My mother passed away, leaving 75% of her house to me and 25% to my sister, setting this up as a trust. The house was appraised at $944K, based on the time of my mother's death (November 2022).

I want to buy my sister's 25%, which she agreed to, as I will be living in the house and not selling my 75%.

Problem - Looking at current market data (April 30, 2023), I believe the house is worth less than the appraised $944K, as other houses in the neighborhood have recently been taken off the market (3-4 months ago) for being overpriced.

Questions - If I don't want to pay my sister 25% of $944K because I believe the house is worth less, is there any way to sell our house for less than the appraised value and then buy it myself, and pay her with the money from the sale? What are my best options here for paying the least amount possible to my sister and for taxes for a house I feel is overpriced, based on the appraisal value? I'm not sure about taxes, but it seems like if there was a sale (to me) then I would end up paying a lot in taxes and other costs that would exceed any costs incurred by not selling it on the open market to myself and just buying out my sister's 25%.

The house is 100% paid off, so there are no monthly payments. I don't own the house, it's owned by a trust, so as trustee I can sell it and then buy it myself at a much lower rate than what it was appraised at at time of death.

Any help or advice would be much appreciated.

  • 85
    How much do you value your relationship with your sister?
    – littleadv
    Commented Apr 30, 2023 at 18:55
  • 67
    If the house was currently worth more than the appraised value would be asking how to pay your sister a higher amount?
    – Mark
    Commented Apr 30, 2023 at 19:17
  • 3
    If you were your sister, would you buy your own argument and sell your share to her for less than the appraised price?
    – DKNguyen
    Commented May 1, 2023 at 14:35
  • 2
    @Mark That would be the sister's prerogative to ask, wouldn't it?
    – user26460
    Commented May 1, 2023 at 15:24
  • 22
    I don't understand how you are 1. selling the house, 2. buying it then yourself, 3. then paying your sister out of the proceeds of the sale. Even considering the house is owned by a trust, this sounds too much like powering your sailboat with a fan you are holding.
    – CGCampbell
    Commented May 1, 2023 at 15:43

9 Answers 9


You need to negotiate the price with your sister. Until she agrees, you each own the share you each own, and can not unilaterally force the other to sell. She has told you what she thinks her share is worth; if she isn't willing to accept less, she isn't.

That may indeed mean you have to offer her more than you think it's worth. Or turn it around and ask her if she'll buy your portion based on that appraised value. Or agree to sell it and split the proceeds, and then buy whatever each of you wants to buy.

There is such a thing as an "in-family mortgage", which could be used as a way to pay for your share over time if your sister agrees to it. The government mandates a minimum interest rate on these (last time I checked, that minimum was 0.3% APR). That interest is a deductible expense for the borrower but a taxable income for the lender. Be aware that this is in all senses a real mortgage, a loan guaranteed by the equity of the house; if you don't make payments on schedule the lender is entitled to seek foreclosure.

You'll need a lawyer to make sure that whatever you agree upon is done correctly. But you need to reach that agreement.

Remember that arguments about money can destroy relationships, and not just marital relationships. I submit that arguing, rather than compromising, may cost you more in the long run than you can afford.

  • 15
    FYI: A comment from OP on another answer has established that the house is owned by a trust. If the sister is a beneficiary, then there may even be legal problems with "just" negotiating the price (i.e. OP may be subject to a conflict of interest).
    – Kevin
    Commented May 1, 2023 at 5:55
  • 6
    In which case, all the more reason -- again -- to first reach an agreement, then get a lawyer to help you implement that agreement in an acceptable form.
    – keshlam
    Commented May 1, 2023 at 19:46
  • 2
    Remember that arguments about money can destroy relationships, and not just marital relationships. I submit that arguing, rather than compromising, may cost you more in the long run than you can afford. I utterly agree and cannot stress this enough - don't mix (serious) money and friendships/relations - or, as Patrick Rothfuss put it so very well: There are two sure ways to lose a friend, one is to borrow, the other is to lend
    – CharonX
    Commented May 3, 2023 at 6:46
  • @charonx: Absolutes are always inherently incomplete.
    – keshlam
    Commented May 3, 2023 at 13:44

You ask about the cheapest way.

  • Agreeing with your sister on a price you both find fair is cheaper than trying to force a lower buyout price on her.
  • Hiring a lawyer now to do the deal correctly is cheaper than hiring a lawyer later to defend against a lawsuit by your sister and/or defense against a criminal fraud charge.
  • Paying the proper taxes now is cheaper than paying them later with interest and penalties.
  • Paying a few hundred dollars for a professional, official appraisal is cheaper than trying to guesstimate the value of an almost 7 figure property based on Zillow, and then having the IRS, California Tax Board, and your sister's lawyer object to your valuation.

