The devastation of losing a loved one can oftentimes be amplified by the additional stress and responsibility of inheriting their home.
According to the Center of Wealth and Philanthropy at Boston College, baby boomers are predicted to inherit around $27 trillion over the next forty years—a majority of that inheritance being their parents’ homes (source).
While our loved ones surely intend no furthered heartache, inheriting property can become a major liability that results in unforeseen expenses, responsibilities and even family conflict.
What Are My Responsibilities?
If you recently inherited property, chances are you are feeling overwhelmed—and rightfully so. There is a long list of legalities and financial liabilities to consider. So where do you start?
Generally, inherited property must go through probate. This means you are responsible for paying any final expenses left on the home, filing taxes on behalf of the previous owner as well as going through your loved one’s assets.
Probate is a notoriously pricey and time-consuming legal process. In the state of , probate takes a minimum of six months and costs at least $2,000. To make matters worse, this process tends to take place during a time of grieving.
What Are My Options?
If you recently inherited a home, you have three options to choose from:
1. Move in.
For some, moving in may be the most appealing option. The inherited house may be larger than the heir’s current home, in a better location or hold more sentimental value. Choosing to move in, however, can also lead to pricey maintenance expenses and could even result in an increase in property taxes. A stepped-up value, which is the readjustment of property value for tax purposes (source), can significantly increase the current rate on the home. Additionally, the previous owner may have had a senior citizen property tax break that dissolves with new ownership.
You may decide that renting is the best option for keeping the family home without sacrificing your own. While this is a popular choice among heirs, this decision also comes with many additional, long-term responsibilities. Renting a home necessitates that you purchase a landlord insurance policy. This coverage protects personal property, structure, medical and legal liability. Unfortunately, you won’t qualify for a capital gains exclusion if you choose to rent, because the home isn’t your primary residence.
You and your family may come to the difficult conclusion that the home simply isn’t worth the exhaustion of resources. Selling a home is a consuming process as well, however. Typically, the selling process takes a minimum of three months and requires a contractor, lawyer and realtor. Selling your inherited property still costs money and time.
How to Make the Right Decision
Not sure how to make the best decision regarding your new inheritance? Here are a few helpful tips:
- Consider Your Resources
Do you have the money and the time to dedicate to this new home? If so, is it worth the commitment? Sometimes, heirs are left with mortgage payments or are forced to refinance. Additionally, if the home is in poor condition or in a bad location, the cost may not outweigh the personal value.
- Keep Taxes in Mind
Chances are, your taxes will become much more complicated and require a professional to guide you through this process. Adding a mortgage and insurance on top of taxes can quickly become too much to handle.
- Do a Thorough Check of the Property
A well-maintained home may still reveal potential risks and upkeep concerns. Make sure you have a full understanding of your impending financial commitments.
- Examine the Mortgage
Was the house paid for yet? Did the previous owners take out a reverse mortgage? You may only undertake your loved one’s mortgage if you decide to move in; whereas if you choose to rent, you may be required to refinance in your name.
- Discuss Options with Your Family
If you have relatives who will be affected by your decision in any way, make sure to include them in your plans. Unfortunately, family conflict is a common result of property inheritance.
- Seek a Local Expert for Guidance
…and if you’re in the Valley, there’s no better expert to talk to than Fair Property Buyers. We understand how overwhelming inheriting a home can be. That’s why we offer free consultations to provide the information you need to make the right decision.
If selling is in your family’s best interest, Fair Property Buyers makes it easy. In fact, if you choose to sell with us you won’t need a contractor, realtor or a lawyer. We buy homes in any condition at any time.
Losing a loved one is truly devastating. Don’t let unnecessary stress take over your life; call Fair Property Buyers today for honest guidance.