AIBU to think there should not be equal split

[Thinker03]

Ok so DH dad passed away 2 years ago. He owned a flat which he purchased with my DH and his sister, DH never lived there but was quite young when he was put on the mortgage purely to help his dad out. The sister always has and still does live in the house. When the dad was alive he paid his mortgage ALONE. No help from the sister on the mortgage or one of the other now adult siblings who occupies a room rent free.

For background info there's 5 Adult siblings including my DH.

When his dad died as house was joint tenancy it passed straight to DH and his sister. Despite the fact that there is 5 Adult siblings all together because they all have their own lives and "are so broke" DH and his sister have been going half on the mortgage. The plan is to sell when market improves asap.

So as not to drip feed info. DH and I have 2 kids we want to have more but canr yet as we are too stretched for money and too stressed. We have struggled to pay our bills our mortgage plus half of mortgage on Dads old house which is now technically DH and his sister house. DH has never lived in house. Also for added info we won't be going on holiday this year as we can no longer afford it. DH has been doing overtime at work.

By the way the dad always spoke about wanting his kids to split the house if anything happened to him but no he didn't have a will and couldn't of really stipulated such anyway due to the way the house was set up a long time ago. (Joint tenancy)

Other than the sister DH is going halves on mortgage with there is also an adult brother living in the house unemployed and rent free. As he is "Just trying to get on feet"

There are also 2 other siblings who have kids of their own and like I said "So broke" and have never offered to help pay the mortgage in light of our situation.

Recently they have been talks of the house being sold and the fairest way to split the house. There's been mention of an equal spilt between them all. AIBU to suggest that an equal spilt is no longer applicable since only DH and his sister have been paying the mortgage?

I agree with redasarose about the "fairest" way to split the proceeds

I think its perfectly reasonable for however much he and his sister have contributed to be taken before anything is split

This is the only way to do it and they need to sell now, not when the market improves.

Everyone is talking about inheritance and inheritance tax.

But from what has been described any transfer of proceeds would legally be a gift from the two siblings to their other siblings which could also have implications for the CGT liability. The house must be through probate so what will happen now is your DH and his Dsis honouring their fathers wishes by dividing the asset but legally it will be a gift from them not an inheritance.

This sounds like a v messy situation. I'm guessing the father needed the siblings names on the mortgage due to his age and saw it as a technicality but didn't realise the complexity of the legal situation. Agree with others you need specialist tax advise, but from a fairness POV I think calculate a rent amount for the last two years for the two siblings living in the house to be taken against their share, calculate the amount paid by the two siblings covering the mortgage, (I'd add on an interest amount to that to reflect what they could have earned if that money was invested elsewhere) take the amount owed off the sale price less fees, then split. Yes the sister has lived their rent free for years but while her father was paying all costs and it didn't affect anyone else I think that was his decision and really rent should only come due from after he passed away.

So: your DH and his DSIS have paid 1100 x 24 months each = 26,400.

Let's imagine a mates rates rent amount of 350/month each for the siblings living there- 350 x 24= 8,400.

And a sales price of 800 which minus outstanding mortgage fees etc leaves 700k.

So: DH and Dsis owed 26,400 leaving 647200 to split, plus the outstanding rent of 16800 = 664000/5 = 132,800.

This goes to the two siblings who haven't been involved.

132800 + 26400 = 159200 to your husband

That less 8400 to his sister- 150,800

And 132800 - 8400 to the unemployed brother, so 124,400.

That seems straightforward enough but the big issue is if there's a big CGT liability- is it fair your DH shoulders the entire burden of that, esp if it leaves him worse off than the sibling who lived rent free?

I agree with others the house needs to sold but you really need decent tax advice first

Sorry meant "Redastherose"

Those figures below won't be anything like that though will they? On a mortgage that 19 years down the line still has monthly payments of 2200?

I was going to say my solution was the same as redastherose. Having said that, I think any CGT the DH will owe should also be refunded to him, so that all siblings (including him) get the same after tax.

If it is a joint tenancy, inheritance doesn't apply as once FIL died the house belonged to your DH and SIL. DH and I have set our house up like this so if something happens to one of us the other doesn't have to deal with others trying to claim the house (quite possible with his family).

Your dh needs to get hold of all mortgage and conveyancing paperwork and get legal and financial advice to see where he stands, and then play hardball with his sister. There is going to be falling out over this regardless, best to get it over and done with.

