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What To Do When You Inherit Your Parents' House

| October 07, 2019


The largest wealth transfer in the history of the world is currently in process. It's estimated
that around $68 trillion will switch hands over the next 25 years. Baby Boomers are
currently retiring, and many of them will pass of the scene within the next few years. Much
of this wealth will be tied up in family homes. This brings up the question of what to do if you
inherit your parents' home.

Move In
Some heirs will benefit from moving into their family's homestead. Many retirees may have
no mortgage. Therefore, those who inherit a home will likely have only the property taxes
and insurance to pay to stay in the house. This can become a great benefit for those who
might have a mortgage or a rent payment to make each month. If you own a house and
have some equity built up, opting to move into your parents' house can provide a great
opportunity to sell your own home and access the equity. The money you'll access could
allow you to make some improvements to your inheritance and bring it up to a more modern
standard. Moving in can make more sense if you don't have to share the inheritance with
any siblings. Additionally, if your parents owned a nicer or bigger home than you currently
do, moving into your parents' home can allow you to move up in your standard of living
without having to deal with real estate agents, increased debt and contract negotiations.

Rent It Out
Another way to benefit from inheriting your parents' house can come when you decide to
rent it out. This will can be a better option than moving in if you have siblings that will inherit
a share of the home. If there's no mortgage outstanding on the house, every dollar that you
bring in over and above any property taxes, insurance and repairs is a dollar of passive
income that you can use for any purpose you choose. You could save or invest the rental
income. You could also use it to pay for everyday living expenses. If you have siblings, you
might have to split up the income, but it's still passive income rolling in every month.

Sell It
The third option for dealing with an inherited house is selling it. Once you inherit the house,
you'll want to maintain insurance on the property until you sign over the deed to another
party. This will protect the value of the home in case a catastrophic event occurs. You'll
have to come to an agreement with any siblings if they also inherited a share of the house.
Even if a house has increased in value, you'll likely inherit the home on a stepped-up basis.
This will allow you to avoid having to pay capital gains taxes. If you decide to sell, you might
want to make a few updates that could improve the selling price. Shag carpet from the
1970s and floral wall paper do not tend to sell well in today's market.
Your parents likely worked hard to provide for you as a child. Over time, one of the assets
many Baby Boomers have been able to accumulate is a home. As an heir, you should
mourn the loss of your parents, but you should also consider which option works best for
you when it comes to dealing with their home.

This material was created for educational and informational purposes only and is not
intended as ERISA, tax, legal or investment advice. If you are seeking investment advice
specific to you needs, such advice services must be obtained on your own separate from this
educational material.