the equity from the sale of their other house and put it into the market where it will grow exponentially. When the rest of us inherit our portions of the estate, the house will be worth considerably more than it is now and the sibling's equity (if put into the market) will have also grown considerably. I have not said anything yet, but I think that if this sibling is given a home worth a few million that the other siblings should be given the same amount in stock/cash. Does this sound fair? Is there anything I'm not thinking of here?

The bolded are assumptions that may not come to pass - they are fair assumptions but assumptions nonetheless. Anything can happen with respect to housing prices and the stock market.

It sounds like your parents have a fair amount of assets. If they gave you money now, what would you use it for? I don’t think it’s crazy to raise with them privately that it seems like a huge windfall for Sibling to get this, and right now you could really use help with [private school tuition, expensive kid sport, etc]. But at the end of the day it’s your parents money and they can spend it how they want. You should probably reframe your thinking about this otherwise you’re going to be very resentful.

[Anonymous]

Anonymous wrote:

Anonymous wrote:Bringing this up would ruin a lot of my family dynamics, and so it would never be worth it to me to mention it.

If the mere presence of this solution will ruin your family's dynamic anyways, then it might be worth saying something. I can't imagine a scenario where you sound reasonable and not petty though.

How could it not?

In my very amicable family, my father helped out my brother by hiring him for certain jobs, paying large bills for his wife's psychiatric care, etc. We all thought this was good and helpful to my brother, but we would have a different view with this arrangement, and i am sure my brother would have refused it. It would be fairer if the market value of the house at the time of the parent's death, rather than at the time of transfer, were taken out of the sibling's share.

Maybe the sibling dynamic already is bad and the parents don't care if they worsen it. Sorry, OP, if this is the case.

Honestly, my parents have helped out my sister way more than they've helped me and she doesn't need the help. It's puzzling to me, but I truly don't care...that's between them. I do fine without the handouts.

[Anonymous]

Anonymous wrote:

Anonymous wrote:My parents are moving and want to give one of my siblings their current house (worth a few million) which this sibling would use as their new primary residence. We all have families and all own our homes, but have mortgages. We also all work, as do our spouses. My parents have floated that if this property transfer occurred they would take the market value of the house when they deed it over to sibling out of that sibling's portion of their estate. However, I don't think that this is fair. This sibling will not only have a huge asset and no mortgage in their 30s, they will be able to take the equity from the sale of their other house and put it into the market where it will grow exponentially. When the rest of us inherit our portions of the estate, the house will be worth considerably more than it is now and the sibling's equity (if put into the market) will have also grown considerably. I have not said anything yet, but I think that if this sibling is given a home worth a few million that the other siblings should be given the same amount in stock/cash. Does this sound fair? Is there anything I'm not thinking of here?

The bolded are assumptions that may not come to pass - they are fair assumptions but assumptions nonetheless. Anything can happen with respect to housing prices and the stock market.

It sounds like your parents have a fair amount of assets. If they gave you money now, what would you use it for? I don’t think it’s crazy to raise with them privately that it seems like a huge windfall for Sibling to get this, and right now you could really use help with [private school tuition, expensive kid sport, etc]. But at the end of the day it’s your parents money and they can spend it how they want. You should probably reframe your thinking about this otherwise you’re going to be very resentful.

I'm making the assumptions that the housing market in NW DC will grow over the next 30 years and that putting $400K in the S&P for 30 years will net a healthy profit. I don't think that these assumptions are really the worth arguing about.

[Anonymous]

That’s not a smart way to do it, anyway. Giving a million dollar asset to your sibling now has significant tax implications. It will need to be documented with the IRS as a gift and count against your parent’s lifetime estate tax exemption. Your sibling will also get your parent’s basis, as opposed to a stepped up basis if they inherited it. The estate tax exemption might not matter under the current exemption, but the current level sunsets in the next few years and there is no guarantee what the level will be in the future. It could be significantly less.

The best thing you could do here is suggest to your parents that they get some good tax advice STAT. There are probably creative solutions involving trusts that could be structured to let your sibling have use of the house while making it fair for the other heirs, in a way that would also maximize the tax benefits of the inheritance laws.

[Anonymous]

Is there context missing on why they would gift their house to this sibling specifically? If, as you say, all of you have houses and mortgages of your own right now?

Because this is odd, and I'm trying to understand.

There's got to be more to this.