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If you have inherited a home you may be unsure about how to handle the next steps. While it's a well-meaning gift, a new home might not fit seamlessly into your life at this time. Here's what you should know.
When a will is written, it names a specific executor to carry out its instructions. When the homeowner passes, title transfers to the home's county probate court as soon as that executor begins the probate process.
Assuming the deceased person's debts can be duly paid off in probate, the home's title can then take another journey—from the probate court to you.
Upon accepting the deed, you'll become the homeowner, responsible for insurance and utility bills, maintenance and cleaning costs, new mortgage payments if necessary and, of course, taxes. What if that's all just a bit too much?
If selling is your best path, use the time while the house is tied up in probate to prepare. Consult with your real estate agent on how to get the house in shape to sell.
When you decide to sell your inherited home, it might be worth a lot more than the previous owner paid for it. That accumulated profit—what the IRS counts as capital gains—will be taxed at a discounted rate when you inherit the property. Your stepped-up cost basis will only count any rise in value since the homeowner passed. The IRS website offers current details.
Are you up for becoming a landlord? Think first about how much repair work you'll need to have done so the rental complies with all applicable regulations. Be sure there are no zoning regulations that would rule out a rental property.
Do you have time for vetting and interacting with renters? If so, your rental property can become a reliable income stream. Have it appraised and inspected. If it's in good condition, its investment potential may make claiming the deed worthwhile. If time or distance is a factor for you, consider hiring a property management professional to help you locate tenants and handle maintenance.
Assuming your name was not already on the deed, you do not have to claim any interest in the house. Ask the probate court where to obtain a disclaimer of interest form. Then complete it and get it notarized. The probate court can help you properly fill in the details.
Decide promptly, to meet state and federal rules and deadlines, and so the home can be quickly transferred to, and maintained by, its new owner.
Need more help? Remember that legal advice must come from your own lawyer. Yet your real estate expert can let you know what to expect, and what to ask.
