What Happens When a Beneficiary Is Living In an Inherited House?

Inheriting real estate with other people can be challenging, particularly when one of the beneficiaries is living in the house owned by a deceased loved one. This scenario commonly occurs when siblings jointly inherit their parent’s home and one of the siblings is living in the home—this situation can lead to increased family tensions during an already emotional time.

It is always preferable for siblings to work out an arrangement that all of the beneficiaries agree with, such as a buyout agreement. However, under California law, if the siblings can’t agree and any of the siblings want to sell the house they inherited, they can use a legal proceeding known as a “partition action” to force the sale.

What Happens When One Sibling Lives In an Inherited Property and Refuses to Sell?

When one sibling lives in an inherited property and refuses to sell when the other siblings want to, there are several options for solving the dispute. For example, if the sibling living in the home has the financial means to do so, they could buy out the other siblings’ shares of the property. 

Ideally, the best option is for all siblings to come to a mutual agreement that allows for either the beneficiary to remain in the home through a compromise or by buying out the other shares of the property. Seeking a mutual agreement through open communication and negotiation is often the best way to avoid lengthy legal disputes while maintaining family relationships.

However, if the beneficiaries cannot agree on how to handle the situation, the siblings who want to sell can force its sale through a partition action.

What Is a Partition Action?

A partition action is a legal proceeding that allows a co-owner of a property to get a court order either (1) to sell the property; or (2) dividing the property into separate parcels for each owner, if possible. Since residential homes can rarely be apportioned like this, the most common outcome in these situations is that the court orders the property to be sold and the proceeds to be divided among all co-owners – importantly after the petitioning party’s fees and costs are paid. 

This means that the siblings that want to sell an inherited property can typically force its sale, even over the objections of the sibling who lives in and wants to keep the home. 

California Law Provision for Unresolved Disputes

Unresolved property inheritance disputes in California may be subject to the Partition of Real Property Act, passed in 2022, which is a law in place to prevent a forced sale of a property. Under this act, co-owners of the property, in this case beneficiaries, have the right to sell their own shares or buy out the other shares of the property.

If none of the beneficiaries exercise their right to purchase the shares of the other parties, then the court will order a partition of the property either by sale or in kind. A partition by sale will cause the house to go on the market with the proceeds received from the sale going to the beneficiaries.

A partition in kind results in the property being divided into distinct, separately titled parcels. However, because homes are often not capable of being divided into parcels, a partition by sale is the most common result.

As noted above, partition actions are one of the specific situations in which California permits the recovery of attorneys’ fees by the petitioning party.

Texas Law Provision for Unresolved Disputes

Texas law surrounding unresolved disputes is similar and is covered under the Uniform Partition of Heirs’ Property Act under Title 4, Chapter 23A. As in California, if the beneficiaries cannot come to an agreement, and none of the beneficiaries opt to purchase the others’ shares, the court may order a partition of the property by sale or in kind.

What Are the Legal Rights and Obligations of Siblings Regarding Property?

If siblings inherit a property together, they each have designated rights to the property. If the siblings own equal shares of a property, then they are known as either joint tenants or tenants-in-common.

As co-owners of the property, each sibling has a right to reside on and use the property. Under the Partition of Real Property Act, siblings also have the legal right to sell their share of the inherited property at any point.

In addition to these rights, property owners also have several responsibilities for preserving the property. For example, all beneficiaries have a responsibility to pay for any outstanding mortgage left on the home—not paying the mortgage could result in foreclosure on the property.

Depending on how siblings decide to distribute inherited property among them, as property owners, they will also be responsible for the upkeep and maintenance of the property. The beneficiary who remains in the home typically has a responsibility to maintain the property’s condition, but this also depends on any agreements between beneficiaries regarding how to manage the property.

That said, if a sibling refuses to cooperate or comply with the decisions of other co-owners regarding the property, the other property owners have a right to seek legal action with the support of an experienced attorney. For example, if a sibling residing on the property refuses to pay rent or their share of a mortgage, the other siblings may pursue a partition action or eviction of the sibling not upholding their end of the agreement.

Financial Responsibilities of the Beneficiary Residing in the Inherited Property

If a beneficiary remains in the inherited property through an agreement with their siblings, they do have certain responsibilities. Typically, the beneficiary who lives in the home will absorb all of the financial costs associated with doing so.

Financial responsibilities include:

• Property taxes – Once the probate process is settled, the beneficiary living in the home will often be responsible for paying the property taxes associated with owning the property unless otherwise discussed by the other beneficiaries.
• Mortgage – The beneficiary must continue to pay any existing mortgage payments on the home to avoid foreclosure.
• Utilities – The beneficiary residing in the home should pay any utility bills associated with the house since they will be occupying the space.
• Homeowners insurance – When the original owner of the home passes away, the insurance should be rewritten with the beneficiary’s name on the policy to ensure the property is covered against risk.
• Maintenance – The beneficiary will become responsible for all maintenance costs with the home, like yardwork, HVAC maintenance, pest prevention, and more.

These financial responsibilities may be a topic of discussion during the negotiation process between the other beneficiaries. For example, if siblings agree to maintain co-ownership and rent out the property to another sibling, then they may work together to pay the property taxes and mortgage payments rather than place the responsibility solely on the sibling living in the house.

Can I Buy Out My Siblings From an Inherited House?

Yes, if you and your siblings inherit a house together, you can buy them out if all siblings agree. Even if your siblings have already filed a partition action, there is still time to reach a settlement agreement. 

The fact that a partition action has been initiated does not mean that the forced sale of the inherited house is inevitable, as long as you and your siblings can come to an agreement. The most common settlement scenario is where the sibling who wants to keep the house buys out the siblings who want to sell it.

