Inheriting a house can be a life-changing event with emotional and financial implications for anyone. This is especially true for people inheriting homes on Long Island, where the housing prices have always been high. Understanding your options and obligations is critical, whether you sell it, keep it, or rent it out. Insights from LendingTree show you how to make the most of your inheritance.
What’s the Legal Process of Inheriting a House?
When inheriting a house, you don't immediately receive the title in your name. The inheritance process involves probate, where a judge reviews the will and appoints an executor to carry out the deceased's will. The executor handles responsibilities like insurance, identifying debts or liens and paying utilities. They also distribute belongings and manage property taxes. This ensures that the estate's assets settle any outstanding debts before you receive ownership.
What Should You Do when Inheriting a Home?
When you're in line to inherit a home, there are five steps you should take immediately.
- Communicate with the Executor: Establish a clear line of communication with the executor. This will help you learn the necessary information and simplify the transfer process.
- Coordinate with Co-Heirs: Work with the others if you are one of several heirs. Avoid costly disputes by deciding whether to sell, keep, or rent the property.
- Get an Appraisal: An appraisal calculates the property's value. This informs your decision to keep, sell, or rent the home while informing you of tax liabilities.
- Evaluate Debts: Identify any liens or debts tied to the property and compare them against the house's value. Understand the financial implications and incorporate that into your decision.
- Seek Professional Advice: Consult estate planning attorneys, accountants and financial advisors. These professionals can clarify ownership-related problems, such as debt obligations and inheritance taxes.
What Should You Do with the House?
Moving Into an Inherited House
Moving into the inherited house can provide a new residence or vacation home. However, this option can be costly due to mortgages, taxes, repairs and insurance.
Renting Out an Inherited Home
Renting out the property can provide passive income, while keeping it in the family. Buy out other heirs or work with them to share costs and rental income. Depending on the town you are in you may need a rental permit even for a short term rental. Towns like Southampton and East Hampton are stricter on rentals than towns further west that have much fewer short term rentals.
Selling Your Newly Inherited Home
Selling the house is a straightforward way to obtain immediate cash. The proceeds can help pay off debts tied to the house, and the remaining proceeds will go to the heirs.
How Can You Finance an Inherited House?
If debts and taxes are associated with the house, that doesn't mean you need to sell. There are many ways to finance the home and keep your inheritance.
- Mortgage Assumption: Take over the existing mortgage if its terms are better than what you'd get with a new loan. The lender must approve the assumption.
- New Purchase or Refinance Mortgage: You can obtain a new mortgage or refinance to put the house in your name. This option is particularly useful when the property has a reverse mortgage.
- Cash-Out Refinance: Refinance the mortgage with a cash-out option to tap into the home's equity to cover expenses, like buying out heirs or making repairs.
- Investment Property Loan: Mortgage an investment property if you plan to rent the house.
Inheriting a House? Schedule a Consultation Today
Navigating the process of inheriting a house requires legal, financial and practical knowledge. You can get this knowledge by scheduling a consultation with our estate planning attorneys. We'll listen to you and provide tailored advice about handling your inheritance.
Key Takeaways
- Inheriting a House: The probate court oversees the inheritance process, and the executor handles legal and financial responsibilities.
- Options: Move in, rent out, or sell the property based on financial goals and agreements with co-heirs.
- Financing: Explore mortgage assumptions, new or refinanced mortgages and other financing options.
Reference: LendingTree (Nov. 16, 2021) "Inheriting a House? Here’s What to Expect"
