Understanding Your Inherited Property

Is the property immediately mine after my loved one's death?

There are quite a few legal issues to consider before a property transfers ownership. 

For example, if you inherited a house by deed, you were likely appointed the "remainderman" for the deceased's estate. This means the house probably moved into your hands after your loved one passed, and there's no need to go through probate proceedings. Since your name is likely on the deed, you should have no issue selling the property.

If your loved one left their property to you in their will, you might have to go through probate. During this process, the house will be transferred into your name. You will be able to sell the house after the probate process is completed.

If you inherited the house through a trust, you (and the other heirs) should get control of the property at the time of your loved one's death.

What options do I have for the property I inherited? | Pros & Cons

1. You could sell the house.

PROS: If you have no interest in keeping the house, you can sell the property. In most cases, you won't have to pay capital gains tax when it sells.

CONS: You are responsible for all expenses until the house sells. Preparing a home for the market can sometimes be daunting, especially if any repairs or upgrades need to be made to get the best price.

Of course, these options are more complicated if multiple heirs inherit the property. Group decisions are sometimes difficult to make and may require the assistance of an attorney.

2. You could rent the house.

PROS: If you are emotionally attached to the house but aren't able to live there, you could rent the property. There may also be financial benefits to renting – as the rent can be added to your monthly income. 

CONS: There are expenses associated with home ownership such as getting the home renter ready this may take more time and money that expected. Also, owning a rental property can be a hassle, and it may be financially harmful if you can't find reliable tenants for the property or the tenants damage your home. If this is a family home or a home with memories there can be a lot of distress associated with damaged homes and unreliable tennants. This is often something people don't consider going in but something we see everyday.

3. You could live in the house. 

PROS: The assets of the estate may pay off any existing mortgage. As long as you live there for at least two years, you could receive capital gains tax exclusions on primary residences ($250,000 for individual taxpayers and $500,000 for married couples filing jointly) when you eventually sell the property.

If the house isn't paid off, you may have to get a mortgage in your name to pay off the remaining balance. Then, you could continue payments on the property until it makes financial sense to sell it.

CONS: Even if the mortgage is paid off, there are still other expenses associated with home ownership, including property taxes, homeowner's insurance, maintenance, repairs, utilities, etc. 

What are the financial considerations of inheriting a house?

There are quite a few financial considerations when deciding to inhabit, rent, or sell a home – especially if multiple people own the house. 

Inheritance tax and estate tax may need to be considered depending on the property's location and the estate's size. In addition, selling the property may trigger capital gains taxes. 

If money was still owed on the house, you might need to take out a new mortgage in your name if you wish to continue making payments. You will also be responsible for all household expenses as soon as the property is transferred to your name – including property taxes, utility bills, homeowners insurance payments, etc.