Inheriting A House

[davethewave]

California My half of my Moms' estate includes a house that's worth about 500k. My sister will get 250k for her half of the house. Before my mom passed she borrowed 300k on the house. To figure out how much cash I will receive my sisters' attorney is deducting 500k for the house. Can they do this? If I were to sell the house I'd walk away with 200k !
Also, I've lived in the house since 2009 and have rented out rooms which my mother knew of and was fine with that. Now the attorney says that's the estates money and will be deducting that from my cash allowance.

 

[Ohiogal]

California My half of my Moms' estate includes a house that's worth about 500k. My sister will get 250k for her half of the house. Before my mom passed she borrowed 300k on the house. To figure out how much cash I will receive my sisters' attorney is deducting 500k for the house. Can they do this? If I were to sell the house I'd walk away with 200k !
Also, I've lived in the house since 2009 and have rented out rooms which my mother knew of and was fine with that. Now the attorney says that's the estates money and will be deducting that from my cash allowance.

How is the house titled? When did Mom die? You are recieving something worth 500k. What is your sister getting? What does the will state? Or is this intestate?

 

[adjusterjack]

I've lived in the house since 2009 and have rented out rooms which my mother knew of and was fine with that. Now the attorney says that's the estates money and will be deducting that from my cash allowance.

You lived there rent free for 14 years plus generated rental income then you have nothing to complain about. Your sister is entitled to an extra $50k.

 

[TrustUser]

i cant tell how the assets were divided. so for conversation sake, i am assuming that the whole estate is divided in half. you would need to deduct the mortgage to ascertain the worth of the estate. and then divide that in half, to see how much each person should get. the house, with the mortgage, is worth 200K

 

[LdiJ]

California My half of my Moms' estate includes a house that's worth about 500k. My sister will get 250k for her half of the house. Before my mom passed she borrowed 300k on the house. To figure out how much cash I will receive my sisters' attorney is deducting 500k for the house. Can they do this? If I were to sell the house I'd walk away with 200k !
Also, I've lived in the house since 2009 and have rented out rooms which my mother knew of and was fine with that. Now the attorney says that's the estates money and will be deducting that from my cash allowance.

Are we to assume that you are keeping the house? Otherwise it doesn't make sense at all.

If the house has a 300k mortgage against it then it does not sound reasonable to be deducting 500k from your share of the estate for the house (assuming that you are keeping it). Nor would it be reasonable for your sister to get 250k credit for her share of the house if the house only has 200k of equity. Her share of the equity would be 100k not 250k. Of course that is assuming that the 300k your mother borrowed against the house was not of some kind of direct benefit to you.

I am reading between the lines a bit here because your explanation is vague at best. It may be that you should consult an attorney of your own.

 

[LdiJ]

You lived there rent free for 14 years plus generated rental income then you have nothing to complain about. Your sister is entitled to an extra $50k.

I completely disagree with you on this issue Jack. What happened while mom was alive is 100% irrelevant to the division of the estate unless mom's will made it relevant, which does not appear to be the case.

In addition, you don't know that the OP lived there rent free, or what the financial arrangements were between the OP and mom.

 

[Taxing Matters]

California My half of my Moms' estate includes a house that's worth about 500k. My sister will get 250k for her half of the house. Before my mom passed she borrowed 300k on the house. To figure out how much cash I will receive my sisters' attorney is deducting 500k for the house. Can they do this? If I were to sell the house I'd walk away with 200k !

If the estate gets court approval for it, then they can do that. The real question is what the will specifically says about the house and what intent she had (if the will reflects it) for distributing her estate. The $300k loan could be accounted for somewhere else in the distribution plans. I'd have to read the entire court file to know what all the assets are that are available and what constraints there are in how they are distributed.

Also, I've lived in the house since 2009 and have rented out rooms which my mother knew of and was fine with that. Now the attorney says that's the estates money and will be deducting that from my cash allowance.

This is one of those items in which the exact terms of the will and the details of your agreement with your mother (that you can prove to the court) matters a lot. It was your mother's house and she'd ordinarily be the one entitled to the rents earned from it. You'd want to be able to show that you had a deal with your mother that allowed you to keep the rents and gave up any claim she would have to that rent. How much rent was collected each year?

Consider, too, what you are getting that you've not mentioned. You had 14 years living in the house, presumably rent free, saving you a lot of money. Inheriting the property after your mother dies wipes out all the income tax gain in the house that had accumulated over the time your mother owned it. If you promptly sold the house after you received it, you'd have little or no income tax capital gain to pay. You may also be getting the home with a low real property assessment, too. You'll have an asset from which you may continue to get income from rent and a property that may continue to appreciate in value faster than other investments. Finally, you get to retain a place to continue to live rent free. Your sister isn't going to enjoy any of those benefits. So to me the issue of what the proper split should be is not as clear or simple as you might like it to be, especially if you want a truly fair outcome for both of you.

 

[Taxing Matters]

I completely disagree with you on this issue Jack. What happened while mom was alive is 100% irrelevant to the division of the estate unless mom's will made it relevant, which does not appear to be the case.

The home is in CA, and that state takes a slightly different view of that than most of other states. In some instances what happened while Mom was alive is very relevant in that state and CA courts are more willing to accept evidence of intent outside of the four corners of the will than some other states.

In addition, you don't know that the OP lived there rent free, or what the financial arrangements were between the OP and mom.

Nor do we know any of the other financial details of the estate or what the complete distribution plan was. That information would be important to what kinds of options may be available. What that means for the OP is that he or she needs to see a probate attorney to find out what those options are and what it will cost to pursue them.

