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It's not a tax question. I recently received an early

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It's not a tax...

It's not a tax question

Accountant's Assistant: The Accountant will know how to help. Please tell me more, so we can help you best.

I recently received an early inheritance from my parents in order to buy a house. They gave me $200k. This was put towards a house worth $750k. So, the $200k is about 26.6% of the total price. My parents intention was always that their assets would be divided equally between my brother and me. My brother has insisted though, that when my parents will is finally executed, he should receive not only $200k more than me, but also the appreciation on my $200k that is achieved through the value of my property rising. Basically he wants 26.6% of the value of my property, at the time the will is executed, to be taken out of the assets of the will. So if my property were to double in value, 26.6% would have doubled to $400k. If my parents leave behind $800k, then he takes $400k from that straight away, leaving $400k to be divided equally between us. Is this fair? i can see that the value of the initial $200k will have grown with the value of the house. But in order for me to access that I have to sell the house and buy a cheaper (smaller) one. Whereas he gets the cash to do with as he pleases. Like I said, is this fair, considering my parents wishes that everything is divided equally?

Accountant's Assistant: Is there anything else the Accountant should be aware of?

Not that I can think of right now

Submitted: 3 months ago.Category: Finance
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12/22/2017
Financial Professional: Chad EA, CFP ®, CERTIFIED FINANCIAL PLANNER TM, Professional replied 3 months ago
Chad EA, CFP ®
Chad EA, CFP ®, CERTIFIED FINANCIAL PLANNER TM, Professional
Category: Finance
Satisfied Customers: 2,140
Experience: Federally licensed IRS Enrolled Agent, Certified Financial Planner (R), MBA
Verified

Welcome to JustAnswer!

My name is***** will be able to assist you today.

If your parents already gave you $200K and you purchased a home in your name only, then the question of "fair," would be your question alone to answer.

___

When a life time gift is completed, such as the one your parents made to you for the home, the $200K becomes your sole property. You have no obligation to give your brother any amount, if you so choose.

___

If your parents, for example leave $800K behind then they should first, write clear written instructions on how they wish to have the $800k dispersed.

Any will may be contested. Therefore, I recommend your parents name beneficiaries to specific accounts and assets.

However, the $200K that your parents gave you during their lifetime will not be included in their final estate. The $200K is a completed gift to you and therefore you would be solely responsible to determine what is fair, if any amount is fair. Any amount you give your brother would be a gift from you to him and need to be reported to the IRS.

The increase or decreased value of the home would not be taken into consideration in settling the estate.

I am happy to expand on my answer or answer any follow up questions you may have.

Thank you!

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Customer reply replied 3 months ago
I think "fair" was the wrong word to use. I think "equal" would have been better. My parents will write into their will the formula my brother wants to use - that he gets 26.6% of the value of my property taken out of the will first, and the rest is divided equally. So I won't be giving him anything. What is concerning me is that he will get a large amount of cash to do with as he pleases, whereas I will have to sell my house in order to access that same amount. Meaning I would have to buy a cheaper house (assuming property value rises). From a financial point of view, is there a difference between cash and value tied into property?
Financial Professional: Chad EA, CFP ®, CERTIFIED FINANCIAL PLANNER TM, Professional replied 3 months ago

I understand fair and equal.

Once the property is yours, via a life time gift, the $200K or 26.6% of the home value really isn't your parents property to give away.

How they word the will under these circumstances will be subject to scrutiny and like any other will contestable.

continued....

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Financial Professional: Chad EA, CFP ®, CERTIFIED FINANCIAL PLANNER TM, Professional replied 3 months ago

There is a lot of other information to take into consideration. For example, if you did have to sell your home to pay your brother how would the transaction cost be handled?

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Financial Professional: Chad EA, CFP ®, CERTIFIED FINANCIAL PLANNER TM, Professional replied 3 months ago

From what you shared, you, your brother and parents should really sit down and confront this situation while your parents are still alive and able to address this is.

The very last thing you want to do is be in a court battle over your parents estate with your brother. At the end of the day a large chunk of your parents estate will go towards attorney fees.

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Financial Professional: Chad EA, CFP ®, CERTIFIED FINANCIAL PLANNER TM, Professional replied 3 months ago

The court will first look towards the will to determine what the intentions of your parents were and then apply state law, if the court can't decipher your parents true intentions.

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Financial Professional: Chad EA, CFP ®, CERTIFIED FINANCIAL PLANNER TM, Professional replied 3 months ago

In my experience, this situation is best handled with a frank conversation while taking into consideration all the cost.

It would be my opinion that a home also has cost associated with the up keep. Would cost such as this be factored into the 26.6%?

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Financial Professional: Chad EA, CFP ®, CERTIFIED FINANCIAL PLANNER TM, Professional replied 3 months ago

If you have no further questions please take a moment to rate and accept my answer by clicking on three stars or more.

A positive rating of 5 stars or more is always appreciated.

Thank you!

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