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FreeEagle -> RE: Rental property advice needed (7/5/2008 7:59:24 AM)
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First I would say that no mater what you do, make sure you have all of your plans laid out in a will or trust. Your will is your love letter to those you leave behind. I feel it's great when a parent can help their children with a home, but as you mentioned rent/sell / how do you rent /sell something their going to inherit.
I would first raise the question - Are the four children going to each receive 1/4 of the actual land or 1/4 the $ from the sell of the land? If actual land then they would have the right to move onto and live there themselves. If $, then they are obligated to sell, in order to actually receive.
The second question is - Is there a loan against the property? - if so upon your passing, this could force the sell of the property to pay the lender off. Which if sold this way could bring far less then it's real value.
My grandfather had 320 acres of farm land. Upon the marriage of his three kids, they were offered a chance to purchase one fourth of the land to start their own farm. My father and my uncle each took him up on the offer and each bought 80 acres. My aunt declined the offer, and moved on to another farm with her husband. So Grandpa kept the reminding 160 acres, even though he only farmed 80. Now I don't know all the details, but I think the land was appraised at the time of their marriage, Grandpa discounted the appraisal, and at some point they needed to take out a loan to purchase the land.
Fast forward 25 years. Within a few years after purchasing and building his farm my dad died from a fatal hunting accident. Mom lost (80 acres) the farm to the bank. When I was 18 or 19 my uncle filed papers to take legal guardianship over my Grandfather. Claiming Grandfather was not taking care of the farm and bills properly. By this time, we lived several hundred miles away, and my uncle was still neighbors to Grandpa. Now at this time Grandpas farm was paid for. He was still farming, so he had cattle feed and other general operation expenses. Based on my uncles testimony of my Grandfathers health, the court granted my uncle guardianship, without even having Grandpa there.
After the hearing, while we were visiting with Grandpa, he told us that my uncle had asked him to mortgage his farm (Grandpa's) because my uncles credit was bad. When Grandpa told him no, that's when my uncle came up with the stories of Grandpa not being able to take care of things. We came to the realization that the only reason my uncle wanted guardianship, was so he could mortgage Grandpa's farm to finance his own expense and desires. We began to contact an attorney to reverse the guardianship, and to get a will into place. A few days before our appointment, Grandpa passed away.
End result, a year and a half of probate, between the state and the attorney's they took half of Grandpa's estate, my aunt gave her share of inheritance to my uncle, and us 6 kids each received 1/6 of my dad's share. By state rules, it didn't go to mom, a will would have changed this.
Now back to your daughter. If you're renting the property to your daughter, do so with the same rules you'd have for a non family member, the amount may be less, but the rules should be the same. Should you decide to sell her the property, be sure to clearly what happens upon your passing, or in the event she divorces, or if something happens to her. Does her husband take over? And what if he remarries? It would be best if you sold them the property where they had paid you're asking price now. How would you feel about buying/renting a property, doing repairs and upkeep, only to divide it among your siblings? Put it all in writing.
As far as the money goes, it's all part of your estate - the kids can decide to pay off the house with their share, or continue to rent from the estate. Their rent would just be less their share of inheritance. On the other hand, you're own situation may change, and you might spend their inheritance, what's left is what it is.
If everything you own is in a trust, no one really owns anything, they just control it, upon you're passing there is no inheritance, just a transfer of the trustee (from yourself to your kids, or an appointed child). There by there is no tax paid, until the trustee's (all your kids) decide to sell something from the trust.
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