 

[TrustUser]

hi tm,

i dont see your reasoning

Consider, too, what you are getting that you've not mentioned. You had 14 years living in the house, presumably rent free, saving you a lot of money. Inheriting the property after your mother dies wipes out all the income tax gain in the house that had accumulated over the time your mother owned it. If you promptly sold the house after you received it, you'd have little or no income tax capital gain to pay. You may also be getting the home with a low real property assessment, too. You'll have an asset from which you may continue to get income from rent and a property that may continue to appreciate in value faster than other investments. Finally, you get to retain a place to continue to live rent free. Your sister isn't going to enjoy any of those benefits. So to me the issue of what the proper split should be is not as clear or simple as you might like it to be, especially if you want a truly fair outcome for both of you.

hi tm, not sure i get your reasoning, here. the 14 years living in the house is really a separate issue from the inheritance. that was something between the mother and son. i would not want to guess as to what it was. but as long as the mother chose to do this freely, i see it as a non-issue.

most assets are not gonna have any capital gain to report, as i am assuming that it is all gonna be inherited with a stepped up basis. all assets have their own advantages. if one person has a home to live in, then the other person has some other asset with its own advantages. like perhaps some investment that gives him current income.

in my post, i stated i was assuming that the intention of the mother was to share things equally. which to me means that the kids get an appraisal of all of the main assets, and either work out a plan of their own that both can agree to. or they sell some of those assets, until they can agree. or until all that is left is cash, and there is nothing to agree on. certainly if some assets have capital gains on them, and others do not, this needs to be taken into consideration. just as assets that have mortgages on them, etc.

but inheriting the house is not necessarily any better or worse than inheriting anything else. i think that all depends on the wants and needs of any particular individual. am i missing a point that you were making ?

 

[davethewave]

Thank you all for expressing your thoughts. I'd like to point out that moms' estate is about 1.2 mil. My sister is saying I'll get 200k cash ! My attorney has requested the accounting but they just ignore us. And the 200k left over from the loan that mom had has disappeard. Moms' Merryl Lynch account was at 149k. They say is 90k. I'm retired living on 1800/mo social sec. House payment (will be ) 1300/mo. I'm not yet making the payment untill after probate. And why isn't the loan payed off from moms' assets? Because my sister and her husband (who are well off) are pissed that I have been living rent free all these years. They want to see me get stuck with this bill. Mom took out the loan because in home care used up all her funds. There were other resources for the money, but my sister and husband went this rout just to screw me. Should I, or can I go to probate court and report that my sister is stealing funds? It may very well delay the distribution. But she needs to be held accountable.

 

[Taxing Matters]

hi tm, not sure i get your reasoning, here. the 14 years living in the house is really a separate issue from the inheritance. that was something between the mother and son. i would not want to guess as to what it was. but as long as the mother chose to do this freely, i see it as a non-issue.

The paragraph of mine you quoted was not meant as a list of potential legal issues. Instead, they are things to consider when thinking about what advantages the OP has had through the arrangement with the mother as a factor in thinking about what might be a fair split of the estate assets.

most assets are not gonna have any capital gain to report, as i am assuming that it is all gonna be inherited with a stepped up basis. all assets have their own advantages. if one person has a home to live in, then the other person has some other asset with its own advantages. like perhaps some investment that gives him current income.

And those two assets provide very different tax results. Inheriting a capital asset gives you a step up in basis such that if you sell it shortly after death there will be little or no capital gain. If you hold onto it and sell it later, you get taxed on any gain at capital gains rates. But should you inherit an asset like pension in which all payments that will be received are entirely subject to tax and, even worse, at ordinary income rates, you've got a very different tax outcome. If both assets were valued at, say, $500,000, a split giving one kid the house and the other the pension is not an equal split once you take into account the tax results. If you were the beneificiary and had the choice, which would be more likely to take? The house, right? And the reason is you get more money after tax with that asset than you do with the pension.

in my post, i stated i was assuming that the intention of the mother was to share things equally.

That may have been the case. But as I said before, one would have to read the will and consider any other relevant evidence to determine what she intended. CA is more liberal in considering extrinsic evidence of intent when deciding probate matters than many others, like my state, would be. All estate planning documents should be drafted to make the wishes of the decedent crystal clear. If it isn't clear, you open the door for court challenges, and then you end up leaving it up the judge to work out what was intended. The judge may or may not get it right. The available evidence might not point to exactly what the decedent really wanted.

but inheriting the house is not necessarily any better or worse than inheriting anything else. i think that all depends on the wants and needs of any particular individual. am i missing a point that you were making ?

What I tell my clients is that if they want their kids to truly get equal shares of the assets they have at death then they need to consider not just the fair market value of the asset, but also what is left after the government takes its bite in taxes. Not all assets will be worth the same on an after tax basis, and that's important information that a lot of clients would not otherwise consider when deciding who gets what.

 

[TrustUser]

why does your sister's attorney seem to have all the power ?

 

[zddoodah]

I was going to ask a bunch of questions, but then I saw in your follow up post that you have an attorney. Your attorney should be guiding you through this process. Please consult with him/her about your questions/concerns because no one here can provide you with better information than your own attorney.

 

[m.torres841002]

Please consult with him/her about your questions/concerns because no one here can provide you with better information than your own attorney.

 

[davethewave]

I don't have an attorney right now. I've gone through 2 and I'm out of funds. The first one alls he said was I'm getting the house. I paid him 5k and he's saying I owe another 5k and is putting a lien on my inheritance. The second one was OK but not aggressive enough. Mother died Oct. 2022 and I've been told I should receive money sometime this summer. That should give me time to get bank statements and hopefully prove that my sister is hiding money. They have ignored my requests and former attorneys' request to see the accounting. And I've refused to sign the waiver that gives up my rights for the accounting.