Inheriting property is more complicated than inheriting cash or an investment portfolio. There can be issues whether the property was a family home or a rental property that brought in income over the years.
In this blog post, we cover some of the more common such as sibling rivalry to the more obscure such as environmental liabilities. Working with an estate planning attorney may be one way to avoid some of these issues along with a lengthy and costly probate.
To keep or sell the property
Parents often leave real estate in equal shares to their children. This strategy can present some issues. Sibling rivalry can easily lead to fights over whether or not to sell.
One of the children may want to live in the property. In Southern California, this can easily be the case for real estate in prime areas. If other siblings have moved out of the area, they may not care. But there must be a way to buy out their shares.
The decision to sell may be what makes the most sense, but inherited property can be harder to sell. If updates were not taken care of because of a fixed income, the property could need updates or repair. In addition, if not priced accurately the property can sit empty for a long time lowering the value further.
A less common, but costly consideration
With an income producing property, no one may want the responsibility of managing the property. A situation that the New York Times covered earlier this year related to inherited property that required environmental remediation. It was a situation of “toxic succession.”
A rental property had been used as a gas station and leased to a chemical storage company. The property had produced income for the family, but when a sale fell through after a environmental report turned up serious pollution the heirs were on notice that the inherited property had to be cleaned up.
These issues often don’t come up until someone wants to sell. If the issues are known during the owner’s lifetime, placing the property in trust and appointing a corporate trustee could limit the liability for a beneficiary. Another solution when the cleanup costs are too high is to disclaim the property. In these cases, the contaminated property would go back to the state.
Whether a property is a key part of your estate plan or you recently inherited a property, speaking with an attorney is the first step to avoid the issues discussed in this blog. At the law office of Matthew C. Yu, we are experienced in all areas of estate planning and probate law. Schedule a free initial consultation to discuss your concerns.