FREE Ebook: Next Stop: Nursing Home Get My Copy Now!

Schedule Your Consultation Today!

(407) 574-8125

When Inheriting Real Estate, Consider Your Options

Get The Legal Help You Need

When Inheriting Real Estate, Consider Your Options

February 24, 2020
Geoff Hoatson

Inheriting real estate from your parents is either a blessing or a burden -- or a little bit of both. Figuring out what to do with the property can be overwhelming, so it is good to carefully think through all of your choices.

There are three main options when you inherit real estate: move in, sell, or rent. Which one you choose will depend on your current living situation, whether or not you have siblings, your finances, whether the house has a mortgage or liens, and the physical condition of the house. The following are some things to consider:

  • Taxes. In most situations, you do not have to pay taxes on property you inherit, but if you sell the property, you will be subject to capital gains tax. The good news is that inherited property receives a step-up in basis. This means that if you inherit a house that was purchased years ago for $150,000 and it is now worth $350,000, you will receive a step up from the original cost basis from $150,000 to $350,000. You should get an appraisal done as soon as possible to find out how much the house is currently worth. If you sell the property right away, you should not owe any capital gains taxes. If you hold on to the property and sell it for $400,000 in a few years, you will owe capital gains on $50,000 (the difference between the sale value and the stepped-up basis). On the other hand, if you use the property as your primary residence for at least two years and then sell the property, you may be able to exclude up to $250,000 ($500,000 for a couple) of capital gains from your taxes.
  • Mortgage. Does the house have a mortgage on it – either a regular mortgage or a reverse mortgage? Sometimes it is specified in the estate plan that the estate will pay off the mortgage. In cases where it doesn’t, with a regular mortgage, you will likely have to assume the monthly payments. There are some mortgages, however, that require the heirs to pay off the mortgage immediately. With a reverse mortgage, you usually have a limited time to pay off the mortgage in full.
  • Repairs. It is a good idea to hire a home inspector to assess the condition of the house. If the property needs significant repairs, it may affect what you do with it. Renovations and repairs can be costly and time-consuming. You may want to consult with a realtor before taking on any big projects. It may not make sense to spend a lot of money on the house.
  • Property Maintenance. Once you inherit the property, you will be responsible for maintaining it. The first thing you want to do if you inherit property is making sure the utilities and homeowners’ insurance are transferred to the new owners and continue to be paid on time. You will also need to pay all the property taxes and any other fees associated with the property.
  • Other Owners. If you inherited the property with siblings, you will all need to agree on what to do with the property. If one sibling wants the property, he or she can buy it from the other siblings. Otherwise, you can sell or rent the property and split the profits. If there is a dispute among siblings, you can try professional mediation. In mediation, the disputing parties engage the services of a neutral third party to help them hammer out a legally binding agreement that all concerned can live with. The disputing parties can control the process and they have a chance to explain their perspectives and feelings. If you go to court, the judge will likely order the house to be sold so the profits can be split.

Ultimately, there are many decisions to make when you inherit real estate and deciding what to do with it can be a very emotional decision. If possible, try not to rush into any decisions until you’ve had time to thoroughly consider your options.

Copyright © 2024. Family First Firm - Medicaid & Elder Law Attorneys. All rights reserved.
The information in this blog post (“post”) is provided for general informational purposes only and may not reflect the current law in your jurisdiction. No information in this post should be construed as legal advice from the individual author or the law firm, nor is it intended to be a substitute for legal counsel on any subject matter. No reader of this post should act or refrain from acting based on any information included in or accessible through this post without seeking the appropriate legal or other professional advice on the particular facts and circumstances at issue from a lawyer licensed in the recipient’s state, country, or other appropriate licensing jurisdiction.
Family First Firm – Medicaid & Elder Law Attorneys
(407) 574-8125
https://www.familyfirstfirm.com
Share This Blog

Our Locations

Winter Park Office

Family First Firm - Medicaid & Elder Law Attorneys

1030 W Canton Avenue, Suite 102,
Winter Park FL 32789

Get Directions

Altamonte Springs Office

Family First Firm - Medicaid & Elder Law Attorneys
By Appointment Only

715 Douglas Ave Suite# 40,
Altamonte Springs, FL 32714

Get Directions

Get free legal advice sent to your inbox

Name(Required)