How to Divide Inherited Property Between Siblings

How to Divide Inherited Property Between Siblings

Inheriting a House with Siblings

Inheriting a house with siblings can initially seem to be a difficult situation. If a sibling wants to keep the inherited property while others want cash, the siblings will need a solution in order to have the value of the inherited property split between siblings. For inherited property with multiple owners, in a situation which one or more wants to sell the house and another wants to keep it, it is typically best solved with a sibling buyout loan. These loans are commonly known as trust loans or probate loans depending on the type of ownership of the inherited property.

Inherited Property Split Between Siblings the Easy Way

Traditional loan lenders such as banks, credit unions and other large institutional lenders are not able to make loans against real estate owned by an estate or irrevocable trust. Specialized trust and probate loan lenders can provide short-term loans secured by the inherited property. The short-term loan provides the estate or trust with the liquidity to help divide the interest in the inherited property between the siblings.

The loan proceeds from the lender go directly to the estate/trust bank account and then the funds can be distributed to the individuals who are essentially selling their interest in the inherited property to a sibling. The loan is secured against the inherited house. The inherited house can then be transferred directly to the sibling(s) who is keeping the house. Once transferred into the individual’s name, the owner can then go to a traditional lender and refinance into a long-term loan.

Trust and Probate Loan Lenders for Inherited Property

Trust and probate loan lenders are private or hard money lenders that specialize in short-term lending that uses real estate as collateral for the loan. Loans of up to 65-75% of the current value of the inherited property are typically available for terms of up to 12-24 months. The individual with the legal authority to act on behalf of the trust or estate will need to fill out application forms and a copy of the trust or probate letters will be required.

An application form will also be required from the individual(s) who will be owning the inherited property going forward. The lender will need to ensure that this individual has the financial strength to refinance the short-term trust/estate loan into a long-term traditional loan. Cash can also be used to payoff the trust/estate loan if available.

Determine the Value of the Inherited Property

The siblings will need to agree upon a value of the inherited property and then determine who is getting what. In some situations, the inheritance contains additional assets such cash, stocks, vehicles and various other assets.

If the siblings cannot agree on a specific price, the siblings can hire an appraiser to determine the value of the inherited property. Once everyone is on the same page, an application form can be completed and submitted to the trust/probate lender.

The information provided herein is for educational purposes only. North Coast Financial is not providing any legal, tax or financial advice.

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