Inheriting a shared interest in Texas

[smutlydog]

Texas
So one sister and 2 brothers are inheriting a shared interest 1.2 million dollars PRE covide-19 market value. The property consist of ranch land and 3 houses. Most of it is ranch land. My father is still alive but wants to go forward with the transfer. We are seeing an attorney about this next week.
My sister is the executor of the will but I don't know how that applies since my father has decided to make the transfer before his death. She wants to sell when the market improves which I agree with, but we will almost certainly disagree on what constitutes a market improvement. She is a very difficult person and is already acting like she is the boss of the property.
My brother lives 150 miles from the property and says he wants to use the land for a weekend fun place for family dirt bike motorcycle riding. Right now the land is being leased to someone who raises cattle and hunts. I told him noisy dirt bikes cattle breading and hunting may not be a good mix. He said fine then when the lease expires it won't be renewed. He said that without asking me what my thoughts were.

So what are my rights? When the market improves I think the property should be sold because the way I see it doesn't individually belong to anyone of us.

 

[FlyingRon]

If he transfers it before he dies, it's not an inheritance. Your sister is NOT the executor. She may have that designation in his will, but until he dies AND the court approves her appointment, she has no legal status at all.

If you receive the property now, dad will need to file a gift tax return. Unless he's made many millions of dollars worth of gifts at this point, there won't be any actual tax due. However, unless he has significant additional resources, it's ill-advised to deed away property as it can end up biting him in that he can't force you to give it back, and it may disqualify him from certain resources such as Medicaid.

For you kids, it's a bad idea because if you receive it as a gift now, you will also get HIS basis. Presuming he's owned the property a good long time, this is probably pretty low compared to the current value. This will result in a SUBSTANTIAL capital gains tax liability when you sell the property. If you inherit it from him on his death, the basis will step up in value to the market value at the time of his death. This will result in very little tax liability for you.

You have NO rights now. It's your dad's property and his decision, but something as valuable as this, I'd suggest he talk to an attorney and express what HIS desires are and find out whether deeding it away now or putting it in his will or a trust would be a better solution.

If he does transfer it, you will be subject to the existing leases (so that may block you selling the property unless your buyer also is willing to accept those leases). If there ends up with several owners, then it becomes sticky to sell. It can be forced by a partition lawsuit, but that usually ends up not making anybody happy.

 

[smutlydog]

If he transfers it before he dies, it's not an inheritance. Your sister is NOT the executor. She may have that designation in his will, but until he dies AND the court approves her appointment, she has no legal status at all.

If you receive the property now, dad will need to file a gift tax return. Unless he's made many millions of dollars worth of gifts at this point, there won't be any actual tax due. However, unless he has significant additional resources, it's ill-advised to deed away property as it can end up biting him in that he can't force you to give it back, and it may disqualify him from certain resources such as Medicaid.

For you kids, it's a bad idea because if you receive it as a gift now, you will also get HIS basis. Presuming he's owned the property a good long time, this is probably pretty low compared to the current value. This will result in a SUBSTANTIAL capital gains tax liability when you sell the property. If you inherit it from him on his death, the basis will step up in value to the market value at the time of his death. This will result in very little tax liability for you.

You have NO rights now. It's your dad's property and his decision, but something as valuable as this, I'd suggest he talk to an attorney and express what HIS desires are and find out whether deeding it away now or putting it in his will or a trust would be a better solution.

If he does transfer it, you will be subject to the existing leases (so that may block you selling the property unless your buyer also is willing to accept those leases). If there ends up with several owners, then it becomes sticky to sell. It can be forced by a partition lawsuit, but that usually ends up not making anybody happy.

Thanks for advice. We will see what the attorney tells us. I think in the end a land partition might be my only recourse so that the land can be sold at fair market value. I will wait until the value goes back up but beyond that I don't want any business relationship with my brother or sister.

 

[FlyingRon]

Often in a partition action, the land sells for LESS than what might be considered a fair value had it been normally marketed for sale.

 

[TrustUser]

a well written trust specifies how things are to be handled, so that there are no arguments. that is especially important when assets are being shared. i would approach your dad with your concerns, so that he is aware of them, while he makes his final decisions. it is almost never a good idea for a parent to give property before he dies. the fact that he is wanting to do this, makes me think that he has not received any advice on it, up till now

 

[Zigner]

Before the virus, my suggestion would be for dad to sell the land and blow the proceeds in Vegas. The 3 children sound like greedy opportunists.

 

[quincy]

Before the virus, my suggestion would be for dad to sell the land and blow the proceeds in Vegas. The 3 children sound like greedy opportunists.

Smutleydog and his siblings apparently have been discussing the inheritance of their dad’s property for 15 years.

https://forum.freeadvice.com/threads/undivided-interest.293070/

It must make their dad feel special to know his children have long been anticipating his death.

