Let's say there's the following scenario. A couple who are homeowners and parents of three adult children build a small, one-story detached mother-in-law cottage (500 sq. ft.) with kitchen and bathroom on their existing property. They then sell the exact same property (where the cottage is located) to the oldest adult child for the fair market value of the previous home and property (so minus the cottage, which they spent $200k on). In other words, let's say that as a property without a cottage on it, it would have sold for $750,000 and that was the price the oldest adult child paid. They didn't incorporate the cottage value into the sale price.
Next, they live in the cottage the next 25 years rent-free while the oldest adult child lives in the main home. After 25 years, they pass away.
They leave their estate "equally" to the three children. The estate at this point consists only of cash and investments.
The two younger children contend that the mother-in-law cottage on the property should be considered as part of the oldest child's inheritance. After all, the oldest adult child only bought the property and the main house. The younger two children believe that if the parents' assets are split three ways between all of them equally, the overall split is unfair, since the oldest child now receives a cottage on their property on top of the 1/3 split of the cash + investments. They point out that the oldest child can rent the unit out to generate income, or if the oldest child sells the property, they would receive a profit over and above the original value paid due to the presence of the additional unit, which they didn't pay for in the original home purchase price.
If they all agree that they should offset this additional gain to the oldest child, what is a fair, scientific way of valuing the extra unit?