Inheriting a home can be an emotional time. Whether the home is where you spent your childhood or perhaps a place filled with memories of your loved one, taking on the responsibility of managing an inherited home is often trying both mentally and physically. It can also be easy to make emotionally based decisions that don’t fit into or aren’t realistic for your own long-term plans. It can also often get even more complicated when there are multiple parties involved, whether that includes siblings who have different views on key decisions or even down to who gets what in the home.
When you inherit a home, there are numerous considerations. You not only need to consider the sentimental value of the home along with its contents but also the practical legalities, tax implications, and whether or not it is the best option to sell the home. At Homestead Road, we work with clients who have inherited homes all the time. Here, we would like to share some of what we’ve learned over the years with you to make this time and process as easy as possible.
The Legalities
Before you can manage a home that you’re set to inherit, you must first undergo a legal process known as probate. Mentally and emotionally, this can be very challenging because all your loved one’s assets will be frozen during this time. Probate can be a potentially lengthy process that can take as long as 9 to 24 months, so make sure to plan accordingly.
During probate, the court will determine the validity of your loved one’s will and grant its approval regarding the distribution of the estate. This will include specifics as to who will inherit the home and often times distribution of financial and other assets including personal property. Once approved, the court will officially appoint one or more executors to administer the estate and complete the inheritance transactions for the willed assets. Once the home has been transferred into the name or names of the inheritors, the receiving parties are now in a position to start the process of taking steps to move forward with distribution of assets inside the home as well as the home itself.
Establishing a Game Plan to Minimize Stress and Drama
Once the probate process is finalized, the distribution process can be set in motion. Of course, it’s much simpler when there is just one party as beneficiary so decision making is straightforward. However, oftentimes the beneficiaries include multiple parties, often adult siblings who may have differing thoughts on the disposition of the home and other items which complicates and prolongs the process to move forward. Because we have worked with many home sales involving an inherited home, we have seen what works best and desire to share some best practices to consider.
If there are multiple beneficiaries who will be involved in the decisions about the home and its contents, we strongly suggest getting all the beneficiaries together before any plans are created or any actions are taken. Given the circumstances are likely emotional if there was a passing of a family member, it is best to take steps to avoid additional unnecessary stress and drama.
A key recommendation is to get all the beneficiaries together if possible at a location other than the inherited home where all parties can review the probate order. This also serves as an opportunity to have open and honest discussions to get everyone on the same page in respect to specifics in the will, clarifying who gets what according to the will, determining when everyone will meet at the home, etc. This may include determining a process that is fair and equitable for the distribution of items in the home which were not specifically mentioned in the will. Whether it involves alternately drawing names out of a hat or drawing straws, this is very important to determine for items that are higher in sentimental or financial value to avoid squabbling and disagreements. Setting simple ground rules and getting beneficiaries together prior is an easy step to skip, but in the end, it is an important step for obvious reasons. Of course, then there’s a big decision relative to the disposition of the inherited home.
Inherited Home – To Sell or Not to Sell?
When you inherit a home, the biggest decision you and other beneficiaries in some instances will make is whether you want to hold on to it or to sell. It could be a circumstance where you’d like to move into the home yourself. If the home is located a fair distance from where you are living but you’d still like to keep it in your name or family, you might also consider renting it out to a tenant if you are interested in passive income, but that can take a lot of work and effort to keep it maintained for the tenant as well as making sure it is rented on an ongoing basis.
Sometimes, however, holding on to the home is not an option or your desired choice. Property tax and maintenance for an additional home may not be financially viable and renting the home may be too much of a hassle when you already have so much on your plate. If this is the situation you are in, you may consider selling the home.
Selling the traditional way through a real estate listing can be time consuming and expensive. If you decide you would prefer to sell your home on the market, you will likely need to invest some money into renovations or updates before listing. You can talk to a local realtor to find out what potential modifications you should consider making in order to attract more potential buyers to the house. You’ll not only have to go through the home-selling process but you’ll also have the responsibility of handling your loved one’s belongings. This can include managing how to donate, keep, store, or organize all of the many item’s remaining. This can demand large amounts of your time and energy as well as money if you have to pay for a dumpster and a crew to remove large, bulky household items. If it is difficult for you to be in the home, it may also be too much to handle emotionally.
If you don’t have the time, money, energy, or desire to renovate and market the home using the traditional method but you would still like to sell, there is another option. A quality real estate investor will purchase the inherited property as-is, and you can receive the proceeds in as little as two weeks. You won’t have to worry about which agent to choose, nor will you have to undertake cleaning or repairs. Even better, when you sell to a real estate investor, you can take the items you want and leave any unwanted items behind.
Homestead Road Is Here to Help
If selling to a real estate investor is a route you would like to consider for your inherited home, we encourage you to get in touch with us. At Homestead Road, we are very proud of our Better Business Bureau A+ accreditation and our 150+ 5-star reviews, so we hope you’ll consider us when it comes time to sell your home, especially if you are interested in working with a values-based company where there’s no fine print but instead a streamlined and transparent process.
Since 2007 we’ve helped over 1,000 homeowners sell their homes, including many who had inherited homes. One of our experienced and compassionate acquisition managers will be happy to provide a free, no-obligation evaluation of the home and walk through the selling process with you should you choose to work with us. After the sale, our (optional) gift to you will be a hand-painted watercolor portrait of the home that you can keep to cherish all the memories it held with your loved one.
One Final Consideration – Tax Implications
One final aspect of inheriting a home to consider is the tax implications. As the new owner, you will be responsible for the annual property tax. This is calculated as a percentage of the assessed value of the home each year and varies by state. If the home increases in value, you may end up paying more than expected. We totally understand that these details aren’t thought about in our daily lives much less when faced with a potentially emotional situation, so that’s why we are hoping these tips take some of the potential unknowns off the table.
If you decide to sell the home and the sale price is larger than the assessed value on the date of your loved one’s passing, you will need to pay capital gains tax on the difference between the two figures. According to IRS publication 523, this can be avoided on gains up to $250,000 ($500,000 for married couples) if you make the home your primary residence prior to selling.
In most cases, the tax liability will be withdrawn from the balance of your loved one’s liquid assets. However, if there are insufficient funds available here, the responsibility to pay will be passed on to you as the beneficiary.
