Understanding your options and responsibilities is critical when inheriting a house, whether you sell it, keep it, or rent it out. Insights from LendingTree show you how to make the most of your inheritance. Inheriting a house can be a life-changing event with emotional and financial implications.
When inheriting a house, you don’t immediately receive the title in your name. The inheritance process involves probate, where a judge reviews the will and appoints an executor to carry out the deceased’s will. The executor handles responsibilities like insurance, identifying debts or liens and paying utilities. They also distribute belongings and manage property taxes. This ensures that the estate’s assets settle any outstanding debts before you receive ownership.
When you’re in line to inherit a home, there are five steps you should take immediately.
- Communicate with the Executor: Establish a clear line of communication with the executor. This will help you learn the necessary information and simplify the transfer process.
- Coordinate with Co-Heirs: Work with the others if you are one of several heirs. Avoid costly disputes by deciding whether to sell, keep, or rent the property.
- Get an Appraisal: An appraisal calculates the property’s value. This informs your decision to keep, sell, or rent the home while informing you of tax liabilities.
- Evaluate Debts: Identify any liens or debts tied to the property and compare them against the house’s value. Understand the financial implications and incorporate that into your decision.
- Seek Professional Advice: Consult estate planning attorneys, accountants and financial advisors. These professionals can clarify ownership-related problems, such as debt obligations and inheritance taxes.
Moving into the inherited house can provide a new residence or vacation home. However, this option can be costly due to mortgages, taxes, repairs and insurance. Renting out the property can provide passive income, while keeping it in the family. Buy out other heirs or work with them to share costs and rental income. Selling the house is a straightforward way to obtain immediate cash. The proceeds can help pay off debts tied to the house, and the remaining proceeds will go to the heirs.
If debts and taxes are associated with the house, that doesn’t mean you need to sell. There are many ways to finance the home and keep your inheritance.
- Mortgage Assumption: Take over the existing mortgage if its terms are better than what you’d get with a new loan. The lender must approve the assumption.
- New Purchase or Refinance Mortgage: You can obtain a new mortgage or refinance to put the house in your name. This option is particularly useful when the property has a reverse mortgage.Prop
- Cash-Out Refinance: Refinance the mortgage with a cash-out option to tap into the home’s equity to cover expenses, like buying out heirs or making repairs.
- Investment Property Loan: Mortgage an investment property if you plan to rent the house.
Key Takeaways:
- Inheriting a House: The probate court oversees the inheritance process, and the executor handles legal and financial responsibilities.
- Options: Move in, rent out, or sell the property based on financial goals and agreements with co-heirs.
- Financing: Explore mortgage assumptions, new or refinanced mortgages and other financing options.
Understanding your options and responsibilities when inheriting a house requires legal, financial and practical knowledge. Consult with an experienced estate planning attorney as soon as you can. If you would like to learn more about inheriting property, please visit our previous posts.
Reference: LendingTree (Nov. 16, 2021) “Inheriting a House? Here’s What to Expect”
Photo by Curtis Adams
