What to Expect When You Inherit a Home
by Ted Ricasa on Feb 7, 2014
Inheriting property after the death of a loved one can be something of a mixed blessing. On one hand, you require time to pay your respects and begin the healing process. Then again, you know that you have important decisions to make—decisions that affect your finances and your entire family. Misconceptions about inheritance only complicate matters. Many people think of an inheritance as “free money,” a windfall with no strings attached. Others wonder how multiple heirs will affect their share. The more you understand of the process, the less overwhelmed you will feel when faced with your options.
Many Factors Affect Property Transfer
The transfer process and tax penalties vary according to your relationship to the deceased. For example, you will find that the process moves quickly if you inherit the property as a surviving spouse. In this case you will not likely incur tax penalties, either. Things become more complicated if you inherit a home from a parent or relative. When this happens, you can expect the process to take several months. In some cases, years are needed to fully resolve the property transfer. You can expect to answer questions about your relationship, and you may be asked to provide documentation in support for your claim.
You May Be Required to Pay an Inheritance Tax
Not all states impose an inheritance tax, but those that do will levy stringent penalties for neglecting to fulfill your financial obligations. In instances with multiple heirs, each heir must pay an equal portion of the inheritance tax. A federal inheritance tax also applies to estates valued at greater than $5.25 million. Beyond that amount, the maximum tax rate is not to exceed 40%. The good news is that you will not be expected to delve into your own pockets to pay the inheritance tax. Instead, the tax is deducted from the estate prior to its transfer into your ownership. When accounting for the inheritance tax, you must also consider the taxes levied on the rental or sale of the property once transferred to you, the heir.
Everyone Has a Story to Share
An inherited property is intended to benefit you, not to create a burden. As a sole beneficiary, you can choose whether to keep the home, generate rental income from the house, or gain faster access to income via a short sale arrangement. This route has become increasingly popular in light of economic issues and unfavorable housing markets. What type of person opts for short sales with cash offers?
Maria, who lives in Texas, recently inherited her late mother’s home in upstate New York. Although Maria has fond memories of the home, she has plenty of ideas about how best to use proceeds from the sale of the property. With hundreds of miles between her own home and her inherited property, she dreads going back and forth with a New York realtor for months as they try to sell.
After months of struggling to pay for his elderly father’s medical bills, Robert has incurred thousands of dollars in debt. The expense has taken a major toll on his family, and his wife has even taken on a second job. Robert would like to get top dollar for his deceased father’s property, but he’s exhausted all his lending options. He needs cash, fast.
When their parents left the family home to siblings Jason, Graham, and Sharon, they couldn’t have known how much consternation it would cause. Graham, who lives in a tiny apartment with his wife and two children, wants to move into the home. Jason and Sharon each have children in college, and proceeds from the sale could really help with tuition payments. With all the bickering and ill will, they need a solution, and fast.
Tanya, a single mother, has a hard enough time covering repairs for her own home. Her late father’s home in a low-income neighborhood needs thousands of dollars in work. She can’t possibly come up with the cash to patch the roof, replace the broken pipes, and install a new HVAC unit. Why should she inherit a property that would only make her life more difficult?
You have options: During this difficult time, you will receive an outpouring of well-meaning advice from friends and coworkers about handling your inherited property. When making such an important decision, you cannot overstate the importance of professional support. Hard as it may be, your family depends on you to act responsibly and in everyone’s best interest. Fast Home Help offers honest, fair solutions for managing your inherited property. We invite you to contact us for a free, no-obligation Property Privacy Audit™