Just because you inherit a house doesn’t mean it’s a free ticket. There are many things you need to know about inheriting a house. Check out 7 Things You Probably Didn’t Know About Inheriting A House.
7 Things You Probably Didn’t Know About Inheriting A House
Inheriting a house may seem like winning a lifetime lottery. But, is it? Well, there is more to inheritance than what meets the eye since you have to pass other financial hurdles, obligations, and emotional decisions before becoming comfortable with the property. You can inherit property from your old man or get it as a gift from a friend. If you are a first-time inheritor, there are some things about inherited properties you must familiarize yourself with. Here are some seven things you probably didn’t know.
1. You Will Inherit The Existing Bills And Debt
When you inherit a property, maybe someone passed away or moved to another location. You should also know that you also inherit its debts and obligations. Depending on the debts and bills, you may want to sell the house, rent it out, move into it, and settle the debts. If renting another home somewhere, you can move into the inherited one while saving the rent money but paying the pending bills. If you don’t want to move into it, you can consider the other two options: sale or rent. The sale of inherited property is the best way, and the house condition determines it. You might be forced to put in some money for repairs before making the final sale through real estate agents.
2. You May Have Substantial Tax Breaks
Inheriting a house whose initial owner has passed on can guarantee you substantial tax breaks. You won’t pay capital tax gains, and the tax gets updated to the current market value. What does this mean? The property you inherited is tax-free from the date of death of the previous owner. If you sell the property, the tax you owe accumulates from the date you took over the house and does not consider the previous owner’s taxes.
3. There Are Other Hefty Taxes After Inheritance
You may not be able to pay the federal taxes, but there are other liabilities you need to settle. These liabilities depend on how the previous owner lived and the implications they had on the property. In some states, you might need to pay the state estate taxes. To some, any value exceeding a specific amount gets charged inheritance tax, which is at 16% of the property’s value. This situation means you have to conduct research and know the implications of the inherited house.
4. A Free Home Can Turn Costly
Even when you don’t have any pending mortgage and liabilities, a property you inherited for free can turn costly. How is this? There might be bills which the previous owners failed to settle and might have accrued interest. Such bills include:
- Property taxes.
- Liability insurance.
- Power bills.
- Water bills.
- Municipal bills.
- Homeowners insurance.
- Wear and tear.
- Other bills you need to be aware of.
Some of these bills are ongoing expenses.
5. You Might Inherit More Than What Meets The Eye
Most inheritances come with endless emotions and financial consequences, which get realized moments after acquiring the property.
Besides the usual household stuff, there will be more than what meets the eye, including family battles, disputes, and other issues when sharing the property. If the house has tenants, you might fail to understand their lease, terms, conditions, and much more, which can cause endless confrontations.
6. Make A Plan To Keep Or List It
Immediately you are through with the inheritance process; you have to decide whether to keep the house, sell or rent it out. If you don’t have any other place, you can live in the house as you plan to renovate it. However, if you have another place to live, you can sell the house or lease it and earn from it. All these processes require one to fully prepare for them, including renovating the house, settling its previous bills, and putting everything documented to prove you are the new owner.
7. Update The Service Providers
It is essential to make your new ownership known to the service providers. This idea will mean updating the homeowners’ insurance policy and making the necessary changes, power provider, water, and other amenities to avoid inconveniences when making future payments. You should also cancel every utility that’s not needed and try to carry out renovations as you settle. Check out all the pending bills and ensure they are updated.
Inheriting a property can be a blessing in disguise.