So you just inherited a home, what should you do?
Today we’re going to be highlighting some points on what you should consider when you’ve inherited a home – from selling to renting, tax implications, legal implications. Let’s jump into it!
- One of the first things you should consider when inheriting a home is to understand your options. If the property is in a trust and you are the trustee, the first person to contact is typically legal. You’ll want to confirm if the property falls within the trust and confirm you have the right to make decisions on behalf of the trust. You’ll also want to understand who the beneficiaries are and discuss with them what they would like to do. Keep in mind that you are the fiduciary for everyone - meaning, you need to act in the best interest of everyone involved.
- The next person you should consult is a real estate agent. They will give you intel on what the property can rent for, can sell for, and what improvements should be done to the property as the scope of work will vary depending on which one you lean towards.
- You’ll also want clarity on the tax implications of a potential sale. Become familiar with what stepped up basis is. Depending on how the title is held and who holds it, you’ll want to understand the tax benefits of a potential inheritance.
Stepped up basis is the readjustment of the value of an appreciated asset for tax purposes upon inheritance. For example if a homeowner’s original basis was 30 years ago and based on a very low purchase price, a potential sale today would result in a huge capital gain burden. But if there is a step up because of an inheritance, the basis is formed from the date of passing of your loved one. There’s a huge difference when it comes to the potential capital gains tax reduction. Your real estate agent should also introduce you to a tax advisor to verify this. Your agent will also be able to provide a letter called a stepped up basis valuation for the time of passing.
- If you are considering renting out the home, you’ll likely want to know what needs to be done to the home and what it could rent for. You’ll also want to find a property management company to help you with rent collections. Once you have clarity on this, you’ll be able to move forward with your plans to rent the property.
- In addition, if you are considering selling the home, you’ll likely want to know what needs to be done to the home and what it would be worth when you sell. You’ll also want to clarify what to do with the proceeds once you sell. Are you going to pay off debt? Will you utilize it to reinvest in real estate? Stocks? Having a plan of action for the funds will be helpful during this process.
If you’ve recently inherited a home and have questions about your options or how to navigate the process, reach out to us! Our team is happy to help find the best option for you and your family.