Inheriting property is not always the windfall that people expect. When you must split the inheritance with siblings or if you are not able to keep it, issues can arise. And if you are in the process of making a major life change, such as planning for your own retirement housing, you might be at a loss of what to do with the property. Here, we will briefly explore your options and issues that can pop up.
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What Is Inherited Property?
It is important to know what, exactly, inherited property is for legal purposes. Money or property you receive when a loved one dies is an inheritance. If you are the sole survivor and the decedent has a will in place, then the process is fairly cut and dry. However, if they left no will and there are other beneficiaries, things can get complicated.
Siblings and Surviving Spouses
When you inherit property from an estate parent and you also have siblings, you and your brothers and sisters inherit equal shares of the property. Many people mistakenly believe that assets become the property of the oldest sibling at a parent’s death. This is not the case. All siblings receive an equal percentage of ownership. Another beneficiary to consider is a surviving spouse. If this person is your other parent, chances are, full ownership reverts to them. However, if it is a stepparent, they are legally entitled to one-third of any property owned by your parent alone, and the rest of the interest is split between you and your siblings.
What to Do with Inherited Property
There are many ways to handle inherited property. The first thing you should do, whether you own the property alone or have inherited it with co-beneficiaries, is to determine how much it is worth and research the local real estate market.
If you choose to sell, understand that, in addition to transaction fees, you might also be subject to sales tax on the proceeds. Nolo notes, however, that this only applies if this amount exceeds $250,000 if you are single and $500,000 if you are married. You might not be legally allowed to sell if there are additional parties to consider. Jones Property Law explains that you can force co-owners to sell, although this can cause a rift in the family. In this case, the profits from the sale are divided up based on ownership percentage, but fairness is also considered. The fairness factor might mean that whoever spent the most money on the home (by paying property taxes or for upkeep) would get an equitably higher share of the profits.
All co-ownership issues aside, there are still decisions to be made if you own property. You can rent it for income. This can give you a steady stream of money each month if you have trustworthy renters. You might also choose to stay in the inherited house if it requires less maintenance than your current home. The biggest drawback of this option is that you still own your original home and must decide what to do with that home. And if you share ownership, the co-owners also have full rights of tenancy, so you may not be alone.
Whatever your decision, make sure to partner with an estate attorney and a local real estate agent. These two individuals can help you understand your legal rights and obligations and get the most money out of the home if you choose to sell. When it comes to inherited property, there are no simple answers, but knowing what you may face can help you make the best decision.