When one inherits a house it can be a challenging decision, especially because you have lost a loved one. One must figure out what to do with this house. What is the next step? This might not always be as simple as selling and moving on. There may be things to deal with first before considering selling this inherited house.
Some of those things include:
Debts and Bills: Inheriting a house might have some debts/bills associated with it that might need to be taken care of. There are several options on how to deal with this. One option is to move into the house as your permanent property. One would assume all the debts/bills and would live in the house. This might not be the best option because you already own a house. You might have to share this inherited house with others such as relatives and/or siblings. Another option might be to rent the property out. This might help you bring in additional income. However, this may be challenging if the house needs lot of repairs to make it appealing to potential renters. It can also be difficult to manage the rental, finding time to take care of whatever issues may arise. A third option would be to sell the home outright. This can be a great option because cash buyers will buy the home quickly without asking you to do any repairs. This is an advantageous option because the money can be split amongst the heirs, all the debt and bills can be settled right away, and you can move on from this difficult situation.
Tax breaks: There is potential tax break you can look in to. There will be no capital gains tax even if the home value has increased significantly since the original purchase date by the previous owner. The value will be based on what the property is worth on the day of the original owner’s death. Any taxes owed at the time of sale will be based on the current value and any increases at the time of the owner’s death, not from what was originally paid for the house from when the owner originally bought it.
Taxes: There might be other taxes that are due depending on where you live. Each state has their own requirements on estate taxes based on what the entire value of the house might be. However more than likely no federal estate tax will be due unless the value is over 5 million. Please check your state for more information or consult a professional.
Inherited house not always free: Just because one gets an inherited house for free there still might be costs associated with it. There could be a mortgage that must be paid each month. After that there will be lots of recurring expenses that must be dealt with. Things such as electricity, water, property taxes, home insurance, regular upkeep and maintenance can continue for as long as you keep the property. You must consider these expenses.
Emotional baggage: This is something people do not think of in the beginning when dealing with an inherited property. It can be very emotional to have to clear out the belongings of your loved one. There are many things to move out like furniture, clothes, jewelry, and other prized possessions. Things get further complicated if you have family members that might want to keep the same things such as a family heirloom or a sentimental object. Fighting over things could cause emotional heartache and make an already difficult task even worse. Many times an inherited property can just sit without anything being done to it because the family does not want to deal with the tremendous task at hand.