You possibly need to have serious conversations with all siblings and explain that you can't afford the mortgage and if they are not prepared to contribute, when the time comes to sell you will not be in a financial position to split any proceeds, and they aren't legally entitled to a thing, any payment would be a goodwill gesture and your goodwill is rapidly running out with the financial pressures of two mortgages.

Yes, CGT should be paid before the devision. as your DH is actually the only one in hardship over this, the other are either living there, or just happy waiting with their hands held out.

This is a very messy situation, legally.

The PP have already covered a lot of the issues - but the core problem is that it sounds like the deceased father, DH and his sister purchased the property in a way which was always going to cause problems later down the line (I haven't spotted specific reasons why in the thread but I'm assuming so that the dad could get a mortgage?).

Then to top it all off, he expressed a wish for an equal share BUT the house was set up so that he actually doesn't have anything left to leave to his offspring.

There is a clear, legal, tax difference between your DH gifting part of the estate OP (after cap gains, inheritance tax, and debts, funeral costs), and the deceased father bequeathing something he owns/the other offspring automatically inheriting part of his estate.

Sorry to be blunt, but this is what happens when you purchase a property but don't bother to think about likely future events OR ensure that this is neatly reflected in the legalities.

It simply leaves heartache for your surviving kin to deal with after you're gone.

Personally, if I were the DH in this situation, I would force an immediate sale of the property with the sister - and consult impartial professionals as to the most optimal tax/probate steps involved. Let the dust settle from probate, debts, and taxes then decide what to do with the 50% share of the estate that is legally DH's.

I would strongly advise your DH kicks off both of those steps ASAP, and make it clear to his siblings that's what's happening - they could be just as clueless about the complexities of this from a legal/financial viewpoint so it needs to be spelt out to them. It doesn't rule out being gifted something down the line, but they shouldn't/cannot count on it as part of their late father's estate - it simply hasn't been set up for them to inherit anything.

OP you need to look at this as the proportion of the property rather than the value of what he paid in otherwise you are getting a very bad deal.

Eg. If at the time of purchase your dh put in a third of the deposit and then subsequently has paid half the mortgage, you would need to work out what the overall proportion of the property is. Pay an accountant to work it out if its too complicated. You should definitely not agree to only getting back the money you've put in as you absolutely could have invested that money elsewhere and got a higher return (eg through having a bigger house yourselves that appreciated in value or another btl property).

Personally I would be taking into account the fact that the sister has lived in the house rent free (technically in this situation she should have been paying a proportion in rent to your dh or the father) rather like you would in a housing association. It's all rather complex and I guess dh will have to discuss with his sister what is fair.

I don't think the other siblings can expect anything other than a share of the proportion of the initial deposit the father put in and any other contribution. E.g if he put in only 5% of the deposit and that 5% is now worth 30k they get 10k each before costs deducted.

As others mentioned anything they get is after the costs of selling it, taxes etc are taken off.

Why on earth these siblings truly believe it is fair to split 5 ways when two siblings have paid into the mortgage is unbelievable but I guess it suits them to think that's fair.

Also, to the posters saying that the OP's DH "should" gift whatever's left between siblings.. that:

1. Assumes that there IS something left after probate fees, taxes, debts are sorted. Likely, but not unheard of for secret debts to come back some time after someone's passed away (this has happened in my family, it was chased by a debt collector around 3 years after probate was granted - a small amount but still a debt!).

2. It assumes that the DH and his sister should have expected to shoulder all of the risk involved in owning the house. That surely isn't fair.
   Basement is flooded - would the other siblings have pitched in to pay a 5th of the repair bills? No.
   Negative equity - would the other siblings agree to pay a 5th of the outstanding amount due? No.
   Therefore why "should" they morally by gifted anything at all? You're instructing the DH and sister to accept the downsides of house co-ownership but the other siblings are just given the profits - WTF?

(And before anyone says: Dead father's wishes... they count for nowt as nothing to pass on in terms of the estate, no will, it's a moot point.)

I've been trying to work out what the CGT gain will be for DH. I think the gain will be [sale proceeds]/2 - ([original purchase cost]/3 + [value at death]/6 )

So if the sale proceeds after mortgage paid of were 700,000, original price 200,000, and the value (net of mortgage) at death was the same as now, that would give a gain of 517K he needs to pay tax on.

I guess this is one for someone who knows what they are talking about.

Assumes that there IS something left after probate fees, taxes, debts are sorted.

