Inheriting Land as Tenants In Common. Need Advice.. (I'm in TX, Land is in AL)

[anon_user]

Two of my siblings and I inherited our Aunt's share of 120 acres of land three years ago. The land is worth $6m. Probate is almost complete, the land will be conveyed in the coming weeks. My Aunt owned this land 50/50 with my Mother, I will be a tenant in common as below:

• Sib1: 16.7% (me)
• Sib2: 16.7%
• Sib3: 16.7%
• Mother: 50%

At some point, we will inherit our Mother's share, including a forth sibling:

• Sib1: 29.2% (me)
• Sib2: 29.2%
• Sib3: 29.2%
• Sib4: 12.5%

This land generates $120k of revenue per year from a land lease on a small frontage parcel, and some outdoor signs. Up until now, the lessors have written two checks per month, one to my Aunt (to her estate after she passed), and one to my Mother. The lessors are not willing to write four checks per month.

Our intent is to sell the land, though it could be several years due to depressed prices.

Unfortunately, none of the family members communicate well. I live in Texas, the land and all other parties are in Alabama.

Questions:

1. What normally happens in cases like this? What are our options?

2. Should I be concerned about liability protection if someone crashes their four wheeler on the land, or falls in a creek when hunting?

3. Should we form an LLC and transfer the land to the LLC? If so:

3a. What are the broad steps to form the LLC (file paper -> transfer the title?)?​

3b. How do we find someone to run the LLC (record revenue, distribute income to owners, pay taxes and insurance, handle misc affairs)?​

3c. What is a resonable amount to pay for this service?​

Thanks!

 

[tranquility]

1. What normally happens in cases like this? What are our options?

People talk and work out their problems so everyone can make money.

2. Should I be concerned about liability protection if someone crashes their four wheeler on the land, or falls in a creek when hunting?

Yes. More likely is someone dumps toxic waste on the property.

3. Should we form an LLC and transfer the land to the LLC? If so:

3a. What are the broad steps to form the LLC (file paper -> transfer the title?)?

3b. How do we find someone to run the LLC (record revenue, distribute income to owners, pay taxes and insurance, handle misc affairs)?

3c. What is a resonable amount to pay for this service?

Why? What are your goals?

We have a client who owns land on which there is a lease to a hotel and to a restaurant. He has a person run the hotel and handle the lease. He gives them a percentage. Negotiate the percentage for the work you want done.

 

[anon_user]

Thank you Tranquility.

I know that communication is important, but unfortunately, it will never be good. We've tried and failed multiple times.

Regarding the creation of an LLC, my thoughts were two-fold:

1. Personal asset liability protection; protect our retirement nest egg.

2. Serve as an eitity that will "operate" the land (receive income, pay expenses, pay profits to owners).​

Can we still have a third party perform the accounting and management of the land if we forego the LLC?

Do I just look up Property Management in the yellow pages? What's a fair fee?

Would it be reasonable for one of the siblings to act as the entity manager?

BTW, the land lease hotel is hands-off for us. It's a 50 year lease, the hotel operating company built and operates the hotel, their rent payments are always on time, and we have little need for interaction.

 

[tranquility]

1. Personal asset liability protection; protect our retirement nest egg.

2. Serve as an eitity that will "operate" the land (receive income, pay expenses, pay profits to owners).​

Better would be insurance. I don't see this as a high risk. But, you never know. It's just an expense. Land is often handled in a partnership too.

Can we still have a third party perform the accounting and management of the land if we forego the LLC?

Yes.

Do I just look up Property Management in the yellow pages? What's a fair fee?

Negotiate. Property managers alone tend to get 10% where I am. But, they are accounting for more renters.

Would it be reasonable for one of the siblings to act as the entity manager?

That's the way I'd do it, but if everyone does not get along, no.

 

[anon_user]

Thanks again, very helpful! To make sure I'm comprehending this correctly, some high level take aways:

• Form a partnership in the state of AL with the assistance of an attorney
• Open a bank account in the name of the partnership to be used to deposit revneue, pay expenses, and distrubute income
• Lessors will remit rent payments to the partnership
• Retain a CPA to receive the payments, pay taxes, and distribute income to the partners, and advise on tax treatment
• Consult with an insurance agent on additional personal coverage needed beyond current umbrella

Am I missing anything?

 

[tranquility]

Form a partnership in the state of AL with the assistance of an attorney

I did not recommend an entity. You need to make that decision after consultation with your advisors. (Both tax and legal.)

Consult with an insurance agent on additional personal coverage needed beyond current umbrella

Actually, I'd insure the property. That will be your biggest asset. As long as it is properly covered, your personal umbrella should cover your risk.