If you think it's expensive to do things the right way, just wait until you see how expensive it is to do them the wrong way.

  • 19
    +1 for "f you think it's expensive to do things the right way, just wait until you see how expensive it is to do them the wrong way." Corollary: If you can't afford to do it the right way, you probably shouldn't be doing it.
    – Scottie H
    Commented May 2, 2023 at 15:29

I am assuming that you live in the United States.

I am assuming that nobody has been living in it, and that it isn't being used as rental property.

If you were to sell the house today to a unrelated buyer for more than the value you inherited the house (944K) you might have to pay taxes. The gain would be the sale price minus expenses related to the sale minus the value when it was inherited. If you were to sell the house to an unrelated buyer for less than the inherited value plus expenses there would be no tax impact.

Note the value you care about is the stepped up basis when you inherited the house. This is the number used to determine gain or loss related to taxes.

If I don't want to pay my sister 25% of 944K because I believe the house is worth less, is there any way to sell our house for less than the appraised value and then buy it myself, and pay her with the money from the sale?

Yes you can sell the house to somebody else, and then keep 75% of the money after the deal is finalized. You will have a pile of cash, but no house.

The 2nd part is the problem.

is there any way to sell our house for less than the appraised value and then buy it myself

You are deceiving your sister with the fake transaction, which can cause family problems. You are deceiving the local government with the fake transaction. They will use the fake transactions to set other property assessments. Other people selling their home will be concerned about falling home values.

If you don't make the side agreement to buy the house back the new owner can sell it for the correct value to somebody else and walk away the a nice profit.

and pay her with the money from the sale?

where are you going to get the money to buy it back from the friend? 25% is going to your sister. Plus you have a ton of closing costs. Plus your fiend might want to be compensated for their time, and the hit on their credit file.

So what to do. Make a plan with your sister to determine a fair price. Get a skilled appraiser to determine the fair price. Then make a written contract to buy her out over x years based on her 25% value and an appropriate interest rate. Get tax advice so everybody understands the tax implications of this type of deal.

  • 39
    @user1186050 that would be a violation of your fiduciary duty as the trustee, which is an actual crime
    – littleadv
    Commented Apr 30, 2023 at 23:19
  • 26
    If you doubt @littleadv's advice, all the more reason to get a real lawyer familiar with the exact laws in your area, rather than relying on opinions from the Internet. This is another part of "you may not be able to afford to do this, but you especially can't afford to do it wrong."
    – keshlam
    Commented Apr 30, 2023 at 23:48
  • 23
    @user1186050: "Fake" transactions are absolutely a thing. There are numerous laws concerned with whether a transaction was "genuine," especially if any kind of trust was involved in the transaction. Frankly, a trust makes this much more complicated to do correctly - to the point that the only correct answer is "stop asking strangers on the internet, and go talk to a lawyer."
    – Kevin
    Commented May 1, 2023 at 5:53
  • 18
    @stannius stewart.com/content/dam/stewart/Microsites/massachusetts/pdfs/… In line with these fundamental principles of fidelity and loyalty to the trust and the beneficiaries, it is the general rule that a trustee cannot sell or transfer the trust property to himself or herself, whether title is taken in his or her name or some third person for his or her benefit
    – Barmar
    Commented May 1, 2023 at 16:27
  • 13
    @MJ713 but the market hasn't actually fallen, the OP just believes it has. The appraisal tells you what the market is. In any case, the trustee selling the assets from the trust to himself to avoid paying the moneys to the trust beneficiary is a clear breach of fiduciary duty and at the very least will lead to a civil lawsuit from the sister (and potentially to fraud charges from the government).
    – littleadv
    Commented May 1, 2023 at 17:18

You probably can't purchase the house. If you wanted to, step 0, 1, and 2 would be to start talking to a lawyer that deals with trusts. Attempting to do this is a minefield of potential legal complications for you and you absolutely want to avoid doing anything without a lawyer's guidance.

If you and your sister owned the house jointly, it would be legally easy to negotiate a buyout with her. You'd be (legally) free to negotiate as toughly as you wanted to with her to sell her piece of the house at whatever price and under whatever terms you wanted.

