I am afraid it’s not going to work like this. My impression from reading some materials about retirement and inheritance planning that Vermögenszentrum keeps sending me (no guarantee):
first, depending on the marital financial regime of your parents, the inheritance for children might and most probably (default arrangement) will be due after the death of one parent.
the property will be valued when the inheritance is due.
if there is no inheritance contract (Erbvertrag) signed by all heirs and what you received (property) is valued more than what others receive, you are on a hook to pay the difference.
Will is not enough to go below the obligatory fraction of inheritance for children. Only inheritance contract can regulate it.
In worst case I am afraid that you are going to spend efforts to manage this property and when the inheritance is due, you will be obliged to pay other heirs an equal part of the property’s value, maybe even of the rental income.
I strongly suggest to have a clean and legally binding setup with this property.
Call me naïf. But is it really necessary to have expensive legal setup if all parties are in agreement? Of course, it all depends on:
Even as layperson I could write that all parties agree to this price as well as any valuation that might be performed at the time of death or inheritance. Also, there is a common understanding that any rental income is excluded from the inheritance.
Another thought: if all parties agree about the value of the property at the time of death/inheritance, there will be no official valuation of the property, correct?
I know it’s always a thin line between not overcomplicating and preparing for the worst case. In my personal experience, consultation by a notary is a reasonable middle ground.
They are in agreement now, but they might not be in agreement anymore if some of the siblings (or their spouses) wake up one day and realize that OP has beefed up the value of the property and now there is a 6 to 7 digits amount that they can have from it.
Another problem that I see is contradicting incentives for OP: the better they work on the property and improve its value, the more they will have to pay other heirs, who didn’t lift a finger, in the future.
Real estate + Inheritance + Different expectations from different parties = huge potential for a family conflict.
Sounds to me we are getting way off this case. There is no indication of such divergent valuation. Also, deliberately braking the law is probably not the topic here.
These are hypothesis. As explained by @Dr.PI the value taken into account is when parent deceases.
It may as well be the same or lower, but if it is higher, market value, it’s not right to say “hey we agreed it’s 1M 10 years ago so stick to 1M”.
If you set 3M real market value for the house and the total inheritance estate is 4M incl. the house and there are three children, it’s not right either.
I’m no legal specialist but, in my experience, it isn’t necessarily expensive.
We did one when my father, a lawyer, gave me a small vineyard as advanced inheritance. For that one:
I paid half the estimated value to my sister (we’re 2 siblings).
We signed a contract with all potential heirs (both my parents, my sister and I) that the transaction was settled so and would not give way to additional claims when the inheritance would actually be divided. That contract wasn’t notarized.
As land was handed down and it had to be notarized and written in the land registry, the advance inheritance itself was notarized. It made a reference to the contract signed on the side.
This year, my single mother is handing me down the proceeds of the sale of her chalet. As the advance inheritance is cash alone, the notary advised us that a contract between ourselves, if we wanted to make one, wouldn’t need to be notarized.
We signed a contract with all parties involved (my mother, sister and I) and no notary had to be involved. Cost us the price of paper, ink and the time spent on it but it makes things clearer for when the inheritance will actually happen.
In this case, since a real estate property is handed down, there will be a notary involved anyway. Asking for advice as to how to best handle the settlement between the parents and the siblings shouldn’t cost a lot. If a contract is signed between the potential heirs, it shouldn’t need to be notarized itself.
What if they lock in a price today, and by the time inheritance kicks in, the property has halved in value? Could be market conditions, could be neglect, whatever.
Would OP still owe siblings the agreed 1M on a house now worth 500K?
If the agreement is legally binding, yes. Which actually shows the legal setup protects everyone, not just the OP. Depending on which way the market moves, either side could end up on the wrong end of a vague gentleman’s agreement.
