At first glance, inheriting real estate might seem like an entirely good thing. In reality, when taxation and other estate planning issues are considered, this inheritance also presents several burdens.
While New York does not have an inheritance tax, other states do and it is critical to consider this as well as other issues when deciding what to do with the other property. In short, your options include moving, selling, or renting a property. What works best for you, however, depends on your situation. As a result, this article reviews some factors you should consider when deciding how to respond.
Factor # 1 – Mortgage
It is not enough to determine whether a mortgage exists for the property, if a mortgage exists you should also learn the type. If the deceased’s estate plan fails to mention how a mortgage will be paid off, the person who inherits the property will likely take on the duty of paying the mortgage as part of property ownership.
Factor # 2 – The Existence of Other Property Owners
It is not always the case that a person who inherits property is the lone beneficiary. Instead, sometimes, multiple parties inherit a property. In these situations, you will likely be required to agree with the co-owners on all major decisions involving the property. It is common for multiple co-owners who inherit a property to disagree about what should be done with real estate. If the property is rented or sold, you have a right to a portion of the assets.
Factor # 3 – Property Maintenance
After inheriting a property, you will bear the responsibility of maintaining a real estate. Often, the first task that must be taken is paying homeowners’ insurance and utilities. You will be required, however, to also pay additional costs associated with property maintenance including paying property taxes. Closely related to maintenance are repairs. Property that require substantial repairs can require a substantial investment before you can do anything with the residence. Other times, the repairs that are necessary to update a house may not be particularly much.
Factor # 4 – Taxes
New York might not have an inheritance tax, but taxation can still come into play in several other ways. For example, if you decide to sell the property, you will be responsible for paying a capital gains tax. If a person decides to immediately sell an inherited property, however, they will not owe any capital gains taxes. There are, however, several strategies used to reduce the amount of taxes that a person must pay. For example, if a person uses a property as a primary residence for at least two years and then sells the property, the individual will likely be able to exclude $250,000 in capital gains taxes. This amounts increased to $500,000 for married couples.
Contact an Experienced Estate Planning Lawyer
Deciding what to do with inherited real estate is not easy. It is critical to fully review your options as well as various factors while deciding how to respond. An experienced attorney at Ettinger Estate Planning can help you respond as well as deal with many other estate planning challenges. Contact our law office today to schedule a free case evaluation.