Houses make for terrible wealth transfer vehicles. Bequeathing a house can mean passing along financial burdens, red tape, home maintenance responsibilities, potential family conflict, and housing market volatility, says Kiplinger’s recent article, “Your Home Would Be a Terrible Inheritance for Your Kids.”
Communication about plans is critical. A study from Money & Family found that 68% of homeowners plan to leave a home or property to heirs. However, 56% haven't told them about their plans. That will surprise the recipients who may or may not want or be able to service an inherited home.
Suppose you bequeath a house to an heir or heirs. In that case, they’ll have to make an immediate plan for home maintenance, mortgage payments (if necessary), utilities, property taxes, repairs, and homeowners’ insurance. Zillow says this can amount to as much as $9,400 annually, not including mortgage payments.
The psychology of the home. Owners often have deep emotional attachments to their homes. Therefore, when people gift their homes to children and heirs, they're not just giving an asset — they're endowing them with all the good memories that were made on that property. Emotional connections to the home can be nearly as powerful as a strong attachment to a living being.
Beneficiaries may struggle to make practical choices about the inherited property because of the home’s sentimental value. This emotional aspect can cloud judgment and hinder the effective management and allocation of assets.
The financial burdens and family conflicts for beneficiaries. Inheriting a home entails a range of financial responsibilities that can quickly add up.
Property taxes, insurance premiums, ongoing maintenance costs, and unexpected repairs can strain beneficiaries' financial resources dramatically. If beneficiaries already have their own homes, inheriting an additional property can exacerbate financial burdens and potentially hinder their own financial goals, retirement plans, and aspirations. The passing of a family member can also sometimes lead to conflicts among heirs, potentially exacerbating existing fractures in relationships among siblings and other family members.
According to a 2018 study, nearly half (44%) of respondents saw family strife during an estate settlement. Disagreements can cause tension, strain relationships and even result in lengthy legal battles.
If you need help understanding how inheriting your house to your loved ones might affect them, or if you are going through a probate case, we are always happy to help. Our Los Angeles probate attorneys can guide you through it.
If you have any questions, schedule a free appointment with us through our online appointment page.
You can also read reviews from some of the hundreds of clients we have helped over the years.
Reference: Kiplinger (September 27, 2023) “Your Home Would Be a Terrible Inheritance for Your Kids”
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