Inheriting a home: What you need to know

| Aug 4, 2020 | Estate Planning

Today you found out you have inherited a house. Once you get over the initial joy of knowing you are not going to be broke for the rest of your life, you may have some questions. Can you just grab the keys and move in, or is it more complìcated than that? These are some things to consider:

  • Do I need to pay tax? There should not be any tax for inheriting a home, but selling it later could incur capital gains tax. Usually, it is payable on the difference between the house’s value when you inherit it and when you sell it. If you choose to live in the house as your primary home, that could remove the need to pay capital gains tax.
  • Do I need to pay a mortgage? If there is still money owed, and no condition in the estate plan that the estate will pay it off, then the property is not entirely yours. You may decide to rent it to cover the remaining mortgage payments or sell it. Not all mortgages are transferable, so this may force your hand.
  • What if I jointly inherited it? If the home was left to you and your sisters, you need to talk with them. Perhaps one of you buys the others out, maybe you rent it and share the income, or you could sell it and split the money between you.
  • What about everything inside the house? The estate plan may have assigned specific things to certain people. For example, your sister may have inherited the diamond ring in the drawer, or your niece the old rocking chair. Check the paperwork carefully to avoid problems.

If you have received the good news that you have inherited a Sioux Falls property, seek legal help to understand the implications and your obligations.