Handling inheritance can sometimes be a tricky thing. It’s one of those things that can be different for everyone, with unique concerns in each scenario. The type of inheritance that’s in question can definitely affect how that inheritance should be managed. Which brings us to a question that’s commonly asked when discussing inheritance matters: What do I do if I inherit a house?
When parents, grandparents, and other family members pass on, this situation often arises. Whether it’s the family home they lived in for fifty years or the retirement place they bought in another state, there may suddenly be a house that has to be dealt with once your loved one is gone.
This can bring up a lot of financial and real estate management questions for the heirs. Let’s look at a few things you should be asking to make the inheritance of real estate a little simpler.
If you have already inherited a house
If you’ve already received a house through a Will or a Trust, you should be asking yourself:
Do you now owe anything?
Is the house paid for in full, or does it have a mortgage (or two) attached to it? Are there any liens on the property? Do you yourself have any debts to creditors? What about property taxes? What about inheritance tax? Does the house need repairs?
There can be many costs associated with owning a house, whether it’s your primary residence, a rental property, or a piece of real estate you inherit. If you have already inherited the house and are officially its owner, you’ll want to make sure you address these financial costs of owning and managing the property.
A house is likely a substantial asset, worth a good chunk of money. It’s a titled asset that is now yours. Consulting an Estate Planning Attorney or Real Estate Attorney can help you straighten out anything that you might owe upon inheriting the house. How you proceed in managing the property will depend on a few things, including:
Who else might be sharing the inheritance?
Are you the sole owner of the house, or was it left to you and several other people, such as your brothers and sisters? If you alone have inherited the home, then you alone are the owner and will be responsible for the decisions relating to it. If, for example, you and your sibling have both inherited the house, you will be the owner of half of it. Which brings us to the question:
What do you want to do with the house?
Do you intend to keep the house or do you want to sell it? Will you and your family be living in it? Will another family member be living in it or renting it?
There will likely be a few options. Again, if you alone have inherited the house, you will be making the call. If you and one or more others own it, you’ll all have to agree on what to do with the property. Handling repair, maintenance, property tax and income tax concerns will depend on what you decide to do with the house that’s been left to you.
If you are going to inherit a house
Sometimes you’ll know in advance if a relative is going to leave you a house that they own. If this is the case, you can:
Plan in advance – is a Trust a good choice?
When you know you will be receiving a house, setting some things up in advance can be helpful. If the owner of the house – likely a family member or a close friend – informs you of their decision to leave their home to you when they die, there are Estate Planning measures that can ease the transfer of property.
Trusts can be set up to make the inheritance of a house easier on the inheritor. Revocable Trusts, for example, can be created to transfer property from the owner to the person or persons inheriting it upon the owner’s death. Revocable trusts allow the Trustee to bypass any need for Probate and can make handling Estate and Inheritance taxes easier as well. Irrevocable trusts, similarly, can be used to transfer ownership of a home from one person to another. This type of trust takes the home out of the owner’s estate and may be used to protect the home against the Trustee’s creditors and to avoid the estate tax – minimizing what the Trustee will owe when they do inherit the house.
Prepare for possible costs
Again, you might want to assess the value of the home. You may want to consider the cost of living in the home vs. renting out the home. Is the home in good condition or will it require costly repairs? You will need to consider whether you will be able to afford these costs or if putting the home up for sale will be the better option. You will also want to think about property and taxes and HOA fees that may come with inheriting a house and about how much they will be. An Estate Planning professional can guide you through your state’s inheritance laws and taxes and helps you determine if there is a way to minimize their impact.
Decide how you will use the house
If you are able to have these discussions with everyone who will be involved ahead of inheriting the property, it can make things a lot clearer and prevent any future confusion, rushed decisions, or family infighting. Making things official and legal with State-Specific documents can be a good idea.
Once you have inherited a house
If you have inherited a house and you own it outright or you are a part owner of it, it’s a good idea to:
Set up or amend your Estate Plan
You now own an asset that will one day have to be managed after your death. If you already have an Estate Plan in place, you might want to amend it to include plans for the additional property you now own. If you haven’t made a Will or taken other Estate Planning, don’t wait. Decide what you’d want to happen to the house you’ve inherited and who you want to leave it to when the time comes.
Receiving an inheritance of some type or handling the Estate of a deceased loved one is something that most people will go through at some point. It can be an emotional and confusing time. It’s not always clear what the best thing to do at the moment is. That’s why Estate Planning is so helpful. Making an Estate Plan and talking about that Estate Plan with trusted family members and friends can do a lot to protect the future of your family and other heirs.
At Trust & Will, we can help you get your Estate Plan set up online. With affordable, customized Estate Planning documents selected for your needs, setting up a Trust or a Will online can be easier than ever. Let us know how we can help you with your inheritance questions.