As if losing someone isn’t tough enough, now you must deal with the property they left behind. Whether it was expected or unwanted, there are plenty of difficult decisions ahead.
If you’ve inherited a house, you’ll have to decide to move into it, sell it or rent it out. It’s time to get clear about your options.
Are you the sole heir? Inheriting a property with co-owners can get tricky.
State laws vary but typically co-owners share equal responsibility for debts, liabilities and income. Rent, property taxes, property insurance, property management fees, maintenance and more, get divvied up between you and other beneficiaries. It’s easy to imagine this being an administrative nightmare when feelings run high and power struggles play out.
Say your parents left their house to you and your siblings. Chances are you’re not all going to want to live in it together. Selling may be ideal if splitting the money equally from the sale can be agreed upon. Renting it out is an alternative but it’s time consuming and may be confusing as to who will bear the ongoing tasks of playing landlord.
Inheritances have other emotional consequences, even if you are the only beneficiary. In addition to physical stuff– household goods and furnishings, electronics, clothes–the sentimental things can be disarming. Photos, family heirlooms and keepsakes can be overwhelmingly stressful.
Which is why so many people can’t bring themselves to clear out and sell houses they inherited. Rhea Friedman, CFP, advises against this sort of long-term inaction for being costly. “Not selling a house and not living in it makes for increased maintenance and insurance costs without much to show… and that financial stress adds to the emotional stresses involved."
Did You Inherit a Mortgage?
Say you inherited a house with a mortgage. If you have the cash, you might want to pay it off yourself. Simply put, if the mortgage isn’t paid, the house gets foreclosed.
If you’re considering moving in, you may be able to assume the mortgage in your own name. If you want to rent out the house, the bank may require you to refinance in your own name. If the home was already paid off and the deceased took out a reverse mortgage, understand that this can’t be assumed by heirs.
In general, you’ll want to recognize some of the different taxes involved.
Inheritance taxes are levied on the transfer of assets, at death. Most beneficiaries will never have to worry about them because only a handful of states collect them. Estate taxes are imposed on the fair market value of the property (FMV). If, say, you’re able to sell the property for more than its FMV (calculated at the time of death) you’ll have to pay capital gains tax on the difference between the closing price and the FMV.
Generally, an inheritance is not considered income, so you won't have to report it on a state or federal income tax return. The property that you inherit may have built in income tax consequences. Additionally, with so many misconceptions about taxes and inheritances it’s wise to consult with an estate planning attorney or accountant.
Prefer to Defer?
Some people equate an inheritance with a gift or cash windfall. It’s usually not that simple. If you’ve inherited an unwanted property, or are simply unwilling to deal with the burden, you have options. Today, investors are willing to pay cash and take the home out of your hands relatively easily. For example, if you are trying to sell your house fast jacksonville, you’ll find that there are many fair offers out there from investors.
Losing a loved one is traumatic and having to deal with the business of inheritance is demanding. Finding constructive and trustworthy support to help you through the process is invaluable. If you carefully consider all your options, you’ll be well-informed when it comes to your inheritance. ###