REAL ESTATE

My Parents Left Me Land. Should I Take $170,000 Instead?

moneyologist

moneyologist

Dear Moneyologist,

My parents have adequate savings and enough money that all three of us children will inherit money when they die. Their intention is that we should benefit equally from it. There is a parcel of land left for me. The value of that land will be subtracted from my financial inheritance.

About four years ago, my sister wanted to purchase a house and my parents agreed to give her $170,000. It's more practical for her to have the money now, when she needs it, and preferable to being unable to purchase the house and inherit the money in the future. They would do the same for my brother if he needed the money now. They indicated that they would remove that amount from the will so as to make things equal, but that they wouldn't be making any adjustments for interest.

As I can't use the land, my parents are not interested in transferring it to me now. Any increase in the value of the land will be part of the inheritance and essentially divided three ways.

Hopefully my parents will live long lives. It could be another 20 years before we inherit anything. In that time, the value of their savings will have increased.

My sister stands to benefit greatly from this because although the value of the $170,000 she already received will increase (in her house) and the value of my parents' savings will increase, they will only be taking the original $170,000 off in the will without adjustments, thereby giving my sister the value of the compounding interest twice. The value of the land that gets subtracted from my monetary inheritance will also be at its market value at the time, and not pegged at its current value.

I don't want to sound greedy but 16 to 25 years of growing interest is a lot of money. It doesn't feel fair to me that the interest and increased value isn't considered over time. Should I give up the land and ask instead for $170,000 now? Is there a way to broach this with my parents that doesn't make me seem like a circling vulture? Our parents have given us a lot and I don't want to look a gift horse in the mouth, nor create friction with my siblings.

I don't think it makes any difference to the scenario but I am also the sole executor of their estate.

Regards,

Missing the Interest

Dear Missing,

It's the Great Parental Inheritance Gamble! At least, that's what this would be called if it were a television game show. You have a piece of land that could be worth a lot of money, but you cannot open Door #1 to see the value of that land until 2036. Should you give up what's behind Door #1 and take this giant cardboard check made out to you for the amount of $170,000 so you can buy a home? That home could be worth five times its value in 20 years, or more. But the land might be worth multiples of that. (The audience would likely be cheering and egging you to take the money because TV audiences tend to like instant gratification.)

I wish I could make that decision for you. But the Moneyologist needs boundaries and, while I have often dished out some " just do it" money advice, this choice needs to be yours and yours alone. (If you give up the land now, I don't want you tracking me down when it's sold off or given to another family member, and he or she strikes oil.) I will say this: It all depends on (a) value of the land in relation to the rest of your inheritance and (b) whether you think that value will increase over time and, if so, by how much. You may wish to present the details to a financial adviser to help you make the decision.

As problems go, this is the five-star, first-class, 18-carat gold variety. Your land versus money dilemma is part of a global trend. Approximately $16 trillion of global wealth will be transferred over the next three decades -- mostly to family members -- and 40% of that, or $6 trillion, will be transferred within the U.S., according to a new report by global wealth consultancy Wealth-X. The wealth gap between America's upper-income and middle-income families reached its highest level on record, according to the nonprofit Pew Research Center. In 2013, the median wealth of the nation's upper-income families ($639,400) was nearly 7 times the median wealth of middle-income families ($96,500), the widest wealth gap seen in 30 years.

I'm not saying that to make you feel bad. I'm saying that so you feel lucky. You're in a fortunate position and whatever decision you make will (fingers crossed) be the right one for you.