Opinions needed on how to make things fair between my sister and myself wrt inheritance

[trixymalixy]

To cut a long story short basically my sister is getting part of her inheritance (£140k)early to buy my grandparent's house. At the moment I'm getting nothing but my parents are writing up a new will and want to make things fair between my sister and I when they die (hopefully a long long time in the future!!).

I'm looking for some opinions on how they could make things fair

surely it is up to them how they make it fair?

Yes it is up to them. They don't have to give either of us anything!!!

They want both my sister and I to be happy with it though as the last thing they want is for us to fall out over it.

Several options have been discussed, but I was looking for some independent ideas on how they could make it fair.

In our family, whatever money any of us children have "borrowed" is publically revealed. When my parents die the idea is supposed to be that anything that's left (my sister and I are encouraging them to spend a lot so there might not be much! ) gets split evenly between the children, minus whatever you've already had. So if there's 100 now, there's actually 100 plus say 20 I borrowed and the 20 my brother borrowed meaning there's 140, split between 3 of us would be 46 each. Obviously of my 46, I aleady have 20, so would only get 26 of what's "actually" there.

As the £140k will be worth a different amount by the time your parents die, they need to find a way to take that into consideration. I guess they could either give you a % of the value of their house (ie if their house is worth £280k, they would give you 50% of the value of the house) or they could give you £140k adjusted to take account of the rate of inflation in the years that pass between now and when they die.

First £140k goes to you, rest divided equally?

Could their solicitor suggest options?

Depends what assets there are!

One idea could be that your grandparents house is valued when the last of your parents dies, and based on that valuation, you are entitled to that amount?

But how great that everyone is discussing it and talking!

Hope you don't get your inheritance for a very long time as it sounds like a lovely family

Hopefully there should be enough assets as my parents have more than one property although with the way property prices are going at the moment there might not!!!

Ways that have been suggested so far are:

a) the amount we would have saved on our mortgage had we been given £140k now.

b) £140k rolled up by an appropriate index

c) a % of the value of my grandparent's house

d) a % of the value of our house.

ilovemydog we are a lovely family. Especially me who is allowing this to go ahead as my paren't said they wouldn't do it if I wasn't happy with it !!

All credits and debits go into a 'pot' and then divided up equally. So (unless you've had some dosh from them too) 140,000 would be subtracted from the value of the estate, the remainder would be divided by 2 (assuming just you and sis). Your sis would get that figure and you would get that figure plus 140,000.

Unless you are thinking about how much the house will increase in value by the time the will comes to be executed in which case it will get very difficult.

I don't think a straight £140k to me then the rest split equally would be very fair.

Think of how much £140k would buy you twenty years ago and how much it would buy now!!!

There definitely should be some inflationary adjustment.

Can your parents afford to give you that amount now (or a % of property worth that amount?) Or could you both share the grandparents' house? Then you have a level playing field.
It is tricky. You are nicer than me. My parents gave us an early 'inheritance' and were thinking of giving more to my brother as he had more 'need' (i.e. chose an insecure and poorly paid career) - I wasn't v happy about that so we all ended up with the same amount. Its so difficult trying to do anything else (imo).

I would say b would be the fairest, agree now to use either RPI, LPI or average house prices as a guide?

I think it will be very difficult to do this fairly.

DH parents paid off his brothers mortgage on the birth of his first child. My DH was told the same would be done for him. 20 years on and he is still waiting.

Apparently the will has been adjusted to compensate but he doesn't know the details. I doubt very much that it will work out evenly. Assuming after nursing home fees etc there is any money left, inheriting some money in middle age is not the same as having your mortgage paid off in your 20's.

Jac

Wow - this isn't as easy as it looks!

(c) option is really tricky as there are all sorts of variables. What if the house goes up in value above and beyond what your parents have left in the will? And god forbid, what if house prices don't increase? or rise and crash again? If you split any theoretical equity in your grandparents house, then it wouldn't really be your sister's house. Plus she may want to move etc.

(d) option is also a minefield. If you got the £140,000, then would this include interest? At what rate? What if mortgage tax relief is introduced?

It's almost an actuary formula!

SOme sort of allowance/recognition of the value of the £140,000.

The only really "fair" ie equal way of doing this is to give you £140k now too. Anything could happen in the future to make current arrangements "unequal" however much effort lawyers put into the detail now. If your parents live for another 20+ years who knows what the economic circumstances might be or what your family dynamics might be like.

would have to be he value of - then plus inflation surely.

My DF paid about £100k towards my DB's first flat some 6 or 7 years ago. He was a solicitor so should have known that it wasn't the most sensible equitable thing to do...he has drawn up various trusts etc...but the long and short of it is that when he dies (he is now 67 and in rude health) I will get £100k + interest out of the estate, and then the rest will be split 50/50. It isn't fair and could go pear shaped thinking about possibility of care costs and second wives...and when you think about house inflation in the past etc. However, it isn't worth a major family split. We're doing ok, although £100k would always come in handy. Ha ha. FYI DB and DH have very similar salaries, and SIL doesn't work at the mo, but has the potential to earn same as me.

They can't afford to give me £140k now unfortunately.

I agree fatjac that inheriting the same amount in middle age won't take into account the extra quality of life we could have had having been given the same amount now.

LOL ilovemydogs, I am an actuary!!

I agree with jelliebelly actually - which is why that's the solution we ended up with. Uplifting formulas would be a bit of a minefield as you would have to agree on what basis, and things can change such as the govnt changing the basis of the RPI etc etc.
How old are your parents? Why can't they just give you and your sister an equal amount now?

If they can't afford to give you both £140k, can they give you each £70k?
i really do believe that is the only fair way. Or, if you really really don't mind, you will have to accept that there isn't really a way of compensating you adequately.

The only reason my parents are giving my sister her inheritance early is to keep my grandparent's house in the family. This wouldn't be happening for them to buy any house.

If they gave us £70k each then my sister couldn't afford the house.

It is also the reason that I am fairly happy about it as the house is a pretty special house.

Oh! I feel better knowing you are an actuary!

What about your grandparent's house being bought in both names - yours and your sisters? You could be tenants in common whereby percentage of the house could be assigned based on the £140,000 and the market value?

I suppose the difficult thing is what if there's no money when your parents die? Eg, if they both need nursing home care.

How do you think you'll feel if that happens? Would giving you an interest in your gp's house (but how that would work in practice god only knows..) be an option?

the fairest wa is obviously to sell the house and give you both half

personally I hate all this having your inheritance early

it doesn't take into account future circumstances like what if your parents need a great deal of expensive care in their old age but all their inheritance has been given to you

oh bookthief got there first

This is really hard.
Here's an example from my (distant) family: 5 children, 1 takes inheritance early in order to buy house (at the time when the 'family' house was sold and mother moved to a littler place). Years go by. Mother gets frailer, moves into a care home. Care home fees hideous - and hang on, say the other four, our inheritance is now being used to pay the care home fees while DC with house effectively isn't contributing at all. Mother was in a home for several years, by which time a LOT of the money had been used.
There were other family troubles too, but this certainly made things complicated. DC with house was generally pushing for mother to be as comfortable as possible, in as much luxury as possible; others were (unhappily, guiltily) feeling damn it, it's easy for you, you aren't paying for this!
I'm sure it won't happen the same way, but oh dear, it's a minefield...