Might buy shared property, any wisdom?

[Richard]

The basic question is, do I want to try to buy into the farm?

Scenario:

Decades ago, my now father in law, his sister and his mother bought this farm. Mother died and left her 1/3 to my now father in law and his two sisters (one of which was NOT a part of original purchase).

All spouses have now died so current ownership is:

FIL 4/9 th’s (has 5 adult kids)
UIL 4/9 th’s (uncle in law, has 3 adult kids)
AIL 1/9 th (aunt in law has 4 adult kids)

They’re all in their mid 80’s and AIL is in final stages emphysema. Only the three houses (FIL, UIL and mine) are deeded separate from the farm, the rest of the land is common ownership. Once the “next generation” takes over, there will be 12 owners instead of today’s three. Above I say “kids”, ages range from 43 to low 50’s.

Farm is 250 acres on a lake and there is a developer who has been knocking on the door for 10 years trying to buy the land (under the radar I’m sure so “the market” doesn’t find out and he can nab it cheaply)

All parties are fine as far as finances go…except for AIL, she’s in assisted living and can use a cash infusion I’m sure. Then again, that’s one of my fears… the assisted living place will suck up all her newly found cash (should we buy her out)

There is a strong chance that when my FIL passes on, we might be forced to sell anyway because of estate taxes. Seems it depends on how farm is valued. (Been told by Attorney/CPA that land like this can be devalued as much as 30% max because of the multiple owners. That might save us.

I’d love to buy entire place but frankly, can’t swing a hit like that. If on the other hand, I can buy AIL out, we’d own about 25 acres and later in life, if we can get past estate taxes, wife will inherit another 22. Perhaps we can buy more later…

I guess one of my main questions is, just how dumb might it be to buy AIL out and perhaps, walk into this situation of multiple owners, possible estate tax situation and the ever present hawk developers bugging us?

I’ve tried to get FIL to put land into a trust, so far, no luck

All family kids get along and this was their childhood playground so I don’t THINK any would “force” a sale, but one never knows.

In a perfect world, I’d like to keep the land intact for many years to come, if for no other reason than this area is on the cusp of exploding in growth (on my side of lake).

Any thoughts are appreciated. This is outside my realm of experience (buying into common ground). I know there has to be some pitfalls, but I’ll have to decide since it’s family I’m dealing with, do the pitfalls outweigh the family ties.

 

[MarkV]

Wow Richard, that is going to be a lot of different personalities and agendas involved in one piece of property. From your past posts it sounds like the land is reaching a point with developers that it is going to have significant value. With twelve owners and only a couple of them living on the property it would seem like someone is going to want to sell which sure can get complicated if everyone does not agree.

Now if you could get the Aunts share and have the acreage resurveyed and deeded so the 25 acres around your house was solely yours that would be different. Of course that might well take away some of the development value in the long run. Tough call the way I see it.

MarkV

 

[RonR]

Richard, your post strikes a nerve with us. I hope your family issues turn out much better than ours..........

Grandpa was an a$$hole is about the nicest way to say it. He had two daughters and mentally abused them. Played one against the other. Actually told one (my current Mom-in-law) that he should have drowned her as he wanted a BOY to do work around the farm, which Mom did for years--driving tractors, working cattle, etc. The family was way disfunctional. No one trusted anyone.

Fortunately, Mom got out early, got her mind straight, and lead/leads a great life. She has NO good memories of the farm.

As grandpa aged, Mom was the close one to do all the DR runs, buying stuff, etc. Grandpa rewarded her with NOTHING.

Since grandpa didn't trust lawyers, he died without a will and with the farm & equipment ONLY in his name. The estate lawyer took about 6% of the total value of everything, so grandpa really messed up on that one!

Just prior to his death (cancer), he made Mom promise to keep the farm together. It consisted of two farmsted, one still with a house and outbuildings, the other in cultivation.

The other sister, who'd moved out of state, developed more of grandpa's tendencies of distrust, anger, resentment, etc. These two have 60+ years of bad baggage between them, and they've gone years without speaking to each other.

They each currently own an undivided 1/2 interest in this farm. Mom pays her half; Sister is always defaulting, dragging her feet, not wanting to keep the property up. The house & barn need new roofs big time--and sis won't kick in.

