Inheriting property from a deceased relative can be a bittersweet experience. While it’s often a symbol of love and a legacy, it can also come with responsibilities that may seem overwhelming. Whether you’ve inherited a family home, a rental property, or a piece of land, knowing what to do next is essential to making the most of your inheritance.
Here’s a step-by-step guide on what to do with an inherited property:
1. Understand the Legal Process
The first thing you’ll need to do after inheriting a property is to navigate the legal process of probate. Probate is the legal procedure by which a deceased person's will is validated, and their estate is distributed. If the relative who passed away had a will, it should outline their wishes for the property. If there was no will, the state’s laws of intestacy will determine how the property is divided.
During the probate process, the court will appoint an executor (if one isn’t already named) to handle the estate. This process may take several months, so it's important to be patient.
- Tip: If you're the executor of the estate or responsible for handling the inheritance, consulting with an attorney who specializes in probate can help ensure the process is carried out smoothly.
2. Consider the Financial Implications
Inheriting a property can come with ongoing financial responsibilities, such as property taxes, insurance, and maintenance costs. Make sure you understand the financial impact of keeping the property. These costs can add up quickly, especially if the property is large or requires significant repairs.
You may also have to pay estate taxes, depending on the value of the inherited property and the tax laws in your state. In some cases, you may want to sell the property to avoid ongoing financial burdens.
4. Decide Whether to Keep or Sell the Property
After assessing the property and considering the financial implications, you’ll need to decide whether to keep, sell, or rent out the property. Here are some factors to consider:
A. Keeping the Property
If you are local and a history in owning investment properties, you may determine that the property is a good investment and worth keeping. If it isn’t spelled out in the will, you’ll need to discuss with everyone else in the will how the property will be split. Be prepared, if it’s your first time - owning a rental property is usually profitable but it always requires time and effort.
B. Selling the Property
If you don’t have a personal attachment to the property or if the maintenance and tax costs are too high, selling the property may be the best option. There is work involved here as well between hiring a broker, coordinating showing with tenants and finding the legal documents for the property.
5. Take Care of the Paperwork
After the legal process of inheritance, there is important paperwork you’ll need to handle, including:
- Transferring the title of the property into your name. This will involve filing paperwork with the county or local government, depending on where the property is located.
- Updating insurance: If you plan to keep the property, make sure the insurance policy is updated to reflect the change in ownership.
- Estate taxes: If the property is subject to estate taxes, you’ll need to file the appropriate forms with the IRS or your state’s tax authority.
6. Address Any Debts or Liabilities
It’s important to check if the inherited property has any outstanding mortgages, loans, or debts. In some cases, a mortgage may still be owed, or there could be property liens attached to the estate.
If you decide to sell or keep the property, these debts may need to be paid off first. Consult with an attorney or financial advisor to understand your options.
