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So my dad briefed my sister and me this weekend about his estate and how he was planning on dividing it between the two of us. First, his estate is worth close to $2M which he wants to split in 1/2 between my sister and me.
The problem is that out of the $2M, he has about $400,000 liquid and $1.6M in RE that he mostly inherited from his parents (who inherited it from their parents etc). First my dad resides in Europe so estate taxes are going to be a problem. But here comes the tricky part: he does not want my sister and I to sell any of the RE no matter what situation we might find ourselves in. He does not want us to sign a paper or something, but he wants us to swear we would never do it. Also, because my sister makes a lot less money than I do, he wants to give her most of the liquidities and less of the RE (so that she can pay the estate taxes and property taxes on her share of the RE), and he would give me only RE (so I would have to pay the estate taxes out of my own pocket). Now the kicker: The RE I am bound to inherit cannot be used to generate much cash flow. It's mostly farm land and wood land. The farm land is very valuable because it could be developed immediately (it's in demand, near a road, utility ready...). But since I can't sell it, the only thing I can do is rent it to a local farmer (who can also maintain it for me) but that would not bring nearly enough money to even cover property taxes. The wood land is a bit better in term of cash flow, but I am looking at a break even situation at best for those.
So to summarize, I would have to pay thousands of dollars in property taxes every year on the RE, all of which would have to virtually come from my pocket. In turn I would have to amass a bigger nestegg (and therefore work longer) to cover those extra expenses.
So what to do? I understand why my dad is attached to his land (he is European and where he grew up land is the most important asset you'll ever own). Personally I am not so attached to some of the properties he wants to pass onto me. But I feel like if I swear to him I will never sell the properties, then I must stick to my promise. But at least, after much discussion, I was able to convince him to leave me enough cash to take care of the estate tax, but it is still going to seriously impact my early retirement cash flow.
Have any of you been faced with this situation? and how did you deal with it?
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