How to approach an inheritance conversation

[Ifilikedthewayilook]

This sounds very dispassionate, so I’ll say first neither of my parents are in good health and my sister and I love each other very much and get on brilliantly.

My sister and I will inherit our parents property. It’s 3 bedrooms but small, needs significant upgrading but is in a good area with great schools, a few yards from the beach and has a big garden with off road space. It’s probably worth £120k as is. My sisters kids who are 12 and 6 years older than mine are either well on the property ladder or ready to move abroad. When my parents pass I would like to buy my sister out and sell the house to my son. I’ll hopefully be able to help with the deposit though he’s saving hard too. I couldn’t both buy her out and gift it and neither would I want to - he’ll pay his way. With upgrade that we could do with the help of professional builders and family skills he could increase the value significantly. The semi next door has sold for £200k with upgrade but half garden and no off road space.

Is it fair of me to try to buy my sister out at the current market price knowing the upgrades will increase the value? She’ll know this too. The family skills will come from my partner and my son’s dad rather than my sister. She can always refuse of course and I’d make sure she takes advice.

I think she’d probably love the idea of our childhood home remaining in the family for a while longer, knowing her kids weren’t potential buyers. But I want be fair and need objective views. Cheers

So your fathers will states it will be left to you and your sister, but your mum will live in it until she dies?

I was going to mention inheritance tax but I’ve re read things and if they only have a small amount of savings then it’s unlikely to matter.

I would wait until both your parents have passed to bring forward any discussions. Circumstances change all the time. Your son may not want to/be able to afford to live there.
Your sister may want to downsize and live there.
Half the population may be wiped out due to a zombie plague.

No one knows what tomorrow will bring.

If you are on good terms with your sister it should be an easy conversation. Be prepared for her to say she also has preferences of what happens with the house.

I used to work in the claims department of a life insurance company. Over the years I learnt that families deal with bad news and bereavement in very different ways.

We sometimes had the families ringing us up about the life insurance payment months before the person had died because they were trying to get everything in order, and wanted to know what we'd need.

Many times we had people ring us on the day of the death to get the ball rolling. But frequently there could be long delays. Sometimes there might even be months before we were told.

Death is a hard thing to face and without sounding po-faced, I learnt a lot about how different people handle things. It doesn't mean they're grabby or don't care. Quite often being practical is a coping mechanism.

I'm sorry about your dad's illness OP. I hope you're able to enjoy his remaining time together.

That’s right @MoppaSprings

I’ve no intention of speaking of this till mum passes, my sister and I are very close and sharing the physical and emotional of our parents ill health whilst trying to make the best of time left. I’m 50 this year and it’s a stock take time. I just want to be clear that morally my suggestion isn’t wrong. It’s just a suggestion and my sister and I are in this together.

Thanks @ExhaustedFlamingo. Just want to take him for a pie and a pint in a beer garden now. But he’s too ill. Immunotherapy was superb, pass that on as its relatively new. But covid has robbed us. He’s my hero and it’s breaking me

I'm sorry to hear about your father OP and hope you will be able to enjoy some time
together over the next few months.

If the house will be your mother's to stay in for her lifetime, there isn't really anything to discuss at the moment.

As and when you and your sister inherit, you can then both have a conversation. Any of your circumstances can change but neither of you can insist on one being able to buy the other out. That said, if you pay market price at the relevant time and you're on good terms, hopefully your sister wouldn't refuse to sell to you just for the sake of it. As others have said, all good news to pay is what it's worth at the time though of course clearly more inviting an option to your sister if you err on the generous side. If at the time agents say it's worth between, say, £240 and £260, your sister is more likely to feel happy if you pay £260 than offer £250 less the amount estate agents would pay.

Thanks @GU24Mum. Kind words and solid advice

I’m surprised to see anyone saying op should not be considering or discussing this. IME it is much better to start to mentally mull these things ahead of time. Bereavement is so so hard and it’s much better to have done some of the practical thinking and planning before that, even if only as a sketchy plan as op is doing.

As a culture we are poor at talking about death. We need to get to the point where these sort of conversations become ok and where everyone has a will, has considered powers of attorney to those they trust if they have those people in their life, advance decisions (living will) where they don’t want invasive treatments, discussed what they would want in the event of becoming very illl with their nearest and dearest.

But you'll be putting the work in and buying the materials, so the value after the upgrade is irrelevant as long as you get a fair valuation in its current state.

Isn't it possible it might have to be sold to pay for care anyway? It's a bit presumptuous to think you'll get it at the moment if both parents are alive but in poor health.

Oops...guilty of not reading the updates!

I agree @Foxhasbigsocks. I’ve seen the emotional burden on friends dealing with both the practical and the emotional aspects of parents’ death. When dad was diagnosed he got his will and POA sorted quickly with the intent of easing the burden on his wife and daughters. My sister is a MH nurse and is really struggling now to process dad’s condition alongside her day to day experience.

As my dad is, my son is also at a pivotal point in his life journey and so naturally my thoughts are also about supporting him as he makes his way in the world as it is now.

I don't know. Some of dh family have their eye on purchasing and renovating mil house. It's been 8 years since they first had the idea, leaves a bit of a sour taste I think. Your son might have different ideas in the future and if not looking for a market advantage then might as well look on the open market.

