Learn More About
The Process After Inheriting a Home or Property!
Receiving a generous gift from a loved one, such as the inheritance of
a home or property, can be an emotional time. You might be surprised to learn
that there is a lot more to inheriting a property than just acquiring
the home itself. There are several considerations to take into account when handling this type of inheritance, such as
deciding whether to keep or sell the home, how a possible mortgage or taxes will come into
play, and even how this may affect your family
and relationships.
While the inheritance of a home can come unexpectedly, it is important
to do your research so that you can handle the
transaction to the best of your ability. If you’ve recently inherited a property,
continue reading to learn more about what decisions you may need to make in the
coming months.
Inheritance Options
Once you’ve inherited a home, you will have a few options when it
comes to deciding what to do with the property. In most cases, you will have
the choice between moving
in, selling the home, or making it an investment property by renting
it out. If there are multiple heirs to the inheritance, this may
become more complicated. You will need to work together to find what is best
for each of you. It is important to make sure that the home is being properly
maintained in the time that it takes you to make your decision so that
potential loss
or damage can be prevented. Something else to consider is
the time frame for which the home will be unoccupied as this may determine
whether losses are covered should you need to place an insurance
claim.
The Tax Implications
How taxes will be applied will depend on what you choose to do with
the home.
It’s important to know that while there is no federal
inheritance tax, there may be state
taxes applied depending on where you live and how much the property you
inherit is worth. For most people, just inheriting a property will not trigger
an immediate tax liability.
If you decide to sell the home, and there is a profit on the sale, you
could be held responsible for paying short-term or long-term capital gains tax.
This will depend on how long the
property was in your possession before sale. Capital gain taxes are federal
taxes on the profits gained from the sale of an
asset. Short-term capital gains taxes typically apply on the sale of an
asset that has been owned for up to a year. Beyond that, long-term capital
gains taxes would be applied.
Something to be aware of going forward is that you may be subject to a
real estate tax reassessment. When a home changes hands, it may be reassessed
to find it’s updated worth. In some states, if you are a child
or grandchild of the previous owner, you can be exempt from the
property reassessment, however if you are a niece or nephew, you may be
expected to pay property taxes on the reassessed value.
If you have recently inherited a home, you might consider consulting
with an experienced financial advisor before
deciding on a course of action.
The Stuff
One thing that can often be a point of stress or contention is the
distribution of possessions that are inside
the home you inherited. If there are multiple heirs to the inheritance or even
just multiple family
members involved, deciding where, or to whom, sentimental items will go may
cause distress. This can be an overwhelming process, which is why in many cases
a home may sit empty for long periods of time. Although this can be a delicate
affair, it’s important to remember that leaving the home unoccupied for too
long may lead to damage on the property going unnoticed, potentially causing
issues with your insurance
coverage.
The Cost of A “Free” Home
Although the property may have come to you with no initial costs,
there are still expenses to consider when deciding what you would like to do
with the home. Generally speaking, someone
who inherits a property that’s subject to a mortgage, will inherit the mortgage as well. Oftentimes the new owner can
simply take over the old mortgage, pending mortgagee approval. Depending on the previous owner’s financial situation, an
estate may settle the remainder of an existing mortgage. If not, you would be responsible to pay the
mortgage, in addition to the costs associated with property taxes,
insurance, utilities and maintenance. Again, this can become complicated if there
are multiple heirs involved. It is best to consult an experienced financial
advisor as well as a lawyer before signing any paperwork.
You will also want to assess the property to see whether or not there
are any prominent liability
risks. Consider the cost of
repairing any damages and maintaining the home for
occupancy or for sale during the decision making process.
It is important to take into account the current level of insurance
coverage you have on your inherited home as well. For more information about
home insurance and policy
discounts with NYCM Insurance, contact one of our local
agents by clicking the link below!
