You inherited a house — what will happen next?

If your parents left you their house in their will and you are now the proud owner of a family residence you might consider yourself blessed or the event could act as a cause for concern or rethinking of your future plans. Will you live there? Have you resided there all along and do you want to stay? Will you sell? Is there a mortgage? How much equity remains in the home? What repairs need to be effected? Can you afford it?

You may be limited also by the terms of the will and if you are not the executor/executrix of the estate you need to work with that person as well. If you were your parents’ only child the inheritance probably was a foregone conclusion. If you have brothers and sisters there could be a balancing act as your siblings consider whether you received a better deal in the inheritance.

As with most life events there are positives and negatives.

So what do you do if you are the fortunate person to inherit a house? If you are living there you are probably well aware of the obvious limitations in terms of condition. But there are other considerations that might not immediately come to mind. Here are some choices. Depending on whether you are the only beneficiary or you are buying out other beneficiaries, you might stay or move in if you are living elsewhere. You could rent to provide you with an income stream either temporarily or permanently or you could sell. Tax considerations and family dynamics can come into play. Your feelings toward the house and toward its location, and your own finances also need to be considered.

Here are some of the basics.

Taxes

There is good news and not so good news on taxes. Property that was titled in the name of the decedent at the time of death and then inherited by you or by the estate directly and then to you receives a “step up” in basis. This means there is no federal tax on the appreciation in value from the time the person purchased the property until the date of death. As an example, if the person purchased the property for $50,000 and it is now worth $300,000, the federal government does not tax the difference between the $50,000 and the $300,000 on resale. All of this relates to federal taxes i.e.

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