What to Do When You've Inherited a House
Inheriting a house from a family member sounds like it would be a good thing. But more often than not, it’s a laundry list of ‘to-dos’ that get filed along with the various bills no one warned you about when a loved one’s house is suddenly yours.
Inheriting a house isn’t something that happens every day. So it makes sense that your saying to yourself, “I’ve inherited a house, now what?” Here are a few things you need to take care of quickly to make this blessing doesn’t turn into a curse.
Quick Decisions for Property Inheritance
Is the house empty? Inheriting a house that’s empty is a lot simpler than inheriting a house with an occupant. Depending on who’s living in the property, there can be an emotional component involved in addition to a financial consideration. You do have a few options. Become a landlord and take rent from the occupant; ask them to move out (and hope they oblige); or offer to sell the house to them. In the end, the decision you make should be in agreement with your immediate and long-term financial goals as they relate to the property.
Update the insurance. Once you assume ownership of the home, you become legally responsible for any damages or injuries that occur on that property. To protect yourself and your assets, you need to make sure you have adequate insurance. You need coverage right away to avoid any gaps in coverage that could leave you exposed to risks. Regardless of what you plan to do with the property, you’ll need coverage for both property damage and liability risks.
Decide what to do with the contents of the house. Sometimes, the will stipulates how at least some of the belongings are to be distributed, but even in that case, you’ll probably still be left with a fair amount of property that needs to be disposed of. If the decedent died in debt, the estate may need to sell the contents to repay those debts, and all that will be handled during the probate process. Otherwise, you might decide to sell some belongings and donate others for a tax deduction. Regardless of what you choose to do, clearing out the house ASAP means you can take the next step — selling, renting or moving in — a lot faster, which can minimize your holding costs.
Get a grip on the financial implications. Inheriting a house is not the same as finding money on your doorstep, even though it might seem that way on the surface. In most cases, you’re going to have some holding costs, which can include insurance, utilities, and other fees you might not expect. Before you start planning what to do with your newfound wealth, make sure you make a list of all your costs so you can plan how to address them. For most people, a quick sale is the best solution.
Set some goals. Ultimately, when you’re inheriting a home, you need to separate yourself from any emotional attachments and recognize it as a financial asset that needs to be incorporated into your overall financial plan. This will vary depending on your existing financial circumstances, your age, your goals, and other factors, including the final value of the home. This is where talking to an estate planner can help. A planner can also look at the home from a more pragmatic point of view to help ensure you are making practical, effective decisions.
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