My brother lives in our parents' house, which we will inherit 50/50. I want to keep it in the family for my children. How do I protect my interests?

Realize that the best time to sell a home is soon after you inherit it, to avoid capital gains tax. The problem is that my brother is single and currently lives in the house, and he may not want to sell his share right away. I would be happy to let him live in the house we have together.

I'm afraid he might decide to sell half of it and I'll have to take a financial hit, or he'll get married and live at home with his family, which could complicate things. How do I ensure my interests are protected at home while making sure my brother is doing the right thing?

Thank you very much.

Complex issues

Dear complicated,

Your last question is a good and rhetorical question. Your interests are actually Protected: You are entitled to 50% of this house, not 100%, as you rightly suggest. Inheriting a property with one childless sibling does not automatically give the childless sibling the right to full ownership, and/or obligates that sibling to sell their share to you. Real estate inheritance can cause discord between siblings. Not everyone understands this, as you seem to do.

You can do right by your brother by asking him what he He wants too. This appears to be the only house he has ever known, and one could argue that he has an equal – or even 50.1% – right to buy your house, given that you live elsewhere with your family. If he wishes to continue living there, it would be very generous and compassionate of you to allow him to do so. Many siblings insist on cashing out the money and file a quit claim to keep their siblings out of the family home.

You are right that the home will be transferred to you with a 'step-up basis' that is valued at the current value, not the purchase price, which reduces your capital gains tax if/when you sell. If the house is sold for $1 million, even though it was originally purchased for $500,000, you and your sibling will have to pay capital gains tax on the $500,000. If you decide to sell, you will pay long-term capital gains on the appreciation function – the inheritance.

Rite of passage scenario

However, there is no specific right or wrong way to resolve your family dilemma, except that you both navigate the process transparently and respectfully. If he lives in the house all his life, gets married and has children, it seems reasonable to maintain the status quo—that he continues to live there—but on one condition: he buys you out. You can ask him to do it anyway, but if he is not able to, he is counting on your generosity.

In the grand scheme of things, this is a normal rite of passage scenario. I've received letters from people whose siblings are “borrowing” hundreds of thousands of dollars from their parents with no intention of ever repaying it; Siblings who hid their father's will; And parents who may have been forced to put their son's name on the family home, much to the surprise and consternation of other family members. The list goes on.

What now? Scenario #1: He lives there as a single man, and you don't ask him to buy you out. That's very decent of you, all things considered – although you have the right to change your mind, buy it out or ask it to downsize. Scenario #2: He's starting a family and living there, and you ask him to buy you out. If he doesn't have the money, either sell him or buy him. that's fair. Scenario #3: You both have families and the money to buy each other out. You flip a coin.

Often times, leaving our egos, fears, and desires aside is the best option. Trying to make the case why we Deserve something more than the next person — a bad case of the old “do-re-mi-me-me-me” — can lead to more resentment and one-upmanship. It's not likely to end well. If you flip a coin for financial or family reasons, agree that the end result is the correct one, whether you like it or not: you win heads. Tails wins.

This house shouldn't be more important than your relationship.

You can email The Moneyist with any financial and ethical questions at qfottrell@marketwatch.com, and follow Quentin Fottrell on X, the platform formerly known as Twitter.

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