Since the house is owned by a trust and you are a trustee, however, this is likely to not be possible. As a trustee, you'd owe a fiduciary duty to your sister to get as much as possible for the house. As the buyer (either directly or via some intermediate transaction you arranged), you'd want to pay as little as possible. Generally, the law isn't going to allow you to negotiate against yourself in this way when you owe a fiduciary duty on one hand and stand to gain personally on the other. A lawyer may be able to advise you on an approach that ends up with you owning the house and not being in legal jeopardy which is why that needs to be step 0, 1, and 2 before you do anything that might increase your legal jeopardy.


If you and your sister agree on the fair market value of the house, there is no problem. You can pay her 25% of that agreed value.

If you and your sister do not agree on the fair market value of the house, then anything you try to do is going to cause problems. You will not only get into a tangle of legal issues but you will also destroy your relationship with your sister.

What I would suggest is that you propose to your sister that you consider the house's fair market value to be the value that you think is fair and offer to buy her share for 25% of that. If she thinks the house is worth more than that, ask her what she thinks the fair market value of the house is. If you can accept paying her 25% of that number, then you have a deal.

If you get to this point, you and your sister are too far apart on the fair market value of the house to agree on how much you should pay her. You should then put the house on the market at the price your sister thought was fair.

If the house sells at this price, you should be thrilled. You will be getting significantly more for your 75% than you thought it was worth. If the house does not sell, you now have tangible proof that your sister's estimate of the house's value was too high.

If possible, agree ahead of time on how long the house will be on the market, what the minimum offer you will accept will be, and what will happen if the house does not sell at the price your sister thought the house was worth.

In the arrangement for you to purchase the house from the trust, a mortgage can be included to cover the 25% of the value you need to pay to your sister. Be sure that you are able to make the payments on this mortgage along with all of the costs of owning the house.


Selling a house involves lots of taxes

If the house is owned by an entity you control, then think twice before selling it.

A transfer from one entity to another - even if both are the same hand - involves a bunch of overhead costs - when we sold a $75,000 parcel this was almost $10,000, and I was very mad at my partner, because the property was owned by an LLC that owned only that, specifically so we could just sell the LLEC and avoid all that overhead. I don't know what the costs would be on a $1M property (it's not proportional).

However, trusts also may pay taxes, so you should look carefully at the tax situation both ways, and see what is most favorable to you. This is work for a tax accountant, not yo-yo's on the internet. Given the value of the trust - a million dollars - that is sensible (even if you don't feel like a millionaire).

You cannot reset an assessment with fake sales.

The house is 100% paid off, so there are no monthly payments. I don't own the house, it's owned by a trust, so as trustee I can sell it and then buy it myself at a much lower rate than what it was appraised at at time of death.

Wow, maybe you need some professional help being trustee if you're dreaming up two-bit schemes like that. Obvious scams are obvious. Everyone will "see right through it" - the IRS, the courts, and the local property tax assessor. That will not work, but it will establish you as an unreliable schemer, which will get everything else you've done examined with a magnifying glass.

Your scheme seems to rely on using the assessment that once was valid, to wedge your sister out of the 25% stake. By your logic if the house fell from $400,000 to $300,000, all that cash loss came out of your sister's 1/4 and your 3/4 is still full-value at $300,000. LOL yeah that doesn't work. When the value of the house falls, it's still 75%/25%. Your 75% shrinks too so in that example your sister's stake would be $75,000 and yours $225,000.

The house value is what your sister says it is

... and that's how it is. You can't force a seller to do something they don't want to do.

So whatever the sister thinks the house is worth, 1/4 of that is the price you must pay, and that's that. There's no workaround, short of something illegal like extortion. BUT THAT WOULD BE INSANE. There is a sad misconception in American life that money is the most important - no. What Suze Orman says:

  People first. Then money. Then things. 

Family is forever and family goes first. That's that. Yes, of course you have had your rivalries. Look at France and Germany - they've had a quarrel or two - but when stuff matters, they stand together in NATO and the EU. You do not want to estrange your sister - lose that "much bigger than friends" family bond -- over thirty pieces of silver. Seriously. I can't state this strongly enough.

You seem to be on the road to perdition here, so let me remind you what "perdition" looks like. Your sister hates your guts. Your sister lawyers up and tears apart all your activity as trustee, looking for fraud or misappropriation, so they can expel you as trustee and get someone else as trustee. They can tie up that house and keep you from a) cashing out or b) living there for as long as it takes until you break. Then they buy you out for a fraction because you just want the nightmare to be over and never see the inside of a law office ever again. That's what "estranged" means. And it'll be your fault, because you went down that road.

So quit taking this family rivalry so seriously. You're on the same team. You need to be reasonable, and I really recommend you be kind.

But the trust can get a mortgage (with you co-signing).

