Inheriting a property typically comes along while you’re also navigating the grief process. The news of this generous gift can be overwhelming, all-consuming, and confusing, even if the person naming you was distant. When you inherit a property, there are several steps to take to secure your new asset and protect your interests.
1. Review the Will
Television shows dramatize the will-reading process, but even a private reading can be shocking. First, review the details of the will regarding the property and all other assets. There may be details pinpointing to the home’s contents, usage, and expectations throughout the document.
Confirm that you are the single inheritor and that there are no other current homeowners or beneficiaries. If your grandfather’s second ex-wife was never removed from the home’s deed, clarify which document supersedes the other. Review documentation associated with the home like the property’s home insurance, utilities, and tax records.
2. Confirm the Ownership Terms
Work with an estate attorney to confirm the terms of ownership and any nuances that the will or your state may dictate. Clarify the process for transferring the title into your name and what timeline to expect.
In some cases, a will may name two inheritors, which can complicate matters. If this is your situation, collaborate with the co-inheritors to determine how best to transfer the property. Find out if there are any details in the will that obligate or set expectations for the property once it’s in your name.
3. Identify Any Liabilities
Review the title and determine if there are any liens against the property, such as unpaid property taxes. The property may also have a mortgage tied to it, so find out what’s owed and if there’s an escrow account. Some older individuals sign up for reverse mortgages and fail to update their will, so confirm that’s not your situation.
Seek out any lingering liabilities like homeowners’ association dues or outstanding debts associated with the property. If the previous owner paid for repairs on a credit card, find out what’s to come with the unpaid balance.
4. Learn the Property’s Condition
You may be familiar with the property as a visitor, but you may not have looked at it as an owner. Visit the home to see its current condition and take notes on your findings. Look for any immediate repair needs, especially those that threaten the home’s value or safety.
Get an inspection from a professional, similar to how you would when purchasing a home. This can give you a good baseline on what the condition is and identify needed repairs. Coordinate any immediate repair needs and maintain good records on what money is spent along the way.
5. Sort Out Tax Obligations
Work with your attorney and the attorney representing the deceased to find out what taxes are owed now. Find out what the tax obligations may be depending on what you may choose to do with the property. Tax rates may change when a property transfers ownership, deductions may be lost, and it may trigger an updated assessment.
Discuss the financial implications of this new asset with your financial advisor and what may be the best move. Adding real estate to your portfolio may be a win, but the costs of maintenance and management may drain value. Review all of your options, the inheritance and estate taxes for your situation, and any reporting requirements.
6. Consider Your Options
Now that you know the financial and tax implications of your inheritance, it’s time to consider the emotional side. Inheriting the family lake house may be a welcome gift, but the pressure of others may be too much. Family members may have expectations of an open door policy, just like grandma had, but that’s not your style.
Think about what retaining the property might mean to your lifestyle and if it is an improvement. You may make it your new primary home, use it as a vacation rental, or rent it out to tenants. A family member may want to buy it from you or enter a partnership agreement.
No matter what, take your time considering your options as you navigate the grief process. Wait to make a final decision until you’re in a clear head space and are well-informed about all options.
7. Update Your Portfolio Once You’ve Decided What to Do
Once you’ve made your decision, update your portfolio to protect your interests and your assets. Update your home insurance to reflect the current status of the home and cover your liabilities. Get an appraisal to determine the property’s value and take into account any recent repairs or improvements.
If you’re using it as a rental, you’ll need additional coverage in case of an accident or tenant-related issue. A rental property will also be taxed differently, so update your records with your local tax office.
Finally, update your will to incorporate this property as part of your portfolio and name its inheritors. The family lake house may necessitate a different path after your passing than your other assets.
Manage Your Inheritance Thoughtfully
Inheriting a property can have a positive impact on your life, but it’s not without complexity. Be thoughtful and methodical with your approach to accepting the gift and determining what to do with it. Manage your emotions through the grief process and take your time in making any final decisions about the property.
By taking a thoughtful approach, you’ll consider all of your options, manage risks, and identify opportunities that real estate offers. Take advantage of the gift bestowed upon you and leverage it to improve your financial wellness and security.
