Over the next 4 decades, Baby Boomers will inherit $27 trillion in wealth, with a big portion of that trillion coming from family real estate. Yes, that’s TRILLION with a T! Would you know what to do if you suddenly inherited property?
Circumstances surrounding your inheritance may not be ideal, but it definitely helps to be prepared. Now that the house has become yours, figuring out what to do with it can incite financial and emotional issues, especially if siblings are involved. It can be very difficult to make sound decisions during such a fragile period of time. If you find yourself in a circumstance such as this, you should be aware of your options. Fortunately, you do have several options to choose from, and the pace at which you move is completely up to you.
Get the 4 Step Guide to Selling Inherited Property
You have three main choices for the property: sell it, move in to it, or rent it out. As it turns out, even a free home can still be costly! In addition to making mortgage payments, the ongoing list of expenses can be extensive. You will need to take into consideration additional fees such as property taxes, home insurance, liability insurance, heating, electricity, etc.
When you inherit property such as a home or vacation home, the associated taxes are calculated based on the market value at the date of death. This stepped-up value is always considered long term for capital gains taxes. If the property is subsequently sold for more than the stepped-up basis, the gain will be taxed at long term capital gains rates. If the property is later sold at a loss, it will likely be considered a capital loss. Up to $3,000 in capital losses may be deducted against your income each year, but the balance may be carried forward to future years. It is advisable to consult a tax professional for specific advice related to your situation.
If you’re ready to sell, there are several benefits to doing so. Each family will have different reasons for selling but the main benefits include affordability and preserving family relationships. Since this is more than likely a foreign process to you, we have four simple steps to get you started!
Get the 4 Step Guide to Selling Inherited Property
