Options when Inheriting a House

When someone inherits a home, the emotional connection often competes with practical concerns. You may want to preserve the memory, move in, rent it, or sell it. However, each path comes with financial, legal and tax implications.

Understanding your options can help you make informed decisions that align with both your personal goals and long-term stability.

Assess the Property’s Condition and Financial Obligations

Start by evaluating the home’s physical state. A property that needs extensive repairs or updates may not be worth keeping if you can’t afford the upkeep. Get an inspection if necessary to understand the costs involved.

Next, confirm whether there’s a mortgage or any liens. Just because you inherited the house doesn’t mean it’s fully paid off. If the mortgage is assumable, you may be able to assume it. If not, the balance will need to be paid off, refinanced, or covered through the estate.

You should also factor in property taxes, insurance, maintenance costs and potential homeowners association fees. These factors will impact the long-term affordability of maintaining the house.

Consider Your Use and Intentions

Decide whether you want to live in the home, rent it out, or sell it. Each choice has different tax implications:

• Selling the home may trigger capital gains tax. However, heirs typically benefit from a step-up in basis, meaning the home’s value resets to fair market value at the date of death. That often reduces or eliminates capital gains.
• Renting the home can generate income. However, it turns you into a landlord with all the responsibilities that entails. You'll need to address local rental laws and potential property management needs.
• Living in the home could be beneficial if it aligns with your lifestyle and financial situation. However, you’ll need to ensure that it is properly titled and insured in your name.

Address Estate and Title Matters

The home must be legally transferred to you before you can make changes. This typically happens through the probate process, unless the home was held in a trust or jointly titled with rights of survivorship.

An estate or probate attorney can help navigate these legal processes, especially if other heirs are involved or if disputes arise. Once the title is in your name, you can take formal ownership actions, such as refinancing or selling.

Don’t Delay Financial Planning for the Property

Inheriting a home may significantly affect your estate and tax planning. You should update your will, consider creating a trust and review your insurance coverage. If you plan to keep the home in the long term, it should be integrated into your personal financial strategy.

Key Takeaways

• Confirm the home’s debts and expenses: Inherited homes may come with mortgages, taxes and maintenance costs that affect your options.
• Evaluate how the home fits into your life: Living in, selling, or renting the property each has tax and legal implications.
• Clear title before making changes: Probate or trust administration must transfer ownership before you can act.
• Plan to protect value: Work with an estate attorney to ensure that the home fits into your long-term financial plan.

Inheriting a home can feel both like a gift and a responsibility, and the choices you make can shape your financial future. At The Werner Law Firm, our estate planning attorneys in Los Angeles guide heirs through probate, trust administration, and the tax implications of inherited property, so you can make confident decisions that align with your goals.

If you have any questions, schedule a free appointment with us through our online appointment page.

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Reference: SmartAsset (February 17, 2025) "What to Do When You Inherit a House"