"Some families may simply want to sell up what has been a beloved family home with decades of fond memories, and make a clean break to divide proceeds among those beneficiaries outlined in the will," says Coulson.
"Others may want to take on the home as their first foray into property investment, or add it to an existing portfolio, and may buy out their siblings and other beneficiaries named in the will," he says.
Andrew Bruce, president of the Auckland Property Investors' Association, says mixing the emotional connections with what is really a business sometimes doesn't work.
If beneficiaries do want to use the property as a rental, they need to discuss upfront what everybody's goals and expectations are for the inherited property and to enter into a written agreement confirming how the property is to be managed and what happens if there are disagreements. There also needs to be a written exit strategy covering how the price will be agreed upon if one beneficiary wants out.
Troubles can arise when the tenants don't treat the family home with the respect that the owners expect, says Bruce. Those expectations, however, can be unreasonable.
"You have to find the balance between giving a tenant quiet enjoyment and ensure they look after the property while also being mindful of the fair wear and tear clause (in the Residential Tenancies Act) which the tenants can't be liable for."
It's not at all uncommon for siblings to fall out over the home. Broad has seen instances where one sibling has squatted at the family home and come up with "testamentary promise claims" that the parent had promised they could stay in the house.
Or one child may have more of a connection and have looked after the parents at the home and feel a greater sense of entitlement as opposed to siblings who have spread their wings and left the family nest, he says.
"Often one child will seek to buy siblings out but may not have the financial ability to do so. Also there are often disagreements as to the value of the property with the purchasing child, wanting the lowest price and siblings wanting the highest," says Broad.
The ultimate decision maker is the executor of the estate. It's their role to gather in and liquidate all the assets and pay the bills and then as trustee to pay out the legacies and residue of the estate. If the purchaser is also the executor, conflicts of interest arise.
The executor isn't obliged to sell the property to the children and should get a registered valuation -- although there can still be disagreement over value.
Occasionally, says Broad, PerpetualGuadian as executor will transfer the family home to all of the children and they continue to own it and either just retain it as an investment or then on sell at a later date.
"The trouble is that there is often more at play between the siblings than just the value, with other rivalries coming to the fore and the value being used as a bargaining tool or a means of 'getting even' by blocking the sale or driving up the price," he says. When there are problems, the executor may simply sell the property.
This does not stop the children or child bidding at an auction of the property involved and is a more transparent way of ascertaining true market value if it cannot be agreed upon by the siblings. There may be feelings of loss or blame if the child is unsuccessful at the auction.
Inherited property comes with tax consequences and it's essential to take legal and tax advice if you wish to keep the property and rent it out. If you inherit and sell a property immediately there is no capital gains tax.
If you inherit a tenanted property there can be nasty tax consequences, because the Inland Revenue treats the property as if it was sold to you at market value -- and may claw back depreciation.
