How do you divide up inherited real estate? This type of scenario can arise in a couple of different ways:
- It could be because you are doing estate planning and you want to tackle the question of what to do with the real estate head-on.
- It could be because someone who owned real estate passed away, leaving it to multiple heirs or beneficiaries. What if they have competing interests or different ideas about what to do with the property? That could create some problems.
There are several strategies to apportioning or dividing inherited real estate interests.
First, know that the inherited real estate can be sold and the proceeds divided. When the sale transaction is completed, the division of proceeds of the sale is very easy to do at the closing. Of course, factors such as the condition of the property, market conditions, and the economy as a whole can impact the sale.
If there are extensive real estate holdings, such as a large tract of land or multiple units that could be occupied or rented, then the real estate could be subdivided so that each heir would get a portion of the total portfolio.
Another option is for the heirs to continue to hold the real estate, and to apportion the income and expenses among themselves. This approach may make sense when the inherited real estate would produce a meaningful level of passive income.
Similarly, as in the case with a family vacation home, it may make sense for the heirs to continue to hold the real estate, and to apportion the use and upkeep of the property among themselves, as opposed to potential rental income.
Sometimes, however, one or more heirs wants to keep the property while others want to sell it. In that case, those who want to retain ownership can potentially buy the interest of those who want to sell.
If you find yourself addressing any of these scenarios, sign up for a strategy session with Windy City Legal and we can talk through the implications of each potential approach.