And if you're only borrowing 25% of property value, the qualifications for such a mortgage won't be too high. Once the trust has the cash in hand, the trust can pay your sister the 25% trust value, in cash. Now you control a trust with a mortgage, and YOU need to make sure that mortgage gets paid or you'll lose the house.

On the other hand... the sister isn't in a rush

But consider this as well. You're the one clamoring to sell. Not your sister. Sounds to me like your sister isn't in need of the quarter million, and is happy to leave it sitting as equity in the house.

So here's a crazy idea. Rent the house from the trust. You have the trust say that since you're the trustee and 3/4 heir, it would be silly to make you pay 100% rent only to disperse 75% of it back to you. Therefore you only need to pay 25% rent which goes to your sister of course.

Now you're renting for peanuts and your sister is happy.


my sister was left 25%. The house was appraised at 944K

  • You can pay your sister in installments for her $236k. If you wish, talk to real estate attorney and CPA. (I do not know California forms and laws.)

  • You can try to contest/appeal/dispute the appraisal. (However, you are likely incorrect about the actual value of the home. It takes many hours to become an appraiser unlike other real estate professionals.)

  • You can pay for another appraisal. Although, it may not work out to your favor. [1]


You could decide on a discount, based on time value of money. It's her money, but it's been in the house equity since Nov. Find the difference between Nov appraisal and today's appraisal. Say it's 100K. Then decide a fair rate she could have been getting these 6 months and then do the future value calculation. Say that came to 110K. Agree to pay 10K more than today's appraised value.

There's no hard rules here. I recommend negotiating personally with her first. If she gets crappy about it, consider the effort to get you way vs the effort to just pay. I have a similar situation personally as well, but ultimately decided to not purchase the home.

As for taxes, in most states you only pay on gains since the time of death.

  • How does the fact that the siblings DO NOT actually own the house, but a trust does, change your answer?
    – CGCampbell
    Commented May 1, 2023 at 15:41
  • @CGCampbell I don't see how, unless the trust disallows it for some reason.
    – user26460
    Commented May 1, 2023 at 16:08
  • 3
    After seeing the comments about it being "owned by the trust", I guess my answer assumes OP is beneficiary of it, so a desolution of the trust and transfer of value to the individual beneficiaries is the expectation. That's not a given, but the OP's question seems to be about negotiation and fair values, not the administration of a trust.
    – user26460
    Commented May 1, 2023 at 16:58
  • I don't understand the "time value of money" approach here. I don't see why it's at all relevant how long the sister's equity has been sitting in the house or what other profit could have been made with it in the meantime. There are infinite possible scenarios of things that didn't happen in the past, none are relevant moving forward. The answer as a whole confuses me, you start by talking about a discount but ultimately recommend getting another appraisal and paying the sister more than what her share is ostensibly worth. Agree it's a negotiation, but I don't see where you're starting from. Commented May 2, 2023 at 17:19
  • @NuclearHoagie "Agree it's a negotiation". That's where I'm starting from. She might say, and have legal power to force it, "I don't want to sell, you'll have to rent my 25%, then we can sell when the market is high." Time value is a respectable way to negotiate money values to these kinds of situations. If he's confident, he could offer less and she might take it anyway... Maybe the question is too opinion-based.
    – user26460
    Commented May 2, 2023 at 20:59

The Trust Changes Everything

EDIT: It occurred to me that I didn't really answer your question clearly.

The cheapest way is almost certainly to borrow the money against the value of the trust to buyout your sister. Because the house will not actually change hands, there should not be any significant tax considerations for you. The only cash you should need is to pay THE LAWYER YOU NEED TO TALK TO.


Talk to a lawyer

A trust is an entity all by itself. It owns the house. No one owns the trust - you and your sister are beneficiaries. As the trustee, while you have the authority (within the rules of the trust) to make decisions about the trust, you are legally required to act in the best interest of all of the beneficiaries, including your sister.

I don't own the house, it's owned by a trust, so as trustee I can sell it and then buy it myself at a much lower rate than what it was appraised at at time of death.

You can only do this if your sister agrees to the price. Otherwise, you can sell it at the fair market value determined by an independent appraisal.

As I see it, you have two ways of handling this. One is to pay her to assign her 25% interest to you. In that case, you and she would agree on a price and terms. The other is to buy the house yourself, dissolve the trust, and pay her the 25% and you the 75%. You may be able to borrow against your 75% to do either of these.

The house was appraised at $944k when your mother passed. That means the value of the trust was $944k. The house value is now lower, so the trust has lost money. Whatever you do now, the current value of the trust (i.e. the house) is what matters - the value when your mother passed is not relevant.

Again - Talk to a lawyer

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