Inheriting A House 101
Inheriting a house can bring some very complex challenges. Depending on how you came into possession of the home (whether it’s paid for, and whether you have any co-owners), there could be many potential next steps from which to choose.
If you’ve recently inherited a home, you may be pondering your next move.
This guide to home inheritance is here to detail:
- Different ways to inherit a home
- Taxes when inheriting a property
- Details on the probate process
- Your options when inheriting a home with siblings
1. How Did You Inherit the House
It might not seem like it matters, but there is actually a big difference in how an inherited house should be handled based upon how exactly it became yours.
Inherited Home by Deed
If you were given the house by deed, you were likely appointed the “remainderman” for the deceased’s estate, and the house moved into your hands when they passed. There is no need to go through probate proceedings, and—if you do choose to sell—you should have no issue, as your name will be on the title.
Inherited Home by Will
If your loved one died with them listed as the sole property owner but left you the house in their will, you’ll need to go through probate proceedings in order to move the title into your name officially. This means if you want to sell the home, you’ll need to complete that process first, which can sometimes take a few months.
Inherited Home by Trust
If the deceased drew up a trust agreement declaring that you (or others along with you) are entitled to the house upon their death, it will pass directly to you (and any other potential co-owners).
If, however, the deceased leaves behind a spouse or minor children, you will have to go through the probate process in order to move the title to your name.
2. Inheritance Tax on Property
Selling any asset for more than you paid for it can trigger capital gains taxes. But, what if you didn’t pay for it, but rather inherited it? Unfortunately, you can still be on the hook for taxes if you inherited a house and want to sell it. Do you know your options?
Inheritance tax and estate tax are also to be considered. Inheritance tax is state based, and currently only six states collect this tax: Maryland, Iowa, Kentucky, Nebraska, New Jersey and Pennsylvania. Surviving spouses are completely exempt from the inheritance tax, says The Balance. An estate tax applies to the transfer of a property after death, and it generally applies to someone with assets that exceed $10 million.
Tax rates change slightly every year based on inflation and other political factors. For example, in the 2019 tax year, tax percentages on house inheritance the range from zero percent to 20 percent, according to Credit Karma, depending on the amount of profit you made from the sale.
Sources: The American College of Trust and Estate Counsel.
3. How Do You Handle Probate
If you need to file probate on the estate and the deceased has been gone more than two years, chances are things will move pretty quickly. With a good attorney, you could be set in as little as a week.
However, if the person passed very recently and you’re trying to sell the house, you may be in for a bit of a wait.
The probate process involves posting a notice to and giving anyone who are owed by the estate four (4) months to come forward. Selling a house in probate can take a little longer , but once the judge declares you the new owner, you’ll be set to do whatever you wish with the property.
Probate is more common within cases where there is no will. Usually, the property of the deceased will go to the spouse and immediate decedents. In most cases, if there is more than one descendant, properties will be divided evenly.
4. Inheriting a House with Siblings, Other Owners
The trickiest of all inheritance situations is when you inherit the property jointly with other family members. Under Florida law, for example, all of you will be equally responsible for all financial obligations pertaining to the property, including debts and liabilities.
Typically, one person takes point on being “property manager”, but beware that this can cause tension and resentment. If one of the owners is living in the house, that can also complicate things, as they may not want to pay their fair share, or they may refuse to sell despite everyone else wanting to. Immediately upon inheritance, all the heirs should discuss the situation and make a plan that’s agreeable to everyone (which is often easier said than done).
Complications When Inheriting a House with Siblings
Who Gets to Live There?
If one of the siblings in question was already living in the home—perhaps taking care of their elderly parent—then, naturally, they may feel they have a stronger claim to the ownership and occupation of the house. If that sibling is able to live in the home, do they take on all the responsibility for it? What value does it present to the remaining siblings who aren’t living there?
Can a Resistant Sibling Be Forced to Sell?
If everyone is in agreement but you have one sibling holding out, whether for emotional or financial reasons, you may be wondering if you can override them. Unfortunately, there are very few avenues to do that.
This is especially true if the will is not clear on the owner’s wishes for the property. If the will directs that the house be sold and the profits be split, that’s one thing. But if mom or dad was leaving it up to the kids to make the decision that worked best for them, you’re stuck with having to convince everyone to get on the same page.
Will We Have to Get the Courts Involved?
If there is division among the siblings about selling versus not selling, and an accord can’t be reached, there is legal recourse. But beware that it comes with a steep price.
You can file an inheritance partition, where the courts force the sale of the home and divide the profits into chunks that are proportionate to each heir’s designated interest in the estate. This often means that the home sells for significantly less than it would have on the market, making everyone’s portions smaller, not to mention the havoc it will wreak on personal relationships.
If you have inherited a home, your options typically are:
a) Live in the home (or let one of the co-owners live in it)
b) Rent it
c) Sell it
Selling a house in probate can be a bit trickier, but if you quickly tackle the probate process, you’ll be good to go.
If you’re not interested in renting the home and being a landlord, and you want to avoid the infighting that often stems from sharing ownership of a home with siblings, selling may be your best option.
Conclusion on Inheriting a House
You have many different options when you inherit a house, and it can sometimes feel overwhelming. It’s important to consider your situation and review all the options that might be available to you. Then you can make the best decision for you, and others involved.
If you need more information about how to sell an inherited house, you can seek additional advice from friends, family members or experts. If you seek the advice from experts, you’ll need to find the right expert for the specific advice you are seeking. For example, you might contact an accountant for advice on tax issues. Or, you might contact a lawyer for advice on legal issues.
Many times, people looking to sell an inherited house will contact real estate professionals to find out what their property is worth. Then they will seek additional advice, as needed, from other reputable sources.
It’s up to you to decide how you sell your inherited house. Just make sure you are getting valid information from trusted sources so that you can make the best decision for you.