Hold on or let go?

SOMETIMES, you really can go home again.

That’s what Bruce Morrish did seven years ago, when he moved back into the Los Angeles house where he spent much of his youth. After his mother died in 2003, he inherited the house (with his brother) and now resides there with his wife and 5-year-old son.

“I just like the house,” said Morrish, a 48-year-old certified public accountant. “I like the neighborhood.”

And of course, he said, the home is a comforting reminder of his mother on a daily basis. “It’s like my connection to her.”

For many inheritors, however, deciding what to do with the family home is not so simple or straightforward. The process can be fraught with heartbreak, sibling rivalry and -- given Southern California’s superheated real estate market -- pressure to cash out quickly while home values remain high.

The number of inheritors grappling with the choice to keep or sell the family home is on the rise. Bequests left annually to the nation’s baby-boom generation by their parents should approach 2.8 million this year, increasing annually until they likely peak at 3.4 million in 2015. This is according to a 1993 landmark study by Cornell University researchers that projected the transfer of more than $11 trillion between 1990 and 2040.

Much of that wealth is tied up in the childhood homes of the boomer generation. Although many have settled elsewhere with families and houses of their own, saying goodbye to the old homestead can be wrenching for adult children.

“Invariably the first reaction is, they want to keep the home, because they have this total emotional response,” said Nancy Spector, an estate-planning attorney in San Diego. “Then they look at the practical realities.”

These can include multiple siblings -- and their spouses -- who have divergent notions about whether the house should be rented, sold or occupied by one of the siblings.

In nine out of 10 cases she sees, Spector said, the children are ready after about a year to face the dreaded ordeal of cleaning out their parents’ personal effects and selling the property.

Real estate agents working with inheritors have to learn empathy -- and patience.

“If you’ve grown up in the home,” said longtime area agent Ruth Rumery, of Home Partners Inc. in Torrance, “there are memories you have to detach yourself from.”

That can take years. Rumery remembers helping two brothers and a sister sell their parents’ home. They had kept it as a rental for 10 years, but even then, she recalled, “it was like cutting the umbilical cord.”

Caregiver complications

PERHAPS the most common source of strife among adult children who inherit the family home occurs when one of the siblings has been living in the home and serving as caregiver for Mom or Dad.

Caregivers, either out of choice or sense of duty, might have scaled back career ambitions to assist elderly parents. When the parents die, caregivers can be devastated. If their siblings want to sell the property, they face the prospect of having no home in midlife and too little money to buy a similar home once the inheritance is divvied up.

Caretakers may believe they’re entitled to a larger share of the parental home or have what broker James Joseph calls “pseudo-squatter’s rights.”

“The other siblings will often say, ‘He’s a mooch,’ ” said Joseph, of Century 21 Grisham-Joseph Realty in Whittier. “Many times it brings out the worst in siblings. You have the squatter / caretaker saying, ‘You never loved Mom. You’re out there in Phoenix with your law practice.’ ”

In some cases, however, the parents or the other siblings will recognize caregivers’ contributions to the family with a larger share of the inheritance or home equity.

Other parents, Spector said, set up life trusts, which allow the caretaker sibling to live in the home for life, with the other siblings and their heirs receiving their interests upon the caretaker’s death.

Another sensitive issue for inheritors is the home’s value, Joseph said. Just because a house is dear to the heirs doesn’t mean it will fetch more on the market.

“There’s a giant gap between memory value and market value,” he said. “The memory value is tremendous.”

In fact, an inherited property might sell for less than others in a neighborhood. As the parents aged, they might have been unable to keep up the maintenance.

It’s always a good idea to get an independent appraisal of a property’s market value at the time of a parent’s death, Spector advised. First, it establishes the home’s new basis, or value for tax purposes.

Many inheritors are surprised and pleased to learn, Spector said, that they get a step up in basis. In other words, if the home is valued at $600,000 upon a parent’s death, the heirs will owe no capital gains if they immediately turn around and sell it for that amount -- even though their parents purchased the property 40 years ago for $40,000.

Should the inheritors choose to hang on to the property as a rental rather than a primary residence and it rises in value, they would owe capital gains taxes on the amount above $600,000, minus some expenses.

Capital gains tax rates for assets held more than one year are 15% for those in the higher tax brackets and 10% for those in lower brackets. Gains on assets held for less than one year are taxed at ordinary federal income tax rates, which can run as high as 35%. Other taxes could apply as well.

Preventing disputes

IT’S also important to have an appraisal if one sibling is going to buy the others out, to help ensure that all parties feel treated fairly. Otherwise, Spector said, “people don’t talk the rest of their lives.”

Winnie Davis, a real estate broker with Coldwell Banker Residential Property in Brentwood who has been in the business for 30 years, has seen some bitter disputes among siblings.

In one case, a mother left her home to her two sons and named the younger son, her caregiver, as executor. The younger son wanted to sell the house to a colleague at work, rather than put it on the open market.

The older brother, much more experienced with real estate, believed the proposed sale price was too low and bought the property himself for $10,000 more. He then put it up for sale. Although the older brother scored an $80,000 profit, he took a hit in the family-relations department. The two brothers no longer speak, Davis said.

In another case, the youngest of four brothers has refused to sign off on multiple offers for the family home they inherited, claiming an older brother serving as executor is too controlling. The dispute is now in court. There’s one silver lining though, Davis noted. The property has gone up in value during the squabbling, by about $150,000, to about $800,000.

Some adult children never get to have a say about what happens to their family homes because they’ve been disinherited -- intentionally or not -- when parents remarry.

If a man remarries after being widowed, he might leave the family home to his new wife so she will be taken care of, without thinking that eventually the house will be left to her children and not his.

With proper planning, a life estate could let her live out her years in the home, but it would still belong to his children.

Most inheritors do eventually choose to sell, real estate professionals report.

Ana Marie Colon, broker and owner of Rocking Horse Realty in the San Fernando Valley, has handled an increasing number of probate cases in recent years. “There’s lots of equity to share,” she said. “They just want to sell everything and get out of Dodge.”

Rather than hold on and hope the property will continue to appreciate, inheritors seem eager to sell in this hot real estate market, said Colette Ching, a Santa Monica real estate broker. “They’re deciding it’s a good time to get on with it before the market stabilizes.

Selling not an option

FOR Morrish, it was the keen attachment he has felt to the house since he first “found” it for his mother when he was a teen that made him decide to keep it.

Ruth Morrish, a post office administrator and divorced single mother, had been looking to move her boys out of their apartment to a house when Morrish noticed it was for sale and alerted her.

After he left to earn his MBA at the University of Texas in Austin, Morrish would return home often and help his mother with upkeep. “This was my place,” he said.

When she died, it was obvious that he would keep the house and pay his brother, who lives out of state, half the home’s equity. At that time, Morrish said, the 2,500-square-foot, four-bedroom home was appraised at $425,000.

Since then, prices in the quiet neighborhood off Olympic Boulevard have escalated sharply, to $800,000 and higher. Given such appreciation, his brother has expressed concern that the appraisal value might have been too low.

Morrish said he plans to discuss the appraisal with his brother and show how much is needed in repairs to bring it in line with the rest of the neighborhood. He doesn’t want friction over money to come between them, he said. And he has no intention of selling.

“Never,” he said. “My wife doesn’t even want to approach the subject. I would go into a tizzy.”

Freelance writer Ann Perry can be reached at moneyperry@ aol.com.