Both of my Parents were school teachers and by 2024 they had both passed away. They had 4 children and all are still living in 2024. In 2000 one of the siblings had a home loan with the folks for about $170k and made payments of about $1k/month. The house payments were divided up and put into joint brokerage accounts (jtwros) for the 3 siblings that did not have house notes. After the folks had passed each sibling had accounts with about $135k.

The Sibling that had the house note says those 3 accounts should have been equally distributed to all four siblings.

What say ye?

Were any of the siblings joint owners of or beneficiaries on their respective investment accounts?

Is the house now completely paid for? Who has ownership of the house?

I misread the original post in more ways than one, but I am curious how this plays out for personal reasons.

permabull said:

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Edit: if they were joint accounts they should be transfered to the person who was the joint account holder and it's not part of probate.

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Winner winner chicken dinner.

The three accounts had the Parents names as joint owners with each siblings name as joint owners on the separate accounts. They were created as Joint Tenants with rights of survivorship (jtwros)

Was the mortgage a sweetheart deal for the sibling that bought the house?

Perhaps the parents thought that sibling was getting their reward in the form of a dirty cheap interest rate.
If they were paying a market interest rate, I could see the other siblings agreeing to split the funds, out of the goodness of their heart…if they choose…but otherwise not obligated.

DannyDuberstein said:

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Yep,
1) that $$$ stays with the joint owner. It is not part of the estate to be split
2) the note is an asset of the estate. whatever balance remains on the note is essentially divided among the 4 siblings unless there is some special terms in it to forgive it upon death (or the will deals with it by leaving it to the one sibling, etc). So congrats, 25% is now basically forgiven but still owe 75% of the balance to siblings.

This whole setup seems squirrelly and ripe for causing friction when the parent dies. Gets really dicey to entangle stuff this way even though I'm sure they had good intent. You really have to play out all of the legal and estate implications before doing this

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FYI - debt forgiveness is a taxable event to debtor. That would be a 1099-C that needs to issued to the debtor by the estate executor if any debt is actually forgiven. You really need experts involved when setting up things like this or you get all kinds of unintended consequences.

nm, misread

Since 2000, not 2020. So $290k + earnings = $400k

Yeah, brain fart and edited. Let me at least pretend it's still 2004…..

I would be curious as to the terms of the note. Interest rates did kind of suck in 2000 - 7ish%+. I know this because that is when we bought our first house. That said, they did drop decently not long after that. Or even if there was a rate. Given the parents approach, it seems like maybe it was a 0% interest kind of deal.

DannyDuberstein said:

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I would be curious as to the terms of the note. Interest rates did kind of suck in 2000 - 7ish%+. I know this because that is when we bought our first house. That said, they did drop decently not long after that. Or even if there was a rate. Given the parents approach, it seems like maybe it was a 0% interest kind of deal.

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and that 0% loan would be a gift (unreported and subject to gift tax). At a minimum, parties need to use the applicable federal rates when setting up these types of loans. Another reason to get some advice before doing things like this.

Here are the Oct 2024 AFR's, for example.

https://www.irs.gov/pub/irs-drop/rr-24-21.pdf

I'm a CPA so familiar. This thing is already enough of a mess that I wasn't even gonna go there in my response other than my initial advice on covering all the bases before people get tangled up in this kind of deal with and between kids. It's a shame how many families get sideways with each other from arrangements like this. Something about a road to somewhere being paved with good intentions

I initially misread the OP and thought the parents were paying $1000/month towards the house (which would explain them
Trying to even things out with the other siblings).

I had all the same questions about the terms of the loan, interest rate, is it paid off, who owned the loan (did the parents take out a third party loan and make payments of their own, or did they buy the house outright and the child just made payments to them), did the parents contribute anything to the purchase price (down payment, etc).

If the parents didn't subsidize or offset the purchase in any way and got all of their investment back plus whatever the interest was over the life of the loan (assuming it is paid in full), I don't really understand why they created the brokerage accounts for the three others.

But I also initially missed the jtwros. When I reread and saw that, I figured all those other questions were moot/irrelevant.

Which leads me to wonder why the one sibling is challenging the jtwros, and why anyone is giving it a credence. Seems pretty cut and dried and something the estate attorney could clear up really fast, unless heirs have a right to challenge jtwros.

If I were one of the three siblings, I might consider volunteering to split the account, depending on the answers to all those questions. But if it's not required legally, good luck getting all three to agree to that.

Quote:

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Another reason to get some advice before doing things like this.

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Better yet, just don't do things like this in the first place.

Putting your information into a home loan calculator I get the following:
170k loan in 2000 requires a 6% interest rate to hit a $1000 a month. 24 years in and still has a loan I assume its a 30 year loan.