A beneficiary can buy out a property either through financial means or through exchanging shares of other inherited assets for full ownership of the property. Pursuing negotiation and mediation methods is usually the best option for reaching an amicable agreement.

Alternative Resolution Arrangements in Property Inheritance Disputes

If a full buyout of a property is not a possibility, siblings can pursue alternative arrangements such as renting the property to the sibling living there or allowing the sibling to keep the home in exchange for their share of other estate property. In some situations, it may be acceptable to all the beneficiaries for the sibling who wants to keep the property to purchase their shares through a payment plan. There are as many solutions as you and your siblings’ creativity permits.

Some alternative arrangements for property inheritance disputes include:

• Renting the property to the other party – Co-owners of the property may allow the beneficiary to continue living in the home in exchange for paying rent.
• Exchange of property shares for other estate assets – If a beneficiary would like to remain in the property, they may be able to offer other estate assets they inherit to other beneficiaries in return for full share of the property.
• Payment plans for a buyout – If an initial buyout of a property is not financially feasible, then the parties may be able to reach an agreement where the sibling who wants to keep the property to purchase their shares through a payment plan.

Siblings & Property Issues in Action

To understand the potential complexities that could arise when siblings have disagreements over property inheritance, we’ll examine the following hypothetical scenario. This example may highlight potential challenges as well as possible legal mechanisms and outcomes. Remember that every case is unique, so it’s important to consult with an experienced trust litigation attorney to determine the best course of action for your situation.

The Smith family had a trust established by the late patriarch, Jason Smith. The trust included several assets, the most significant of which was a valuable family home in Brentwood. Jason designated his oldest son, Thomas, as the trustee. The beneficiaries of the trust were Jason’s four children: Thomas, Brianna, Beau, and Bella.

Upon Jason’s passing, the trust assets needed to be distributed. The trust did not specify how the family home should be handled. This ambiguity led to a disagreement among the beneficiaries. Bella wanted to live in the house and keep it within the family, while Brianna, Beau, and Thomas wanted to be bought out of their shares of the house.

Bella agreed to buy out her siblings, but disagreements arose over the valuation of the house. Bella believed the house was worth $800,000, while Brianna, Beau, and Thomas insisted it was worth $1,200,000 based on a recent appraisal.

As the trustee, Thomas had to mediate the disagreement. Bella argued that the house had sentimental value and needed repairs, which she was willing to oversee. She offered $200,000 to each sibling for their shares. On the other hand, Brianna, Beau, and Thomas wanted a fair market value payout of $300,000 each, based on the appraisal.

During the negotiation process, Bella moved into the house without paying rent, claiming she was taking care of it and making necessary repairs. This led to further conflict. Brianna, Beau, and Thomas argued that Bella should pay fair market rent for the time she occupied the house, while Bella claimed that her efforts in maintaining and repairing the house offset any rental value.

The situation escalated when Thomas, as trustee, was accused of not acting impartially. Bella claimed that Thomas favored the higher valuation to increase his own payout, while Brianna and Beau accused Thomas of failing to collect rent payments from Bella, thereby depleting the trust’s assets.

Frustrated by the lack of resolution, Brianna and Beau decided to consult an attorney. They filed a lawsuit against Thomas for breach of fiduciary duty and against Bella for unpaid rent.

The court evaluated the actions of all parties. It found that Thomas did not act impartially and failed to resolve the valuation and rent issues equitably. The court recognized Bella’s efforts in maintaining the house but also acknowledged the need for her to compensate the trust for unpaid rent.

The court ordered an independent appraisal of the house to determine its fair market value. Bella was required to pay fair market rent for the time she occupied the house. Additionally, Bella was given the option to either buy out her siblings at the appraised value or agree to sell the house and distribute the proceeds equally.

Thomas was removed as trustee for failing to act impartially. A professional fiduciary was appointed to oversee the trust’s distribution. Bella was given a deadline to buy out her siblings at the newly appraised value or agree to sell the house. Brianna, Beau, and Thomas received fair compensation for their shares and unpaid rent from Bella’s occupancy.

In this scenario, the Smith siblings faced a complex inheritance conflict. Thomas’ failure to act impartially as trustee and Bella’s unpaid rent obligations led to legal action. The court’s intervention ensured a fair resolution, emphasizing the importance of impartiality and proper fiduciary conduct in trust management.

When Should You Consult an Attorney?

If you are involved in a dispute with your siblings regarding whether to sell a jointly-inherited property, you should discuss your situation with an experienced partition action attorney sooner rather than later. Regardless of whether you want to keep the house or sell it, the earlier you involve a probate litigation lawyer, the better. 

Not only can an attorney help you file or defend a partition action in court, but if you speak to a lawyer quickly enough, they can help you negotiate a settlement agreement that allows you to avoid court altogether, as well as the financial and emotional costs associated with litigation. 

Resolve Inherited Property Disputes Amicably

If you are involved in an inheritance dispute with another beneficiary, you may be able to resolve the dispute through mediation and negotiation. In any case, it’s a good idea to consult an experienced probate litigation lawyer, who can serve as a valuable resource in negotiations and support you in court if necessary.

Our attorneys at RMO can help you navigate property inheritance disputes between siblings or other beneficiaries. We take our time to understand family dynamics and the unique circumstances surrounding each case so that we can pursue an amicable resolution that satisfies all parties involved. With decades of experience, we understand how to navigate the negotiation and mediation processes for the best possible settlement.

Schedule a consultation with our team at RMO to create a winning strategy and achieve the best possible outcome for your property disputes.