Mom's pushing to divide the property. She's still feeling guilt over the promise grandpa forced her into, but she figures she kept it together for 20 yrs, and now it's time to split it.

Of the four kids who will inherit it, only one wants the land, but the sis is being a continuing pain in the butt, so I'm sure it won't be divided until much later. By then, the beautiful farm house and outbuildings will be rubble...........

Sorry for the long rant, but it really bugs me--and I'm mostly an outsider on this, other than my wife keeps getting dragged into this stressful situation of that darned farm....................

I'd check with a good land attorney to see how you can put something together to keep transfer costs down and work it out to make the most people happy.

May your situation work out better.

Ron

 

[Richard]

RonR: All I can say is wow and I'm sad to hear that /forums/images/graemlins/frown.gif

Fortunately for me I guess, our "working base" is probably starting from a higher plane than your wifes grandfather left them.

I just don't get why people do/don't do some the things they do (like some of your examples) and furthermore, my own FIL who saw the estate attorney with me (along with uncle in law and his son...all at my expense) and they just left saying "ya, he brought up some good points and was a nice boy" ... not another word has been said about it, he's gone back to status quo and sticking his head in the dirt.

As a matter of record, if he chooses to sell, that's ok by me as it's his land. If he chooses NOT to sell, that's ok by me too. I just wish he'd decide and if he decides to keep it, then to make it as "transfer friendly" as he can so when his time comes, all the dirty work is done (my wife is his executrix so I'll be dealing with all this ultimately)

 

[kevincook]

Maybe I am just too sceptical but this sounds like a disaster waiting to happen. The simplest thing may be to subdivide the farm now with each current owner then owning their own piece. Good luck getting everyone to agree on how to subdivide the land. /forums/images/graemlins/crazy.gif

Somewhere along the line somebody is going to want to sell because they need the money for medial bills, college, etc. What if they sell their interest to somebody outside the family?

Good Luck,
Kevin

 

[fortyseven2n]

Richard,
I went through something along those lines myself.

This is a 50 acre tract where we are now building a house.

My Great Aunts died back in the early 1950's and the estate was never settled.

Mom and her sister each owned 1/3 and 1/30 share each , My Grandfather and his 2 brothers each owned 1/15 share each and a long lost cousin owned the other 1/15 share.

I made the same offer per acre to each of my relatives and was able to buy out all but one Uncle.He wanted more than everyone else.I think that it was just a case of bitter blood between some of them and had nothing to do with me.I just said to heck with him and sat on the land for 10 years.

One day my cousin called and said my Uncle wanted to settle up so I let him set the price and since it was resonable I bought his share as well.

Finally we tracked down the lost cousin and it turned out he was dead so I bought his share from his widow and finally we own the whole thing.

I still own a tract 50/50 with my Aunt and plan on buying her out after we get over the hump of building our house.

That just leaves one more piece to be settled up after that.

Mom and Dad owned a tract with a relative and wound up having to force a sale in order to settle it up.

Its called petition for partition.

You basically have to go before a judge and present an valid argument as to why a piece of land should be sold.If he agrees, then an auction sale is conducted on the courthouse steps.There is then 10 days after the sale that the bid can be upset and then you would have another auction sale and so on until no more upsets.

Gets the job done but with much potential for hard feelings.

Ron,since there are already bad feelings, this may be something to consider.

Either way I would recomend consulting a lawyer.

Good Luck !
Fortyseven2n

 

[CurlyDave]

In a perfect world, I’d like to keep the land intact for many years to come, if for no other reason than this area is on the cusp of exploding in growth (on my side of lake).

I would look on this from purely a financial standpoint. Sure, the land has emotional value also, but just look at the investment possibilities.

If it looks like you are going to get your investment back plus some return, go for it. If it looks like a losing proposition, sit on the sidelines.

Consult a lawyer first. You may may be surprised about some things. For instance, if something is not divisible, a single house for instance, even a minority owner can force the sale (or a buyout of his interest) of any jointly owned property. OTOH, this seems dividable. Maybe all an owner can do is force a division and then sell his/her piece.

