Selling house may be best course for inherited property

Each Monday, Dan Danford answers a question from a reader in this space. If you have a question you'd like to see addressed, please post it in the comments section or e-mail the blog administrator Robyn Davis Sekula at robynsekula@sbcglobal.net.

QUESTION: My two sisters, two brothers and I will inherit a house in Minnesota from our uncle, who has no other heirs and is in a nursing home. My desire would be to sell it and for us to split the money.

However, my sisters want to keep it. None of us is wealthy. All of us are in our 50s and 60s, and three of us have children in college. No one lives near this property. None of us can afford to buy the others out. I think this property needs some repairs and will need upkeep, plus there will be taxes to pay and insurance every year. There is no debt on the property.

How do we rectify this situation? I do not want to dump money into a property I don’t want, but I don’t want to force the sale either. I was thinking of starting with an appraisal and thorough inspection report so we can see what we’re dealing with. Also, what kind of inheritance tax will we have to pay if we get the property?

ANSWER: First of all, there's no inheritance tax to any of you. If your uncle's estate is large enough, it may pay some taxes, but this inheritance is not taxable income to you or your siblings.

Now, for the other issue(s). If it helps, this scenario plays out daily within families. One reason to do estate planning is to avoid these situations with potential to cause strong discord between family members.

The challenge is that five brothers and sisters will rarely agree on an action plan. Nor should they, because they all have different situations at home. For those needing money, the house represents a financial windfall. For others, it represents an added and welcome luxury - one-fifth of a vacation home in a desirable location. How each sibling looks at this is determined by their own family and circumstance.

Unfortunately, there isn't a good solution that's likely to satisfy everyone. (That's why a well-intentioned gift often goes bad.) The fairest solution is to sell the property and distribute one-fifth of the proceeds to each sibling. For ones wanting it, they can use the proceeds to buy something similar for their family. If one or two siblings want to keep this house, they should buy out the others (again, at fair market value). If the house has good value, this could be done easily though a mortgage loan and payments. Those one-fifth shares could serve as their down payment. If they can't afford that, then keeping the house is not really an option, is it? As a last resort (no pun intended), someone could file a lawsuit and let a judge decide. In all likelihood, however, the judge is going to dictate a sale of the property and distribution of the proceeds.

No matter what, the notion of an appraisal and inspection is solid. You may also want to research what insurance costs, taxes and other services will cost you on the property each year, and find out if there is a market to rent the property. Semi-concrete numbers are necessary for decision-making. You can't really discuss the challenge without knowing the amounts of money involved. I'd encourage you to seek an amiable solution. Your uncle is trying to do a nice thing and it would be a shame to let it come between you.

Don't break the bank for vacations

On Mondays, we answer questions from readers about personal finance matters. This past week, we had a question from @sarahedale on Twitter. You can find us on Twitter @family_finances

QUESTION: What percentage of their income do most Americans spend on vacations per year? What do you think is appropriate or safe?

ANSWER FROM DAN DANFORD: Sarah, a recent Gallop poll found that almost 60 percent of Americans who usually take a family vacation are planning to downsize or cancel this year. Together, that's an estimated $30 billion drop in travel spending this summer. Tough for the industry, but generally good for families wanting to travel.

Rules of thumb aren't much help here. Families differ too much in terms of income, size, geographic region, and personal taste. One family's summer trip to a Minnesota fishing lake doesn't compare well to another's annual pilgrimage to Cape Cod or Aspen. And other families consider any vacation an extravagance. There's little common ground for good comparison.

Here's what I can say. Bargains abound. No matter your preference of time, place, or amenities, costs will be lower than any time in recent memory. Hotels, resorts, cabins, boats, airfares, car rentals, and even para sail rides will available for remarkable savings. It's a buyer's market for summer vacations.

A couple of suggestions. Look for bargain vacation packages assembled to lure travelers. Use credit cards for booking, but pay them off or use cash when buying. Any savings will vanish against high interest rates. Last, don't go if you don't have the money. Vacations are about good memories. Don't try to manufacture good memories out of bad times. First of all, it doesn't work very well. Second, the struggle to pay later could damage any good memories.

Believe me, vacations are about time together, not fancy destinations. You can have a lot of fun without spending a lot of money. Especially this summer.

Spring break shouldn't break the bank

We spend a lot of time on Twitter, giving out a daily financial tip. If you’d like to follow us, please do. We’re @family_finances. Here’s a series of tips we’ve given out on Twitter that all center around getting a good bargain on spring break. The tips began March 2 and are all marked with #springbreak.
1. If you’re planning a spring break trip, pay for as much as possible with debit versus credit. Most hotels will accept debit.
2. Ask hotels for a better rate when booking your spring break trip. Remember your AARP, AAA memberships.
3. Rental car prices are competitive. Comparison shop. Ask for discounts. Remember your AARP, AAA memberships.
4. Consider sharing a condo with friends rather than a single hotel room on spring break. Might be cheaper.
5. Your kids don’t need a fancy spring break trip to have fun. Simple joys work well for small kids.
6. Don’t even consider buying a timeshare. They’re almost impossible to sell and chances are, you won’t use it.
7. Choose flights at unusual times to save on airfare. Check both online and by phone for good prices and compare.
8. Trip insurance usually isn’t worth it. If you can’t afford to lose what you’re spending on the trip, you shouldn’t go.