Search Articles

Find Attorneys

When Inheriting Real Estate, Consider Your Options

  • December 12th, 2019

Inheriting real estate from your parents is either a blessing or a burden -- or a little bit of both. Figuring out what to do with the property can be overwhelming, so it is good to carefully think through all of your choices. 

There are three main options when you inherit real estate: move in, sell, or rent. Which one you choose will depend on your current living situation, whether or not you have siblings, your finances, whether the house has a mortgage or liens, and the physical condition of the house. The following are some things to consider:

  • Taxes. In most situations, you do not have to pay taxes on property you inherit, but if you sell the property, you will be subject to capital gains tax. The good news is that inherited property receives a step-up in basis. This means that if you inherit a house that was purchased years ago for $150,000 and it is now worth $350,000, you will receive a step up from the original cost basis from $150,000 to $350,000. You should get an appraisal done as soon as possible to find out how much the house is currently worth. If you sell the property right away, you should not owe any capital gains taxes. If you hold on to the property and sell it for $400,000 in a few years, you will owe capital gains on $50,000 (the difference between the sale value and the stepped-up basis). On the other hand, if you use the property as your primary residence for at least two years and then sell the property, you may be able to exclude up to $250,000 ($500,000 for a couple) of capital gains from your taxes. 
  • Mortgage. Does the house have a mortgage on it – either a regular mortgage or a reverse mortgage? Sometimes it is specified in the estate plan that the estate will pay off the mortgage. In cases where it doesn’t, with a regular mortgage you will likely have to assume the monthly payments. There are some mortgages, however, that require the heirs to pay off the mortgage immediately. With a reverse mortgage, you usually have a limited time to pay off the mortgage in full. 
  • Repairs. It is a good idea to hire a home inspector to assess the condition of the house. If the property needs significant repairs, it may affect what you do with it. Renovations and repairs can be costly and time-consuming. You may want to consult with a realtor before taking on any big projects. It may not make sense to spend a lot of money on the house.
  • Property Maintenance. Once you inherit the property, you will be responsible for maintaining it. The first thing you want to do if you inherit property is make sure the utilities and homeowners’ insurance are transferred to the new owners and continue to be paid on time. You will also need to pay all the property taxes and any other fees associated with the property. 
  • Other Owners. If you inherited the property with siblings, you will all need to agree on what to do with the property. If one sibling wants the property, he or she can buy it from the other siblings. Otherwise, you can sell or rent the property and split the profits. If there is a dispute among siblings, you can try professional mediation. In mediation, the disputing parties engage the services of a neutral third party to help them hammer out a legally binding agreement that all concerned can live with. The disputing parties can control the process and they have a chance to explain their perspectives and feelings. If you go to court, the judge will likely order the house to be sold so the profits can be split. 

Ultimately, there are many decisions to make when you inherit real estate and deciding what to do with it can be a very emotional decision. If possible, try not to rush into any decisions until you’ve had time to thoroughly consider your options.

Local Elder Law Attorneys in Your City

Elder Law Attorney

Firm Name
City, State

Elder Law Attorney

Firm Name
City, State

Elder Law Attorney

Firm Name
City, State

 


Created date: 12/12/2019
Medicaid 101
What Medicaid Covers

In addition to nursing home care, Medicaid may cover home care and some care in an assisted living facility. Coverage in your state may depend on waivers of federal rules.

READ MORE
How to Qualify for Medicaid

To be eligible for Medicaid long-term care, recipients must have limited incomes and no more than $2,000 (in most states). Special rules apply for the home and other assets.

READ MORE
Medicaid’s Protections for Spouses

Spouses of Medicaid nursing home residents have special protections to keep them from becoming impoverished.

READ MORE
What Medicaid Covers

In addition to nursing home care, Medicaid may cover home care and some care in an assisted living facility. Coverage in your state may depend on waivers of federal rules.