Sorry to hear about your dad OP.

I think it's ok to explore options between yourselves but with respect and not with your mum. Making arrangements when you're grieving is not the easiest so a bit of open thinking in advance is not necessarily a bad thing as long as it's done respectfully.

It all sounds like good thinking to me, op. I’m really sorry about the situation your family is facing and that your dsis is understandably finding it hard.

Based on the situation I saw unfolding (slightly different but some similarities) I would say the conversation around the house should contain/canvass the following points. I am a planner so I would go along with a list!

1. Before having the conversation get advice on tax implications etc of selling the house. Check out legal position on what’s appropriate around selling it to a family member.

1. Discuss with dsis the options - do up and sell, or sell as is. If this was my dsis I would be up front about does she want to do the work to do up or not given costs / potential profit. Does she want it / anyone else in her family want it?

1. Have a very open discussion around selling it to your ds - you would be open to doing that for the highest of three estate agent valuations in the interest of fairness

1. Also point out he will get a profit out of it if he does it up and roughly how much that will be. You yourself wouldn’t expect to get any of that profit, but is she ok with him profiting? He could only buy it if the whole family would be ok with the profit going to him and not being shared. Is she emotionally ok with the property remaining in the family but not being hers? Is she ok emotionally with him changing it?

I hope you don't mind me asking, but I don't understand how it is only your dad's house if they are married. Surely it is an asset belonging to them both and could be counted as such for care purposes? Otherwise wouldn't everyone just have homes in one name only to reduce this risk? Genuine question - it sounds like you have taken legal advice though and this is correct? I agree it's better to discuss these things before having to deal with the bereavement itself.

But @GoWalkabout I’ve not and will not mention this to my sister until my mum passes. I absolutely want my son to have market advantage but not at my sister’s and his cousins expense, only at mine.

A friend of mine who’s lost both parents invests in property and has said to my sister and I (pre dads illness) never to let the house go (or if we do, give her first refusal ). She had to apply to the court of protection repeatedly when her mum declined so she takes a practical approach. That was an abstract conversation and one that can be had adults knowing what’s to come down the line.

When mum and dad were arranging their POAs, they chose that friend to be the person to confirm they were of sound mind. Whilst not the role of that signatory, Dad said she was sensible, savvy and would advise my sister and I well.

I'm with you OP. Working this out now is pragmatic. It's not like you are plotting to inherit everything, you're asking advice on how to avoid drama and fall out in the future.
My parents and brother always discussed what would happen to my parents estate, starting over 20 years ago. It was agreed up front who would get what etc. I know it may sound bizarre and distasteful to some to talk about sharing the spoils. We're a practical family, and it was done to avoid misunderstanding and fall outs once they'd gone.
I plan to do the same.
I love how these threads draw out the 'it'll all go on care home fees' brigade. Currently 4% of the over 65 population are in one.

Such good advice @Foxhasbigsocks and exactly the guidance I was hoping for, thank you.

@Subordinateclause. Being married mum of course would always have had a claim on the house in the event her and dad split but legally she’s not the owner so it’s not and has never been her asset and can’t be taken into account in a care home scenario. That was accidental rather than deliberate. There is an issue with people transferring property to children for care home fee avoidance which can be viewed as “deliberate deprivation”. I can’t imagine anyone thinks putting a house in sole names at purchase purely to avoid care home fees years down the line is a sensible option.

I agree it's a conversation that needs to wait until after your dm passes. I know you say she's in poor health herself, but she may surprise you and live a fair while after your father goes, so a lot can change in that time.

There may be other conversations that need to be had first following losing your father - will she be able physically or emotionally to stay in the house on her own? I know when Dfil was widowed he couldn't bear to stay in the house he shared with his dwife - too many memories. It was their home since first married. Does the will make any provision for this?

I am sorry you're going through such a tough time at the moment - I am going through similar albeit with my DH, and sometimes there is comfort in taking refuge in practicalities.

Also good advice @ClashCityRocker. I’m sorry you and your husband are going through this

Please don't discuss this now, it's really not appropriate.

I bought my parents half of my grandad's house at probate value as they didn't want to wait for the considerable upgrading to go through.
My brother stayed in and therefore got more money than them.

Does your plan for your inheritance mean you won’t encourage them to maybe downsize or sell it go into supported housing?
It isn’t your property or your sisters! It’s theirs and they are still alive.
Think about their needs before you make plans for this inheritance.
I’m appalled by these types of conversation.
I hope when you are very old and not In good health you remember how heartless you were!

I’m discussing it with you @rookiemere. A randomer on the internet who doesn’t know me, my sister or my parents. For impartial advice.

I'd be surprised if it's only worth £120k if next door sold for £200k (assuming the neighbouring house is similar in style /layout). It's very unusual to be able to double the value of a house without significant building work (loft conversions, extensions etc.). Modernising will certainly add value but not that much.
I'd get it independently valued by 3 estate agents when the time comes and use those figures to agree a fair price with your sister.

I thought the same as @Subordinateclause
One of the many things that gets shouted on this site is get married so you cannot be just kicked out, if you divorce you could get half, if they die you don’t find yourself on the streets etc.