Inheriting a house with other beneficiaries, often siblings, and having disagreements about how to share or divide the property, can be challenging. It’s smart to get informed about your various options. You can share the inherited property by agreement, such as engaging in a joint venture that includes using the property during parts of the year while sharing in the profits of the rental of the property during other parts of the year, selling it on the open market and sharing the profit, or coming to a mediated agreement on valuing shares of the property to buy out one or more of the co-owner’s shares. Since the property is shared, it’s essential that the final resolution is a compromise that honors everyone involved, at least to some extent.   

When deciding how to split a house between beneficiaries, for this blog let’s assume they are siblings, the first thing you should do as a beneficiary is to consult the will or trust document. What percentage of the home have you been designated? Did the decedent leave instructions about whether to sell the home or keep it in the family? When specific instructions regarding the property are not provided in the decedent’s estate planning documents, the executor or trustee generally has the right to proceed with disposing of it as they see fit, as long as doing so would be in the best interests of the trust or estate. There is room here for mediated negotiations because although the executor or trustee may have a general right to proceed by exercising their own reasonable discretion, knowledge of the intent of the decedent regarding the property and being guided by that knowledge is required.

The Challenges of Inheriting Property with Siblings

While inheriting land with siblings is common, it is more common for siblings to jointly inherit a house, which complicates matters since physically dividing a house doesn’t make much sense if the siblings are not planning to reside in the house together. Some siblings may prefer to sell the home while others prefer to keep it in the family. When disagreements such as this arise, who has the right to decide what to do with the property at issue? Can a sibling be forced to remain an owner of a home they don’t want? If there is a decision to sell the property, do you have an agreement on a listing broker, an initial listing price, how to determine price increases or decreases, when to accept an offer, when to counter-offer, what contingencies to accept, etc.? What about having to share the cost of a repair, or staging the property for showings?

Mediation is particularly effective for matters like these. It allows siblings, spouses, and even grandchildren to have meaningful discussions about how to handle inherited properties. Mediation helps address old family conflicts and dynamics that resurface during such times. Deciding how to proceed with shared property brings up many complicated feelings, including disagreements about what the parents had intended for the home, differing attachments to the home based on memories made there, disparate financial situations that position some people to need or desire the income from selling or renting versus those who benefit more from an investment property or place to spend their vacations, and divergent values that pertain to the decision as to whether to use, rent, or sell the home. By providing a platform for transparent, structured, and confidential dialogue, mediation enables families to make informed decisions that everyone feels are fair.

Minimizing Conflict Through Mediation

Mediation offers a chance to discuss and resolve these conflicts without going to court. We have a client for an unrelated dispute who has managed to share a family cabin amicably for 25 years with his siblings by communicating well and establishing formal agreements about property use and maintenance. However, not all families are as fortunate. When this is the case, mediation provides a way to work through these issues, ensuring that everyone’s interests are considered and respected. For siblings, the goal is often to maintain amicable relationships, so it becomes particularly important to work through these disagreements in a way that maximizes the likelihood of preserving them. 

Mediators can help grown children relate to each other more easily. For families who have shared inherited property, mediators can assist in creating plans for using or co-owning a vacation home, establishing shared rights and responsibilities of ownership. They can also help families plan the distribution of personal property, which may involve coordination with family members who live far away or require additional resources for valuation and appropriate distribution. Mediation encourages families to avoid bitterness and move toward a more positive resolution.

Practical Strategies for Managing Inherited Properties

1. Share the House with a Formal Agreement: Establishing a partnership agreement is crucial when siblings inherit a shared property and want to keep it. This agreement should outline usage rules, maintenance responsibilities, future transfer options, and guest privileges to avoid conflicts. For example, it might specify how often each sibling can use the property, who takes priority during peak times, and whether the property can be rented out. Formalizing an operating agreement as soon as possible after inheriting the property can prevent future disputes. 

2. Structure a Buyout: In situations where one or some sibling prefers cash over ownership while one or more others do not, a buyout might be the best option. The siblings who want to keep the property can buy out the other's share. This helps to ensure that all parties are satisfied and reduces the risk of future conflicts.

3. Sell and Split the Profits: When none of the heirs want or feel they can keep the property, selling it and splitting the proceeds can be a straightforward solution. It is important to use best business practices, such as having the property professionally appraised and offering family members the right of first refusal at market value.

4. Rent and Split the Profits: If the siblings do not want to use the property but recognize its value, renting it out can be a profitable solution. Creating an LLC to hold the title and manage rental income through a property manager can simplify the process and ensure fair distribution of profits.

5. Combination Approach: Some siblings may be best suited for an agreement that combines aspects of the above strategies. This may involve, for example, renting out the home for certain months and splitting the remaining time among the heirs. Clear guidelines help siblings manage the property amicably and preserve family relationships.

Conclusion

Managing inherited properties can be complex and emotionally charged. Mediation provides a valuable tool for families to navigate these challenges respectfully, harmoniously, and with integrity. By adopting transparent, structured, and private strategies, families can minimize conflicts and preserve the memories associated with their inherited properties, regardless of whether they decide to keep it, rent it, or sell it. 

Consulting with other professionals, such as financial advisors, estate planners, and tax experts, can further ensure that the inherited property remains a source of joy and connection for the family if they choose to keep it, or that it provides enhanced financial stability or access to other important opportunities, such as education or travel. By negotiating mediated agreements, all parties are empowered to participate in determining a resolution together, rather than putting the decisions in the hands of a judge or arbitrator. What better way to honor the family legacy?