My parents want to sell their house to my sister at a discount. Am I losing part of my inheritance? VANESSA STOYKOV

Dear Vanessa,

My parents are planning to downsize, and my sister wants to buy their house for less than the market price. She has always lived nearby and helped them out, so I understand why they want to give her a chance to buy it.

But my brother and I are worried the discount will effectively come out of our inheritance. 

My sister says it’s our parents’ money and they can do what they like. I agree with that in principle, but I don’t want this decision to cause a lasting rift in the family.

Should we say something before it’s too late?

Donna 

Vanessa says:

Dear Donna, 

This is one of those family money decisions where the property is only part of the story. Underneath it are questions about fairness, care and what each person thinks they’re entitled to.

Your sister is right: if your parents have the capacity to make their own decisions, it is their home and their money. They may decide to sell it to her, give her a discount or help her another way. Their decision doesn’t have to be equal to feel fair to them.

But it’s reasonable to want everyone to understand what the arrangement means. A lower price could be a gift to your sister. Your parents might instead intend it to be an early inheritance, or expect her to repay the difference. 

Those are very different arrangements, and family assumptions can cause trouble later.

The first step is to encourage your parents to get an independent property valuation. That gives everyone a clear starting point, even if they decide to sell for less. Then they can talk through whether the difference is a gift, a loan or something they want taken into account in their wills. 

They should get independent legal advice and make sure the decision and its reasons are documented.

There may also be tax and transfer costs to consider. For example, the Australian Taxation Office says a property transferred to family for less than market value may still be treated as having been sold for market value for capital gains tax purposes. Local rules and costs can vary, so your parents and sister should get advice specific to their circumstances.

Try to raise your concerns without accusing your sister of taking something that belongs to you. You might say: ‘We understand this is Mum and Dad’s decision. We’d feel more comfortable if everyone understood whether the discount is a gift, a loan or an advance on inheritance, and if Mum and Dad have had independent advice.’

Then give your parents room to decide. They may choose to help your sister because she has supported them, because she can afford to buy the house, or simply because it’s what they want. You may not agree with their reasons, but knowing those reasons now is better than discovering years later that each sibling had a different understanding.

If your parents are unsure how this decision fits with their broader plans, encourage them to speak with a qualified financial adviser. You can use my free service to find one here.

At the end of the day, it’s their money and their choice. A clear conversation now can help everyone understand that choice, even if they don’t all feel the same way about it.

All the best,

Vanessa 

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