Inherited a rental building & am Executor. Should I be compensated for sister & brother living free in 2 apts.?

Question

Power of direction is in all 3 of us so their are 3 owners of the rental building. I do not live there. They are living there with free rent. Should I be compensated and can I be compensated?

Additional Details

The rental property is in Brookfield, Illinois - Cook County.

Answer 1

Absolutely. Either they need to start paying rent or you need to be compensated in some way.

One way would be for you to take a like amount from the estate every month. E.g. if their apartments are worth $500 a month, then you should get $500 a month cash.

Talk to your estate attorney if you have one...and if you don't have one, get one!

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Answer 2

You can only be "compensated" to the value placed on your executor duties as outlined in the will. If none, then answer is none. If Sister and Brother live in Jointly owned property, you can only deduct their rent from the total due them when you sell the rental property. If they do not want to sell - then you must check with an accountant on the best way to divide the rental income on a monthly basis. They may "live free" but their share will be reduced by their occupancy at the normal going rate for the Apartments rental value.

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Answer 3

Yes, you can and should be compensated.

One option is to just take a 3rd unit for yourself, then sub-lease it to someone and keep 100% of the rent. That way each owner gets 1 unit for personal use. If the others decide to live in the unit rent free, then that's their choice, but you have the right to rent out your unit and keep the profits.

Another option is to make each of them pay 1/3 of the fair rental value of their units. Lets just say for example the unit has a fair market rental value of $999. Each of the 3 owners should be getting $333 from that unit. They keep their 1/3 and since they both live there they would just offset the $333 they should be paying to each other, and they each need to pay you $333 per month. They're still getting a great deal but you're not getting screwed out of the money you would get if the unit was available to rent to someone else.

Another reasonable option is to put the ownership of the property into a company such as an LLC or S corporation. Then the company is owned by the 3 of you in the same portion that you currently own the property. Then they need to pay full market value for rent, but they'll get back their portion by collecting the profits from the company. This probably isn't your best option because it complicates the taxes, but it would work.

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