Looking at the amortization charts, black sheep sibling owes the estate around 60k still and still has 6 years left on the loan.

That is not an insurmountable number, but if mom and dad's rest of the estate is worth at least 240k, just have the black sheep receive 60k less of an estate payout and be done with all of it. Black sheep sibling might stick their heals in and say they have the right to continue with the loan terms even beyond mom and dad's death. Most likely this will turn into he said she said.

Looks like black sheep of the family doesn't see this loan as a gift and clearly mom and dad do. They would not have been a hard money lender to anyone besides their own child.

Sounds like sibling #1 is being a greedy a-hole. Time to make sure that the house is actually in his name and that you don't own 1/4 of "his" house.

Major lesson here for anyone reading this…

Make sure you and any loved ones work with an experienced estate planner to make sure any stuff like this in your life is not left open to interpretation later on.

Just hoping for the best and that everything will work out after you pass away is a recipe for disaster.

Longtime Neighbor of mine just kicked over while working out at one of those extreme training places. He had been a regular there for years and was in great shape. Has two children (one at age of majority and one minor) and an ex-wife. Saw his sister the other day and learned he died intestate. Legal fees, court appointed executor, etc. are going to sop up a chunk of the estate and it is a mess with the ex-wife who has custody of the minor. Don't do this to those you leave behind. Sorry if sound a little aggressive in responses above but I am a little edgy about these situations right now (especially when minors are involved). The threshold for creating a valid will in TX is pretty low; some folks just don't want to deal with hard financial affairs until it is too late.

DannyDuberstein said:

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I can sympathize with black sheep to the extent that they've got a loan that they've been waiting paying back (with some measure of interest) while the siblings got a cumulatively equal gift. But that's how it was set up and it seems quite intentional. Not sure of the logic, but it is what it is

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Exactly. Not sure why it's evolved into the pearl-clutching and hand-wringing that it has but the survivorship accounts the parents set up are doing exactly what they were intended to do.

The only pearl clutching I can see is if the black sheep sibling finally got their credit together a few years in, and could've (painfully) converted this to a normal loan and refinanced to a lower rate, but mom and dad were against it because they liked the $1k a month and nearly $158k in interest paid out over the life of the loan.

But this how family and money can get complicated when mixed. Its usually a blend of comfortable co-dependency. Of all the disfunctions I've witness up and down mine and my wife's family tree, adult children getting help from mom and dad always satisfies some parental desire of having their adult children around vs gone like the rest of the adult children.

Family dynamics like this can be a mess and it only takes one adverse relationship (spiteful parent, train wreck kid) to break things down and make them extra complicated.

Then add the kid's spouses into the mix…..THAT'S where it gets gnarly.

Like the poster said a few comments earlier: meet with a professional that can help you think this out and THEN clearly communicate the plan to the appropriate people. Surprised like this seldom go well.

I was assuming a 15 year loan (so already paid off) at 0% would be 945 a month (close to a grand). I could see a parent wanted to step in to help a kid but not wanting to leave their other kids out and doing something like this. I would be interested to know if the sibling who agreed to the loan knew that is what their parents would do with the repayment.

We also don't know which sibling OP is so don't be too harsh.

My wife had an imbalanced inheritance with her sister based on a misunderstanding of the grandmother's. At first it caused a little bit of a strain with the sister because of the embarrassment, but at the end of the day it was the grandmother's money to do with what she wished and her sister had nothing to do with that decision so it's not a big deal anymore.

Glad to hear it. That sounds like your wife and her sister landed rationally and practically.

Most people don't act that way when it comes to money. Inheritances make people act differently and reveal certain aspects of character that often remain hidden from other family members until something like this brings that stuff to the surface.

Best story is the guy out in West Texas (just a country boy who got rich) who had sizable acreage and was pumping oil (and I guess NG, these days) off that land like no one's business. Needless to say, a very sizable estate and land holdings.

Married three times; kids by wife #1 and wife #2; wife number 3 was late comer and in it for the $$$. It appears there was a dodgy "best and final will" made with wife #3 under less than straightforward circumstances. All three tranches of family vehemently disliked the others, all had claims of "we were promised ______" and there was a special kind of hate for wife 3 by all.

This was in Loving County and the probate judge only showed up on Wednesdays at 2pm sharp (this was a true circuit judge). All these folks would have to tolerate each other out in the front of the court room (I am being generous in calling it that). Attorneys would come in from Dallas and Austin representing the different parties. Needless to say, the bills were extreme for each party to get their pound of flesh. I am guessing they pissed a good chunk of it away fighting each other.