READ MORE
How to Qualify for Medicaid

To be eligible for Medicaid long-term care, recipients must have limited incomes and no more than $2,000 (in most states). Special rules apply for the home and other assets.

READ MORE
Medicaid’s Protections for Spouses

Spouses of Medicaid nursing home residents have special protections to keep them from becoming impoverished.

READ MORE
Medicaid Planning Strategies

Careful planning for potentially devastating long-term care costs can help protect your estate, whether for your spouse or for your children.

READ MORE
Estate Recovery: Can Medicaid Take My House After I’m Gone?

If steps aren't taken to protect the Medicaid recipient's house from the state’s attempts to recover benefits paid, the house may need to be sold.

READ MORE
Help Qualifying and Paying for Medicaid, Or Avoiding Nursing Home Care

There are ways to handle excess income or assets and still qualify for Medicaid long-term care, and programs that deliver care at home rather than in a nursing home.

READ MORE
Are Adult Children Responsible for Their Parents’ Care?

Most states have laws on the books making adult children responsible if their parents can't afford to take care of themselves.

READ MORE
Applying for Medicaid

Applying for Medicaid is a highly technical and complex process, and bad advice can actually make it more difficult to qualify for benefits.

READ MORE
Alternatives to Medicaid

Medicare's coverage of nursing home care is quite limited. For those who can afford it and who can qualify for coverage, long-term care insurance is the best alternative to Medicaid.

READ MORE
ElderLaw 101
Estate Planning

Distinguish the key concepts in estate planning, including the will, the trust, probate, the power of attorney, and how to avoid estate taxes.

READ MORE
Grandchildren

Learn about grandparents’ visitation rights and how to avoid tax and public benefit issues when making gifts to grandchildren.

READ MORE
Guardianship/Conservatorship

Understand when and how a court appoints a guardian or conservator for an adult who becomes incapacitated, and how to avoid guardianship.

READ MORE
Health Care Decisions

We need to plan for the possibility that we will become unable to make our own medical decisions. This may take the form of a health care proxy, a medical directive, a living will, or a combination of these.

READ MORE
Estate Planning

Distinguish the key concepts in estate planning, including the will, the trust, probate, the power of attorney, and how to avoid estate taxes.

READ MORE
Grandchildren

Learn about grandparents’ visitation rights and how to avoid tax and public benefit issues when making gifts to grandchildren.

READ MORE
Guardianship/Conservatorship

Understand when and how a court appoints a guardian or conservator for an adult who becomes incapacitated, and how to avoid guardianship.

READ MORE
Health Care Decisions

We need to plan for the possibility that we will become unable to make our own medical decisions. This may take the form of a health care proxy, a medical directive, a living will, or a combination of these.

READ MORE
Long-Term Care Insurance

Understand the ins and outs of insurance to cover the high cost of nursing home care, including when to buy it, how much to buy, and which spouse should get the coverage.

READ MORE
Medicare

Learn who qualifies for Medicare, what the program covers, all about Medicare Advantage, and how to supplement Medicare’s coverage.

READ MORE
Retirement Planning

We explain the five phases of retirement planning, the difference between a 401(k) and an IRA, types of investments, asset diversification, the required minimum distribution rules, and more.

READ MORE
Senior Living

Find out how to choose a nursing home or assisted living facility, when to fight a discharge, the rights of nursing home residents, all about reverse mortgages, and more.

READ MORE
Social Security

Get a solid grounding in Social Security, including who is eligible, how to apply, spousal benefits, the taxation of benefits, how work affects payments, and SSDI and SSI.

READ MORE
Special Needs Planning

Learn how a special needs trust can preserve assets for a person with disabilities without jeopardizing Medicaid and SSI, and how to plan for when caregivers are gone.

READ MORE
Veterans Benefits

Explore benefits for older veterans, including the VA’s disability pension benefit, aid and attendance, and long-term care coverage for veterans and surviving spouses.

READ MORE