If you could work out a solution where each owner got a piece you would end up with a fairly large area. If some owners then sell to developers this will only increase the value of the remaining undeveloped land.

In most states transfers between family members get special treatment, which might help on taxes, etc.

You will not have estate taxes on any part you buy. And, if your wife inherits part of the land, you will have estate taxes to deal with whether you buy part now or not. Estate taxes really are a separate consideration.

And, don't ever sell to a developer without putting the property on the market and seeing what the real value is.

 

[beenthere]

To answer your basic question, basically NO
The best scenario here will be a disaster, IMO and experience. The kids of the ailing owners are going to make a real mess of this.
My advice (not that it means a thing) would be to walk away from it at least in your mind and think about it as someone else's property and problem. Already there are too many 'shareholders' and their heirs, who can nix any sensible plan to dispose of this property to new owners.
The best scenario at the moment would be to put it up for sale, and divide the money among the shareholders so no one has an alterior interest. I doubt that will happen, as already there are too many to get to agree on one thing. Over time, it won't get any better.
If I was you, as soon as possible, I'd have an offer to purchase written up for my "25 acres" and hope that the present shareholders will all sign that offer, and then get a deed to the parcel free and clear. I doubt that will happen either, but it might be the only chance you have.
Regardless, this is a disaster waiting to happen, and the wisdom to avoid this disaster was passed up many years ago.
IMO. /forums/images/graemlins/wink.gif Good luck. At some point a third party will mediate the final dispersal, or it will go tax delinquent and the county will get it. /forums/images/graemlins/frown.gif

 

[Richard]

</font><font color="blue" class="small">( And, don't ever sell to a developer without putting the property on the market and seeing what the real value is. )</font>

As much as I admire & respect him, I do have to say... "if only I could get my father in law to understand that"

His feeling seems to be "well, if no one else is knocking on the door, they must not be interested in it"

My wife is trying to beat into his brain "Dad... they may not be knocking on the door because they may not know you might entertain selling it"

He is EXCLUSIVELY talking to a single entity about buying it and I think he's FINALLY "getting it" that the contra party might have vested reasons to NOT let word get out that discussions have gone on over the years (well DUHHH) I'm sure (sarcasim) they'd welcome some competition.

We on the other hand are trying to make him realize that if he decides to discuss selling it, he really needs to make it as public as possible.

I even mentioned to her (to mention to him) about possibly putting it up for some type of auction, sealed bid or other, subject of course, to his secret "minimum bid" of say, 10 million dollars. This way he can get public notice of interest of discussions AND get an idea of what "the market" might bring for it. Then he can decide if he wants to take the highest bidder or simply close this door.

I've also asked her why doesn't he develop it himself? That was his original intent. He can probably sell some of the backside of the farm as lots and use those proceeds to start funding other developement.

(the backside has about 1/2 mile of road frontage and could have numerous lots put on it)

The wife has asked me to build a shed and do some other things around the farm... she just doesn't realize that I'm NOT going to build anything (on someone elses land) that is in this state of disarray.

As far as looking at it from a financial perspective, I hate to sound greedy, but that is one clear reason I'm thinking this way. Indeed, as expensive as it may be, I might even entertain draining out my IRA account for additional capital if need be (though I highly doubt I'd do that, it would fly in the face of every conventional thought I've got)

Point being though, 40 years ago when he bought this, he bought 1,200 acres for $60,000.

Society has now caught up with us and are moving out our way. His 250 acres are worth at least 2 1/2 million. Split that by 4/9ths and he's got 1.1 million. Then you have capital gains...

Every year he can hold out is in my opinion, money in the bank. As far as I know, there is no single parcel on my side of the lake that is this large and owned by so few people. Furthermore THIS PLACE is about two parcels away and in my opinion, looking for us to be the next domino in it's path.

 

[riptides]

Wow!

Looks like your trying to be nice about this for all parties. Face it, reality is these are your in-laws. I doubt your going to be able to protect them for $$$'s coming at them.

I'd say try the buy out, hoping beyond hope that appropriate wills and estate planning has happened on your in-laws part.

It appears to me, that your one-step removed from the property, soon to be two (once the next-gen kicks in).

Any chance at powers of attorney?

-Mike Z.