When your relative passes away and leaves you their property, you may feel overwhelmed. Even if you're familiar with the responsibilities of homeownership, you're likely unfamiliar with the inheritance process and everything it entails. You have far more to cover than you might have initially thought.

If you've found yourself in this position — with an inherited home and no idea how to proceed — you should set aside time to review your options. As long as you know what those options are, follow the proper protocol and seek legal counsel when necessary, you have no reason to worry.

We'll walk you through everything you need to know about inheriting a property, touching on the most important details of your role as a recipient. Once you have an understanding of your obligations, you can avoid some common mistakes and make the most of an unfortunate situation.

1. Keep Current With Policies and Payments

Once you've inherited your relative's property, you'll need to update homeowners insurance policy. Contact the insurance company and make any necessary changes, and contact them quickly. It's best to attend to this small task sooner rather than later, as the policy can lapse if the house is unoccupied.

After you've updated the policy, track down all of your late relative's utility accounts. Cancel anything you won't need, and make payments on the essential utilities like electricity, water and heating and cooling. Beyond utilities, you also need to keep current with property taxes and mortgage.

2. Meet With Legal Counsel to Discuss Details

The inheritance process isn't always simple, and you should seek legal counsel to address any concerns you might have. An experienced representative will assist you with your questions regarding the will, estate and taxes, guiding you away from mistakes that other inheritors have made in the past.

As you move through the next three steps, you'll find that legal counsel is indispensable. When you're deciding what you should do with the property and, most of all, how you should approach your sibling inheritors, you'll need the service of a legal professional who understands your situation.

3. Sell or Share the Contents of the Home

It's unlikely that you'll inherit an empty home, and you'll eventually have to address the subject of your late relative's belongings. With sibling inheritors, a round-robin approach is ideal. Meet with your siblings and take turns choosing the items you each want, including other relatives at your discretion.

You can donate the remainder of the items to charity or hold an estate sale. It'll take time to organize your late relative's belongings, but you'll find that it's well worth the effort, especially if you have unclaimed valuables that you have no intention of keeping. An estate sale also helps with the next step.

4. Decide Your Intentions With the Property

You have three primary options when you inherit property. If you're not interested in living in the home yourself, you can choose to sell or rent it. Otherwise, you can make a plan to move in and occupy the property, which comes with its own responsibilities, just like your other two options.

When it comes to selling the property, the process is similar to the average home sale, though you won't pay capital gains tax on any increase in the home's value during your late relative's lifetime. You'll only pay capital gains tax on an increase in value between the time of inheritance and when you sell the house.

Concerning the choice to rent, you should research the subject before you commit to the role of landlord. Look into your homeowners association and its rules for renting, as well as relevant city ordinances that could cause difficulties down the line. It's also wise to secure a landlord insurance policy.

As for living in the home, you'll have to manage a rise in property taxes. More than that, inheritors with siblings will need to consider the complicated issue of joint ownership. If you find yourself in this position — with family members who inherited the property as well — study the next section carefully.

5. Address the Rights of Sibling Inheritors

If you're the sole inheritor of the home, you won't have to concern yourself with the challenges of joint ownership. But if your siblings are stakeholders in the property, you'll have to take another approach. It's necessary to acknowledge the rights and feelings of everyone involved in the process.

If you plan to live in the home, joint owners will need compensation. This compensation can take the form of rental payments, though you don't necessarily have to take this course of action. You have many alternatives, but it's best to move forward with tact and sensitivity regardless of what you choose to do.

As you settle matters with your family, consider the following options:

• Sell and split profits: You and your siblings sell the home, and you take your part of the proceeds after commission and expenses.
• Rent and split profits: You and your siblings rent the home, and you take your part of the monthly rent after maintenance and management costs.
• Promissory note: When you want to keep the property but your siblings want to sell, a promissory note outlines how you'll pay your part of the home's value back to your siblings over time.
• Suit for partition: When you and your siblings can't agree on a solution, you have to file a lawsuit for partition, a time-consuming and expensive process where you ask a judge to order the sale of the home.
• Buyout: When you want to keep the property but your siblings want to sell, you can buy them out with cash or through financing half of the home's value, with out-of-pocket expenses like closing costs and an appraisal.

Move Forward With Confidence

If you're feeling overwhelmed after an inheritance, take a deep breath and remember that you have no reason to worry as long as you follow the steps on this list. Just meet with legal counsel and discuss your options, referencing some of the details above, and you should have everything taken care of quickly.