Upcoming generations are set to pull in big inheritances. In fact, an estimated $30 trillionis expected to be passed on to heirs in the next few decades. And much of that will be in the form of real estate.
But it’s not always easy to know what heirs should do after they inherit a house.
We’re here to help clear things up. We’ve nailed down the process surrounding inheriting property or inheriting a house. Read on for the inheritance ins and outs. If you have an interest in getting a cash offer on your inherited house, we would love to give you a cash offer!
Things to Consider if You Inherit a House
Inheriting a house usually comes at a hectic time in a person’s life. The inheritance tends to be unanticipated, and it often comes among heavy emotional times or big life changes.
And it can be hard to remember, or have time, to research the must-dos.
Here are some key things to think about if you inherit a house:
What about Taxes?
Taxes might seem like a big concern when inheriting a house. But the federal government doesn’t place taxes on inheritances. Most states also don’t tax inheritances, although there are a few that do.
In most cases, the person who has inherited a house pays on a step-up tax basis. That means the individual gets the house at its fair market value at the time of inheritance. From there, the heir is just taxed on the gains made between the time of inheritance to the time it’s resold.
This can come in handy if the heir is inheriting a house that has increased in value from the time it was originally bought. When it’s resold, tax is based on the value at the time of inheritance rather than the original value.
But there are also taxes linked to a person’s broader estate. That means it’s a good idea to get the help of an accountant when sorting through inheritances.
What’s the Mortgage Status?
The status of the mortgage can have a big impact on how quickly an heir might want to sell after inheriting a house. If heirs are inheriting a house with a mortgage, it’s good to understand what they’re dealing with.
Here are some common situations when inheriting a house:
Due on clause – This means the whole loan is due when a person transfers it to someone else. In most cases, if family members inherit the house they can just assume mortgage payments. But the clause could make it smart for the heir to sell the home.
Underwater – This means more is owed on the home than it is worth. Sometimes the lender will agree to a short sale to recoup losses.
Reverse mortgage – This usually means the heir has around six months to pay the due amount.
Paid off mortgage – Inheriting a house that is paid off usually means the heir owns it, free and clear.
Are Repairs Needed?
It’s smart to get an inspection after inheriting a house. From there, decide if the house will be kept, sold, or rented out.
This decision could help inform what renovations will be best.
Selling an Inherited House
This guide should help clear up questions if you inherit a house. But we have more helpful information.
Contact us here to learn about how we can help you reach your home-selling goals.