Q: We have a cabin & have 2 sons. We want to give one son 1/2 of what the cabin is worth. Say it's worth $150,000.
We would give the one son $75,000. Say when we die the one that has the cabin wants to sell. He would be pocketing $150,000. We realized the other son only got $75,000. This is not right though. So would we write up that the one son that got the cash would get another $37,500? Which would then be equal to $150,000 + $75,000 = $225,000 ÷ 2= $112,500. How does one make this even? We want to be fair doing this.
A: It depends on what you are trying to accomplish. If I understand correctly you want to gift $75,000 in cash to one son today. Instead of cash, you plan to leave the other son your cabin at death. You could order an appraisal of the cabin now and figure out what it is worth. If it is worth exactly $150,000 today, then giving one son $75,000 today would be the same as giving him one half of the cabin right now. A dollar tomorrow is worth less than a dollar today, due to inflation and opportunity cost, so if you gave one son $75,000 cash today and that equals half of the fair market value of the cabin today, then you would be treating each son equally. The appreciation on the cash would belong to one son, and the appreciation on the cabin (if any) would belong to the other son.
The other method would be to give one son $75,000 right now and then say that this amount would be deducted from his share of your estate upon your death (whatever that final amount is). Since property values and the stock market fluctuate daily, you can never be sure exactly what something will be worth at death. For this reason, many estate planners include provisions in their documents that your real estate will be assessed upon death using the fair market value on the date of your death. You then use these values to divide the estate evenly, or to deduct any amounts for gifts already given to children during your lifetime. A final option would be to leave your sons and equal interest in the cabin, and leave some cash to the other son (who did not get cash during your lifetime) to even things out. There are many ways to do this and I suggest you consult with a qualified estate planning attorney who can guide you through your options.
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