As my family and I were in an identical situation. Our approach was (simplified):
No legal “inheritance” or “pre-inheritance” of the property was involved directly
We determined the value of the property (in today’s value) where everyone agreed on (in case of disagreement we would have used the service of one/multiple RE estimator)
There were (equal) cash “pre-inheritances”, which were used to buy the property via a regular sell/buy transaction
We agreed on a preemption- & profit sharing stipulation in case of selling the property (max. 25 years into the future)
…
… in most of the steps there needs to be a notary involved and things needed to be stipulated by formal contracts.
at the moment I look at it this way: as I don’t expect to use the house for myself anytime soon (or ever), to take the house and take care of maintenance, renting, possible hassle etc is worth only, if the price is fixed and agreed now. so i take all the risk and potential on me. I dont see much motivation, to take good care of it and invest my money into maintenance and renovation to keep or rise its value. and then in 20 years, the effort “is used against me” during the regular inheritance. if that will be the case, i’d most likely not take the house and my parents should sell it. therefore I try to figure out, the best way to agree on that now with the familiy and very important, to avoid any conflict later
Then you should absolutely have a contract now that settles the terms of you getting that house now. By my understanding, the standard legal practice that will apply at the time of the actual splitting of the inheritance is to use the value of the house then (with probably some caveats regarding the investments you’ve made into it yourself and potentially the rents you’ve got from it).
Anybody could contest your agreement and, with time, it’s not even reliable to assume everybody will remember the agreement as it actually happened, let alone doing so while under the emotional duress of grieving a parent. People could have disagreements as to what was agreed to with everybody acting in good faith.
For the record, if what you want to do is to fix the price now, I would absolutely pay each sibling their share of the current value assessed for the home in cash. I would say anything short of that could legitimately be considered unfair by an unbiased person and could give way to disputes later on.
Of course, you would rather have the cash yourself so may consider that the deal wouldn’t be fair to you as you’d get real estate you don’t really want per se along with a bunch of debt while they do get cash. You may find a way to discuss this with your siblings in order to come to an agreement that seems fair to all of you. I would absolutely get it written down and signed by all parties, including both parents.
And there are so many stories where this was agreed and later one, siblings were unhappy with the deal they agreed on once house prices shot up higher than people expected.
Another case, I saw where funds were invested in the stock markets and some siblings withdrew it early. One left it in which grew to multiples of the original value and the other siblings wanted to go back and claim more as it was ‘unfair’.
I think like others have said, the safe way to handle this is that the parents give the house to all the siblings and then you buy them out. This way the house is fully settled in a future inheritance (and no questions about fairness) and this will never come back to haunt anyone.
i think that is in an overall view not very attractive. I would have much higher transfer tax than my parents. and i could imagine that taking the house and directly sell it could also upset the family. and still: then what would i owe my siblings? the sales price at the time of the sale, but payable at the time of the inheritance?
Nah, it’s sketchy, but that may be your exit plan anyway, maybe not straight away.
My 2 cents: managing real estate needs motivation and commitment. It looks more like you’re FOMO, but not really more motivated at heart than your siblings by the estate and investment itself.
As the value of all the assets are determined at the time of passing, IMO, there is no legal binding way to fix this now other then going a “cash(-equivalent) way” under today’s market price (e.g. sell/buy & buy out the other parties - end even this may be questioned later on!)
… and if there are other binding ways, I’m interested to know
To make things even more complex, by default in CH the children will already get 50% of the estate when 1 of the parents passes away, as i am unfortunaterly finding out with the passing of my wife.
this means, 50% of 50% of the house should be distributed when a single parent dies (the other 50% of 50% going to the other spouse, assuming both parents are on the house title). What I believe/hope/pray is the case, is that for minor children their share of the house is protected until they reach 18. Then I don’t know what happens .
Assuming all your sibling are/will be over 18 at the time a single parent passes away, then you will officially inherits the 1/3rd of 25% of the house. Only when both parents pass away will you receive 1/3rd of 100% of the house. Therefore, this create 2 events with 2 different valuations and twice the emotional + legal headache .
by far the simplest is just to sell the house. If there is no practical reason to have it, i.e. you wont live in it, then it will inevitably cause strife among siblings. Oral agreements wont necessarily be honoured, and legally might not have much legs to stand on. The probate judge will have a big say , e.g. the value is at the time of inheritance not today.
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