Look at previous posts, the house isn't part of the estate, it belongs to the DH and his sister with immediate effect from the father's death. Only the mortgage and CGT bill will reduce the DHs share.

There's quite a lot of brilliant points here and my apologies for not addressing them all individually as one of the posters mentioned the legal title is held jointly between DH and his sister so the flat wasn't part of probate and I don't think they meant to be clever by doing that, just ill advice when the mortgage was taken out. The flat was bought 17 years ago for just over 200.000

The only thing my DH has not considered is the Capital Gains and I agree that this should be deducted before any body receives their share.

Yes legally DH and his sister can split 50/50 as the flat is theirs however even though I'm angry I couldn't live with that either.

Based on previous posts it's probably morally right to split 5 ways after all fees capital gains and mortgage repayments paid by my DH plus interest are given back to him. Plus the extra for the risk of giving up his name for 17 years. Nothing to his sister back to his as she received the benefit of living there.

In reality I don't see my DH feeling confident about walking away with a bigger cut even though it will be his money back plus extra for the stress and inconvenience for fear of looking greedy but they think that of him anyway just because he wanted to sell.

We could apply to the court to order a sale I think the thought of paying solicitors and court fees on top of the mortgage payments was putting DH off because money has been so tight.

Thank you for the point about Capital Gains

Also thank you @babyworry2018 for your breakdown.

I have lots to talk about to DH this evening when he returns from his double shift this evening!

Hope this inspires those who don't have their affairs in order to get them in order!

Any suggestions by a lawyer regarding splits will only be based on a moral obligation anyway...

Once he tells his sister he can no longer afford it, it will have to be sold surely. or, he may have to move in & rent your house. might help with CGT, freeloader would have to go, & d sis will have to suck up sharing a 800K house she can't afford.

Sorry, my gain calculation was obviously bollocks, forgot to halve the sale price. Should have said gain of 167K. But I'm definitely not qualified to work this out anyway.

I also agree that Redastherose's suggestion would be the fairest, but it all depends on SIL and the non-paying BIL being prepared to sell and move out

Trouble is, that also depends on them being fair, and OP's posts suggest they'd prefer is to stay in the house while being subsidised by her DH. Even if it could be sold against SIL's will - and I've no idea if that's possible? - there's the question of whether she'd be present at viewings and perhaps in a position to put buyers off the place

I really hope it all works out, but overall I believe it will be surprising if everyone comes through this with relationships intact

Equal split would have to be after DH and sister have claimed their mortgage payments back.

CGT - I agree that this should be deducted before any body receives their share.

Of course you'd agree to that, as it's a cost of yours that you want other people to pay - why should the sister contribute anything to your DH's tax bill, it's her home? You can't argue on one side that the legal ownership is all that matters for dividing up, and then say that the CGT needs to be split.

I have just read somewhere that joint tenants can be liable to pay the balance of an inheritance tax bill if the estate doesn't/can't pay it's bill.

Even though the house isn't part of the estate,it looks like the fathers share does count as his asset for the purpose of calculating any inheritance tax.

Another one for the experts, I guess.

Of course you'd agree to that, as it's a cost of yours that you want other people to pay - why should the sister contribute anything to your DH's tax bill, it's her home?

I don't think anyone has suggested that the sister physically pay a penny to the DH.

The sister would not be contributing to his tax bill, she would be making a bigger gift to the other siblings out of her (bigger because no CGT) share of the proceeds.

I can see how stressful this is for you and your dh. No holidays, dh working overtime to pay the mortgage.
Solution - sell NOW! Get rid.
Legalities - 1/3 to dh, 1/3 to dsis, and the other 3rd divided equally between the 5 of you, which would have been fil share.

I’m sure you’re fed up of supporting deadwood bil too.

Force the sale through, if sil wants to stay she can buy your dhs and siblings share, and put her dB up.

We could apply to the court to order a sale I think the thought of paying solicitors and court fees on top of the mortgage payments was putting DH off because money has been so tight

This is understandable, but realistically, will SIL be prepared to move out any other way?

FWIW I think you're very generous to consider a moral obligation to people who are already calling your DH greedy just for wanting this resolved and his subsidy ended. I also agree with PPs who've said it's unlikely that any amount will be considered "enough"

Overall it's a crying shame that FIL didn't sort this out properly with a will. It's hardly the legal profession's fault if people don't access the advice they offer, but you can see why they make so much money out of exactly this sort of situation

JUST BLAME THE Taxman.
Tell SIL... You need to sell...