As the Family passes on, how do we handle the homestead?

Numerous articles have been written addressing the boomers progression through life. I am a boomer so it always catches my attention. Lately it is hitting home more often than I would like but life marches on and we have to address it.

So what happens when the homestead becomes empty of your parents? One of you may still be at home (the care giver). How do you handle the distribution of the largest assets most parents have to give their children? How do we respect the considerable effort of the care giver and yet still be fair to all siblings? Everybody’s needs are different.

Yet this is a very difficulty time for your family, for most it will be the most difficulty time in your life. I have seen families torn apart buy this distribution. I have been blessed as the oldest of 13 children to have a sister that handled this perfectly. We are one happy, functional family 15 years after the passing or our last parent. I place all the credit on my sister Mary Lynn who handled that two year period of time with such attention to detail and communication.

Statistics say that bequests left annually to the nation’s baby-boom generation by their parents should approach 2.8 million this year increasing annually until they likely peak at 3.4 Million in 2015. This is according to a 1993 landmark study by Cornell University reserchers that projected the transfer of more than $11 Trillion between 1990 and 2040.

Although many children have settled elsewhere and saying goodbye to the old homestead can be wrenching for adult children.

Normally the first reaction is they want to keep the home , because they have this emotional response. Within a year they will take a more practical view of this decision. How do they handle the upkeep? The tax payments? The management of the rental?

What issues do you have to consider?

• Caregiver complications
• Preventing disputes
• Selling not an option
• What is the real value of the home
• What is the real cost to maintain
• What is the real cost to restore to 2005 expectations

Caregiver complications, how do you reward a family member who has devoted their previous months or years to supporting your parents? There is no one way, some families increase the value of the caregivers share while others feel they have been rewarded with the limited or non existent rent they have been paying over the years. You should take into consideration what that caregiver passed by in life to take care of you parents. Another way is to set up a Life Trust for the caregiver which provides him/her with a home to live in for their life. At the time of their death it returns to the other siblings and their heirs.

How do you prevent disputes that can disrupt a family for the rest of your lives?

It is always a good idea to get a professional appraisal of the property’s market value. This will establish the value (as of your parents death). This is important in evaluating the tax base for capital gains. Lets say the appraisal showed the property was worth $400,000.00. If you sold the property at that time you would owe no capital gains even if your parents only paid $40,000 for the property 30 years ago. Now, if you keep the property for a year and sell it for $500,000 you would owe capital gains on the $100,000 in value it gained that year. This is the reason for the appraisal. It also protects all siblings from any sense of fraud if one sibling buys the others out.

Some adult children never get to express how the homestead will be divided. They are sometimes disinherited intentionally (or not), when parents remarry after being widowed, a parent might leave the family home to their new spouse, without thinking that eventually the house will be left to the new spouse children and not theirs. With proper planning , a life estate could let the 2^nd spouse live out their years in the home, but it would still belong to the original siblings.

How do you hand the siblings that feel selling the home is not an option? This emotional response is not uncommon and will usually subside within a year, if the family can wait that long. If not get a fair evaluation of the home and offer that sibling the opportunity to purchase the home out right.

Who can assist in this evaluation? A Realtor can offer a Market Analysis and a review of the specific home to determine a fair sales price. An appraisal can be ordered by a licensed appraiser the difference there is Realtor usually work expecting you will list your home with them when you decide to sell it. The appraiser charges a fee for his work usually some where around $400.00. The appraiser looks at current history where a Realtor will project what the market is like today using history but also looking at the energy in the market itself. We sold a home for a family estate sale, they purchased an appraisal and then called us. The appraiser projected selling price should be $220,000. We projected a listing price of $235,000 knowing we had a hot market and we held multiple open house events that generated 7 offers 4 over asking price and it sold for $245,000. You do the math, I recommend that you get a third party professional document of the value of the home so there is no question among siblings, just realize many things impact the sale of a home.

Please email us if we can be of any assistance to your family.