You’ve recently inherited a house, but you’re not sure where the process goes from here. In some cases, inheriting a house is an emotional time especially when it once belonged to a close friend or family member. In other cases, there may not be any sentimental value attached.
In any case, it’s often a hard decision to make when contemplating what to do with the house next. You do have some options, so it’s vital that you understand each one and take the time to do what’s best for everyone involved. Continue reading below for our guide on property inheritance, where we’ll help you do just that.
Cleaning out the Home
Now that you’ve inherited a property, the first thing you must do is clean out the house. Depending on the situation, this might be an easy task to accomplish or a much harder one. If there’s no attachment to the house and the stuff in it, you can hire a company to clean out the left belongings.
Decide what items you want to keep for either yourself or to sell first and then have the company come in and clean it out. However, things get more difficult if there is an attachment to the house and the belongings in it. In this situation, it might take you longer to go through all of the personal belongings left by your loved one.
It’s okay to take your time and carefully go through what can be thrown out and what needs to be kept. Consider having other friends or family members help you out. There may be some items that a friend or family member wants to keep that you aren’t attached to.
You can make 3 separate sections, one for trash, one for keeping, and one for selling.
Next, you’ll need to focus on the upkeep of the house. Just because no one is living in it at the moment doesn’t mean you want the lights and water to be turned off and the lawn to overgrow. Go through all of the utilities and disconnect any services that the house no longer needs such as cable or internet.
Consider hiring a lawn service to keep the lawn mowed if you can’t keep up with it yourself. And be sure to contact all needed utilities to ensure you’re paying the bills to keep them running. Hopefully, it won’t be too long before you make your final decision on what to do with the house, so you won’t have to worry about paying these bills for long.
Selling, Renting out and Keeping
It’s time to discuss your options for what you can do with the house. There are several things that you can do. Either you want to sell the house after cleaning it out, you want to rent out the house and use it as an investment, or you want to keep the house to live in yourself.
Below we break down these 3 options for you.
Selling the House
When choosing to sell the house, you’ll need to know if the house is paid off or if a mortgage is still owed on it. When all debts of the deceased are paid off and the house is listed in the will, probate occurs. Selling probate property is a process that’s best handled by a probate attorney.
All situations are different, but you’ll need to ensure that all taxes are handled, debts are paid, and so on. It’s also important to note that beneficiaries are given a stepped-up basis (property’s fair-market value at the time of the death), which means when you sell the house, you only pay taxes on gains made after the passing of the previous owner.
You’ll also need to ensure that you’re keeping up with the home insurance on the house. Switch it into your name until the house is sold. After you sell the house if there’s mortgage left to pay, pay it. You’ll also need to cover closing costs, transfer taxes, and real estate commissions.
Renting Out the House
Another option you have is to rent out the house. This is sometimes a great investment for those who inherit property. However, renting out a property isn’t as simple as placing it on the market and bringing in renters.
There’s a lot more that goes into it, but if done correctly, it could be a great option for you. To avoid any mistakes, consider hiring a property manager to help you manage the marketing and leasing. Have a home inspection done, make necessary repairs, and check with city ordinances for renting rules.
Once you check off everything, you can rent out the property and use it as a great investment.
Keeping the House
Your final option is to keep the house and move in. When planning on living in an inherited house, you should expect the property taxes on it to increase. However, it can be the perfect option for you if the house provides you what you need such as more square feet or a better neighborhood.
Be sure to have an inspection done when planning to live in it as well as you’ll need to know of any repairs that need to be made and the costs. Also, keep in mind that just because you’ve inherited it along with someone else doesn’t mean you can’t live there. Come together and discuss a fair decision.
In some cases where there are co-owners for the home, one person pays the other co-owner in the form of rent payments or buying them out.
Understanding the Taxes
Tax laws for inherited houses differ from state to state. And fortunately, the federal government doesn’t tax inheritances, so the state laws are the only ones to worry about. Check with the state or hire an account that can help you sort everything out.
You should also note that even though there isn’t a federal inheritance tax, there is a federal estate tax or “death tax” to take into consideration. Be sure to know what taxes you’ll be responsible for and the cost of them.
If You’ve Inherited a House, Follow Our Guide!
If you’ve recently inherited a house, then you’ll want to keep our guide handy. Whether you have attachments to the house or not, deciding what to do with it is often difficult. Know your options and what each one entails to help you make the right decision.