Inheriting a house has financial implications.
Those who inherit a home are often hit with a barrage of emotions.
They likely have memories and connections to the home.
These memories can trigger feelings of profound loss for the loved ones who are gone and also joy at the continued connection to the loved one.
Sometimes, those inheriting a house desire to move into the home.
Other times, they choose to sell or rent it.
According to a recent LendingTree article, it is essential to understand your financial options and obligations after inheriting real estate.
Those inheriting a house can generally choose to rent it, sell it, or move into it.
Inheriting a house is not immediate.
Generally, probate is involved in transferring a home.
During probate, a judge must review the last will and testament of the deceased and appoint an executor.
After the executor has been confirmed, this individual must administer the estate according to the wishes outlined in the last will.
Executors are responsible for handling insurance, paying utilities, identifying liens or debts, managing property taxes, and distributing assets.
The probate process ensures debts are paid before property ownership is transferred to heirs.
Those inheriting a house should take these five actions immediately.
Communicate with the Executor.
The executor is responsible for the administration of the estate through probate.
Establishing and maintaining communication with the executor informs you of necessary updates and simplifies property transfer.
Coordinate with Co-Heirs.
Estates often have more than one heir.
If you inherit a house with other heirs, you must work together in choosing whether to keep, sell, or rent the property.
Get an Appraisal.
The appraisal of a home is critical in determining the property's value.
This information lets you better understand the tax liabilities and implications of keeping, renting, or selling the house.
Evaluate Debts.
Some inherited property will be subject to liens or debts.
Compare these to the home's value to understand the financial implications of your decisions.
Seek Professional Advice.
While it is possible for those inheriting a house to make decisions independent of any professional advice, working with accountants, estate planning attorneys, and financial advisors can help you better understand ownership issues such as inheritance taxes or debt obligations.
Those who inherit a home may use it as a vacation home or a new primary residence.
Simply keeping the home yourself may be more costly than anticipated with repairs, insurance, taxes, and mortgages.
Renting is a good option for those who want to keep the house in the family while establishing a passive income.
If multiple heirs inherit the property, you should devise a system to share costs and rental income or to buy out the other heirs.
If your need for immediate cash is greater than your connection to the property, you may choose to sell it.
The money from selling the home can be used to pay estate debts.
Proceeds can then be distributed to heirs.
Even if you are inheriting a house with taxes and debts connected to it, you do not have to sell.
Options are available to keep your inheritance through financing the home.
What are these?
Mortgage Assumption
Getting a new loan for a home can be challenging in this current economic climate.
If the lender approves the assumption, you may be able to take over the existing mortgage if it had better terms.
New Purchase or Refinance Mortgage
You can refinance or obtain a new mortgage to put a house in your name.
If the house had a reverse mortgage, this option can be helpful.
Cash-Out Refinance
Refinancing with a cash-out option allows you to use some of the home's equity to cover expenses, such as making repairs or buying out other heirs.
Investment Property Loan
If you plan to rent the home, you can mortgage it as an investment property.
There are various legal, practical, and financial aspects to inheriting a house.
Working with an experienced estate planning attorney or other tax or financial professional can help you decide how to handle the property.
Those inheriting a home often have to wait for the lengthy probate proceedings to settle before taking ownership.
Once probate is complete, the heirs must decide whether to rent, move in, or sell the property.
In the case of multiple heirs, a plan must be made together.
If financing is required for the final decision, the heirs can explore a few options, such as assuming a mortgage, refinancing a mortgage, or getting a new mortgage.
Whether you inherited a house alone or with other heirs, you should work with wise and experienced professionals to act based on your current needs and future goals.
This post is for informational purposes only and does not provide legal advice. You should contact an attorney for advice concerning any particular issue or problem. Nothing herein creates an attorney-client relationship between Harvest Law KC and the reader.
Reference: LendingTree (Nov. 16, 2021) "Inheriting a House? Here's What to Expect"
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