Inheriting Family farm at a cost of $450k

[compostcowmanure]

I walk thru the scenario of my uncle taking out a loan of $450k to satisfy the will & suggest he'd have to put the farm up as collateral. Besides this he'd still have to show that his personal income could meet that criteria.
Now imagine that he has an illness or dies unexpectedly, in that case the bank will want their money or the farm is theirs unless my mom & oldest brother pay the note themselves.

 

[TripleR]

May be too late now, but we have our farms in an LLC with a TOD (Transfer on Death) to our children. It cost a bit in lawyer and accountant fees, but having actual fist fights over inheritance issues, we want to avoid as much strife as possible.

As to the present situation I would go with intent and not to the letter. We have a neighbor who went through this and now no one speaks to each other and one moved away.

 

[compostcowmanure]

If your uncle gave each of the other 2 relatives 12 acres each ($240000 at $20000/acre), he'd have 126 acres instead of 150 and owe nothing.
Doesn't sound too bad to me.

This is some very sound advice & precisely why I posted this question here.
It's doubtful that the attorney would have ever suggested this.

I'm 34 and though I might not possess life's experience & wisdom, I do know where to tap into it as needed which is extremely valuable.
Thanks to all thus far.

 

[Pine Strip]

I've watched a couple large family farm estate settlements in my area end with lasting family resentments, rarely do family members come out emotional unscathed.

 

[Rock knocker]

And the tax man will be right there with his hand out......

Maybe, maybe not. Liquidation may not affect the tax liabilities at all. And tax could be due on properties even if there was not a liquidation.

 

[newbury]

Kind of been there- done that.

On my wife's side of the family older aunts have been passing away. SWMBO is a real estate attorney. She handles the distribution of the estates.

Apparently, at least in that neck of the woods (NE Mississippi), the commonly accepted practice is to offer land to CLOSE relatives at up to approximately a 50% discount off "going" land values with the "understanding" it's to be kept "in the family". And usually inter-family loans are made to help finance purchases.

Otherwise setting it up as an LLC or splitting off land as suggested would seem the most fair, if the family was brought up to respect family and tradition.

From what the OP wrote basically Younger Uncle is getting 150 acres with a value of $3M. Older uncle and Mom get value of $800,000 land plus $200,000 each (total $1M each). So to be "fair" each should get about $1.6M BUT if you run it thru the taxman that would decrease significantly.

Also what is the "basis" for the value of the inheritance? Sometimes that is not present FMV.

As a total aside it seems land worth $4.5M should generate more than $40K/year.

 

[dave1949]

It pays to keep one's Will updated. It's too bad the grandfather had such good intentions, by the sounds of it, and it isn't turning out that way.

If your Mom and her sibling forgive Uncle Mike the $450K, is that legally a gift which would be taxable? I think the tax-free gift limit is $13K per year, or if your father is a joint owner, he and your Mom can give $13K each tax-free.

I think the first thing needed is an equitable family agreement, then a lawyer who knows how to implement that to avoid taxes. I'm sorry, but I can't agree with your Mom's concept that that is what the law demands. It was given to her and she can now do whatever she wants with it, including helping Uncle Mike out.

 

[brin]

And the tax man will be right there with his hand out......

:thumbsup:Tax man...exactly...and always follow the money...Money corrupts...sorry...so sorry to say, even in apparently close knit families....I feel sorry for the Uncle who has spent 20 some years caring for the deceased and is now being put in such a horrible position...with no appreciation for all the sacrifice he made....Not Good...

 

[Ted Summey]

The best thing is for the three siblings to go in a closed room alone and agree to an equitable settlement. When others who are not direct heirs named in the will are involved it makes a complicated matter worse.

The land shares of 12 acres each for the two siblings (from the one receiving he 150) sounds like the simplest and most fair solution. The brother with the 126 could lease that back for a small amount annually. But it is best if they can come to such an agreement together and agree that they abide by the decision.

 

[two_bit_score]

There's lots of real world advice to be found at TBN so that's why I'm posting my question here.

My mother & her two brothers are trying to sort out their inheritance and things are looking bleak for my one uncle.
Here's the will as far as I understand it:

My mother & her older brother are entitled to:
40 acres of farmland each + $200,000 each worth of financial investments.

The younger brother gets 150 acres of farmland which includes the house & barns. With him being responsible for paying my mom & other uncle the difference between the appraised 150 acre value & their total inheritence value.

All agree that nobody is ever going to sell their part to fulfill my Grandfathers wishes.

When the will was last revised 22 years back farm land value was around $1000/acre and not the $20,000 it is today.

So to get to the punchline, the youngest uncle is on the hook for paying the other two a total of $450,000 since his 150 acres is so valuable.
So he's about 5 years from retirement & has been dealt a whopping bill to pay his brother & sister for a home he was raised in & will never sell but rather would be leaving it to his nephews & niece since he doesn't have any children of his own.
In the long run I'd be one of them to inherit this but I can't believe how unfair this whole situation is for him.
My mother is loving & reasonable but feels she has her hands tied by the letter of the law(will). I try & remind her that they need to go by their parents original intention which didn't include hanging their youngest child with a huge bill.
Anyone else go thru something like this & how did you handle it?

By the way the entire farm brings in $40k annual income under its current land lease agreement.

I think this is pretty simple, actually, if inheritances ever are.

The young uncle should just agree on paper that the other two convey their property to him in exchange for his life estate and upon his death the entire parcel conveys to them and their heirs.

As long as all parties would agree I think some form of this would work. He would get access and lifetime control to the property w/o an out lay of a large sum and they would have the money already conveyed in the will.