If you expect to inherit the family home from your parents, you’d be forgiven for only focusing on the upsides. But things can get very tricky if there are other siblings involved.

Below are a few avenues you might find yourself considering.

Selling the property

Some options might lead to more straightforward outcomes than others. The most obvious example might be selling the property and splitting the proceeds between you and your siblings.

This might be your first choice, or it might be a potential solution if you and your siblings can’t agree on what to do with the property and would rather wash your hands of it.

If you were all bequeathed an equal share, then the proceeds of the sale can be divided equally between you. If not, then the amount each person will be entitled to might correspond to their stake in the property.

Just keep in mind that your share of any capital gains from selling the property will have to be declared in your tax return. There are, however, some cases where you might be exempt from paying capital gains tax, such as if your parents acquired the property before 20 September 1985 and you and your siblings dispose of it within two years of inheriting it.¹ Before making any decisions, consider seeking professional tax advice so you’re clear on your obligations.

Renting the property out

There’s also the option of keeping the property as an investment. This will require a discussion about how rental income will be divided, as well as who will do the lion’s share of the work when it comes to liaising with real estate agents, attending strata meetings (if the property is an apartment), managing bills, and paying for maintenance and repairs.

Buying out your siblings

If your siblings want to put the property on the market but you find you’re still attached to it, then you might want to consider buying them out. Of course, your ability to do so will depend on your financial position, and if you don’t have the cash to buy their share outright, you’ll need to secure financing from a bank or lender.

You should also think about engaging a solicitor or conveyancer to help you navigate the legal aspects of the sale. What’s more, a valuation of the property will also need to be obtained. The market value will then be used to calculate how much stamp duty is payable on the property purchase (although there are some cases where full or partial exemptions might apply).

Private arrangement between siblings

If the above options don’t suit you and your siblings, you might be able to reach another type of agreement. For example, if one sibling wants to live in the property but isn’t in a position to purchase it from the others, you might agree to a rental arrangement. Just keep in mind that if you charge below market rate, there might be limits on how much you can negatively gear.

And if the property is a holiday home that you’re all intent on using, drawing up an accommodation schedule might help keep family harmony intact. This might, for example, involve alternating who stays at the property each year or having one sibling and their family agree to stay during off-peak periods.

Handling inheritance disputes

Sometimes, beneficiaries can’t decide what to do with an inherited property and it becomes necessary to involve the courts. Of course, this path can put a big emotional and financial strain on your relationship with your siblings, so all parties should do their best to arrive at some kind of resolution before letting things reach this point.

Problems can also arise when spouses or children have different ideas about what should be done with the property. So anyone inheriting a home should be vigilant for potential rifts, both within and between families.

At the end of the day, selling might turn out to be the least stressful option. Sharing a property can be complicated, and that’s before new generations of soon-to-be beneficiaries enter the picture. Ultimately, however, what you decide to do will depend on you and your family’s unique circumstances, as well as the input from lawyers, accountants and advisers.

Sources

1 ATO