As more boomers come to a certain age, the big question for many is what to do about that parental home they recently inherited. The next few decades will see almost 450 trillion dollars’ worth of real estate pass hands in this way. But making decisions on what to do with this house can be both an emotional and financial quagmire. If you have siblings it may even get ugly. When it comes down to it all, there are three ways to handle this inheritance. Sell, move in or rent it out – all have good and bad points.
Selling the Family Home
While this is never an easy decision, it might be the best one for you. But selling inherited property can have its own pitfalls, and it is best to know them ahead of time. The first consideration is to determine how much the home has gained in value. This is because when it comes to inherited property, the biggest tax bite is long-term capital gains taxes.
Since the latest tax laws allows inheritors to get a break as the tax is based on the property’s value at the time of death, you may see a smaller tax then expected. But make sure you have the insurance extended to cover post death, naming you as the insured just to cover anything that happens between death and when you take over the property and sell it.
You Can Go Home Again
Sometimes the best solution is for one of the kids to move into their parent’s home. In this age of many adult kids still living at home, it may be more common then thought. If there are siblings involved, a discussion even before your parents’ death may be helpful. For some families, the obvious choice may be the one child with kids still at home.
One other advantage is that by moving into the home the family will have more time to go through possessions and make decisions on what to keep and what to sell or discard. Be prepared for property taxes and if the home was willed to all the surviving children, rent or payments may need to be worked out for a time.
Renting It Out
Sometimes the easiest solution, even if only for a time, is to rent the inherited home out to others. This doesn’t have to be a full time rental. For some families where the parents home was the gathering place for family, vacation rentals to cover the cost of caretaking and taxes was a simple solution.
Using the services of companies such as Airbnb can make this easy to do. In addition, many property management companies have sprung up to handle these types of rentals. In the end, all you may need to do is sign the agreements with the property management companies and take your share of the income each month. Just don’t forget to book that time for special family get-togethers in the home ahead of time. It would be embarrassing to find out you cannot have Christmas at the old family home because you have forgotten to book it and the agency has it rented out already.