Having a house may sound exciting, but it has a lot of responsibility attached to it as well. You will have to keep an eye on things like bills, taxes, repairs, etc. And if you already own a house to live in, you will most likely wonder whether you should keep the new one or not. Some people even inherit the house with siblings or other relatives, which makes the scenario a little bit more complicated.
Although it may be intimidating, inheriting a house does leave you with some good options. You do not have to act immediately, but being aware of what your options are may make you feel stronger. Let us discuss your best options.
1. Sell the House
One of the easiest things you can do is sell the house. Many people will choose this as an option. You will never have to get concerned about getting the house ready or attempting to find a renter for your house. And selling it also prevents feeling sad about what you might see in the house.
If you inherited the house with someone else, for example, a brother or sister, selling it will make it much easier to divide the cash between you. You can each take your cut and walk away. You can even sell your house privately by using services such as Quick Move Now, thus having full control over selling it on your terms.
2. Live in the House
If you are paying rent presently, then residing in the house could be a good option. It would cost you less money, and you would have your own home. But if you stay with another relation, it would be difficult to make up your mind about whether or not, and how you can coexist there.
In the first place, if you have another house, then you will have to pay double taxes for staying in two different houses. Besides, this house may hold a few memories; therefore, the emotions while staying here will be unbearable at times.
3. Rent a House
If you do not want to sell or occupy the house, you can rent it out. That is, you will be a landlord and rent out the house to some other person and receive rent from them. In this manner, you can earn extra income.
But being a landlord is not that easy. You need to take care of the house so it is safe and clean. You also need to know the area so you can charge a good price for rent. It is best to do research beforehand before investing in a rental property.
4. Give Property to Another Heir
In situations where multiple individuals inherit a property, and not everyone desires ownership, one or more heirs might consider transferring their share to another co-heir. This can simplify ownership and decision-making.
Considerations for Transferring Property:
- Legal Formalities: Property transfer entails certain legal formalities, such as re-registering property and possibly bearing gift tax implications based on the nature of the transfer and applicable law. The services of a real estate lawyer are necessary to make the transfer legal and to submit all paperwork in due course.
- Family Dynamics: All the heirs should be open and in consensus. Financial conditions and likes of each can be shared for a smooth transfer without rancor or miscommunication.
- Valuation: The property has to be established as to what its fair market value would be in the event one heir is “buying out” another’s share.
- Financial Consequences for the Transferor: The beneficiary giving up their share may relinquish any short-term financial benefit from the property, except in a buyout agreement. They need to consider carefully their long-term financial objectives.
5. Utilize the Property as a Vacation Home or Second Home
If you have a primary residence, the inherited property can be utilized as a vacation home or second home. This option allows you to utilize the property from time to time without all the full-time obligations of primary use or the commitment of being a landlord.
Things to Consider in Using as a Vacation Home:
- Maintenance: Although it will only be used part-time, the property will need regular maintenance, security checks, and possibly landscaping. A budget for periodic costs needs to be accounted for.
- Travel and Logistics: Calculate the cost to travel to the property. Periodic visits will likely yield high travel costs.
- Dormant Use: The property may sit vacant for long periods of time. There may be an emotional feeling of underuse or a loss of potential rental earnings.
- Future Uses: Having the home remain a vacation property gives possibilities for future life occurrences, such as retirement or a desire to relocate.
- Tax Consequences: A second home could be subject to differing tax impacts from a primary residence. Becoming informed on state property tax statutes and accessible deductions is imperative.
6. Donate the Property to Charity
For those with deep philanthropic sentiments, giving the inherited property to a charity organization can be a fulfilling choice. This can result in a high tax deduction and benefit a cause you are passionate about.
Donation Considerations:
- Charity Eligibility: Make sure the selected charity is eligible to accept real estate donations. Certain charities have special requirements or restrictions.
- Appraisal: An asset acquired by the individual should normally be appraised by an expert before its fair market value is used as a basis for the deduction of tax.
- Tax Benefit: Consult a tax expert in this regard. Normally, the value of the deduction depends on the value of the asset and the nature of the charity.
- Legal Formalities: The process involves legal formalities for the transfer of ownership to the charity.
- Emotional Ramifications: While yielding tax benefits, giving away a precious family residence may also carry emotional undertones.
Key Measures After Inheriting a Property
Regardless of the course you ultimately choose to pursue, there are some initial steps that are paramount after inheriting a property:
- Secure the Property: Secure the property by altering locks, checking windows and doors, and perhaps scheduling security surveillance.
- Review Insurance: Inspect the current homeowner’s insurance policy and make sure that there is sufficient coverage. You must renew the policy or acquire a new one in your name.
- Manage Immediate Bills: Find and settle any outstanding bills related to the property, such as property taxes, bills for utilities, and mortgage payments (if applicable).
- Inventory and Appraisal: A listing of the contents of the property and a professional appraisal to determine its fair market value for tax and future planning purposes
- Legal Consultation: A probate attorney to gain information regarding legal considerations regarding estate taxes and transfer of ownership.
- Financial Planning: Meet with a financial planner to figure out the monetary advantages and disadvantages of each option and develop a plan that suits your overall financial goals.
Conclusion
Accepting a property is both a privilege and an obligation. There is no one-size-fits-all approach, and the optimum approach will depend on your specific case, financial condition, emotional connection to the property, and relationships with any co-heirs.
Be cautious and carefully consider each alternative, weigh the pros and cons, and seek professional advice when necessary. Communication openness among relatives is essential if you are receiving property together.