 

[TrustUser]

if it is placed in trust, there are an almost endless number of options. if i am dad, and aware of the situation, i would probably do something to the following.

the property in question has been appraised for 1 million dollars on mm/dd/yyyy. a copy of the appraisal is in the trust folder, and a separate copy has been given to each of my 3 beneficiaries.

property shall be held in trust for at most 3 years after the death of the grantor. which at that time, the property will be sold, and proceeds distributed per the distribution set up in distribution section.

if at any time 2 or more of the beneficiaries wish to sell, it may be sold at that time.

this way there are no complications, no land partitions, and no way to really contest anything.

and the siblings do not need to have business contact with one another after the 3 years is up

hopefully this may stimulate some plan that is best for your situation

 

[smutlydog]

Smutleydog and his siblings apparently have been discussing the inheritance of their dad’s property for 15 years.

https://forum.freeadvice.com/threads/undivided-interest.293070/

It must make their dad feel special to know his children have long been anticipating his death.

This property has been in my family since the 1880s so everyone in the family and extended family anticipates owning ranch land. It makes more sense to discuss it. A 3-year trust sounds like a good idea and will head any disputes.

 

[smutlydog]

if it is placed in trust, there are an almost endless number of options. if i am dad, and aware of the situation, i would probably do something to the following.

the property in question has been appraised for 1 million dollars on mm/dd/yyyy. a copy of the appraisal is in the trust folder, and a separate copy has been given to each of my 3 beneficiaries.

property shall be held in trust for at most 3 years after the death of the grantor. which at that time, the property will be sold, and proceeds distributed per the distribution set up in distribution section.

if at any time 2 or more of the beneficiaries wish to sell, it may be sold at that time.

this way there are no complications, no land partitions, and no way to really contest anything.

and the siblings do not need to have business contact with one another after the 3 years is up

hopefully this may stimulate some plan that is best for your situation

That sounds like the best plan
thanks

 

[smutlydog]

a well written trust specifies how things are to be handled, so that there are no arguments. that is especially important when assets are being shared. i would approach your dad with your concerns, so that he is aware of them, while he makes his final decisions. it is almost never a good idea for a parent to give property before he dies. the fact that he is wanting to do this, makes me think that he has not received any advice on it, up till now

That was my mother's idea. I will bring that up when we meet with the attorney next week. I would rather no deal with all this right now anyway

 

[quincy]

That was my mother's idea. I will bring that up when we meet with the attorney next week. I would rather no deal with all this right now anyway

This property has been in my family since the 1880s so everyone in the family and extended family anticipates owning ranch land. It makes more sense to discuss it. A 3-year trust sounds like a good idea and will head any disputes.

Is your mother still alive? Is she currently married to your father?

Estate planning is important but, if your father is mentally competent, he is better off discussing his plans with his own attorney rather than with those who are looking to inherit what he owns.

A word on living trusts: They are not right for everyone and there are costs involved in administering them.

Here is a link to information from the Texas Law Help organization on estate planning and resources:
https://texaslawhelp.org/article/estate-planning-planning-who-gets-your-property

 

[t74]

If there is a question about the ability of the trustee/executor of the estate to follow the provisions in the trust or will, an external trustee/executor should be named. It will be cheaper to pay the fees involved than to pay to unscramble the mes
from someone that breaches his/her fiduciary duties.

 

[smutlydog]

Is your mother still alive? Is she currently married to your father?

Estate planning is important but, if your father is mentally competent, he is better off discussing his plans with his own attorney rather than with those who are looking to inherit what he owns.

A word on living trusts: They are not right for everyone and there are costs involved in administering them.

Here is a link to information from the Texas Law Help organization on estate planning and resources:
https://texaslawhelp.org/article/estate-planning-planning-who-gets-your-property

Yes my mother is currently married to my father. He is 89 and is competent but not as sharp he was just 2 years ago. He asked that I go with him to see an attorney, but I am probably going to say as little as possible. The one thing I will say to the attorney. "Count on their being disagreements on how and when the land will be sold so please advise my father how to reduce that possibility. " I am not trying to get the upper hand. I just don't want to be business partners with my brother and sister any longer than I have to. I want to use the money to purchase property in the city I live in and keep the tradition alive by willing it to my only son when I die. I already have 2 houses, so I will be leaving my son more than I received.

 

[LdiJ]

Yes my mother is currently married to my father. He is 89 and is competent but not as sharp he was just 2 years ago. He asked that I go with him to see an attorney, but I am probably going to say as little as possible. The one thing I will say to the attorney. "Count on their being disagreements on how and when the land will be sold so please advise my father how to reduce that possibility. " I am not trying to get the upper hand. I just don't want to be business partners with my brother and sister any longer than I have to. I want to use the money to purchase property in the city I live in and keep the tradition alive by willing it to my only son when I die. I already have 2 houses, so I will be leaving my son more than I received.

Just remember that the attorney that you speak to may not be familiar with the tax aspects of the matter and that is really huge for all of you. Let me just give you a quick example:

Lets say that your father's bases in the property is 100k. If he gifts it to you and it sells for 1.2 million, then that is 1.1 million dollars that they 3 of you have to pay tax on. That could possibly be over 250k in taxes. However, if you inherit the property you get a stepped up basis to FMV as of the date of his death, which mean, taking selling expenses into consideration, you could actually end up with a small capital loss for tax purposes instead of a capital gain, and therefore not only not have to pay any capital gains tax, but maybe get to take some loss against your other income.

That is a HUGE deal.