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Many children inherit their parents’ homes when those parents pass away. Not only is that an emotional and often difficult time, but it can also be financially complex and frustrating. Decisions have to be made about taxes and other expenses that go along with the home, along with any renovations or upgrades, and whether the home will be sold or kept in the family.
While some adult children do keep the homes they inherit from their parents, around 70% plan to sell them instead. Often this is because of the additional expense the home brings, typically due to property taxes. That’s not the case with second homes and vacation homes, though, suggesting that it’s the parents’ primary home that’s most commonly sold in these situations.
If there’s more than one child it may also be that one sibling wants to buy the home and live in it or use it as a rental property, while the other siblings want to sell. In that case, finding a fair valuation for the home becomes important. That way it can be potentially sold to the sibling that wants to keep it, but the proceeds of the sale will go to the other siblings.
When a homeowner dies the cost basis of valuing their home resets to market value, and if the home increases in value after that date the increase would be considered long-term capital gain. Selling the home quickly means little gain and, therefore, little to no tax. For families that just want to sell the home and move on, selling quickly is often the best option financially.
Still, emotions can get in the way and make it more difficult for adult children who have lost their parents to sell the home, in some cases. That has to be taken into consideration, as well, when making plans and determining the right choice in a delicate matter. Strictly financially, though, the best option is almost always to sell quickly to reduce any property taxes, capital gains, or other expenses that can start to add up on the property.
A carefully prepared estate plan will ensure your health and financial wishes are known should you become incapacitated and that, after death, your wealth remains secure until it passes to your beneficiaries. A properly prepared plan saves money on court costs, taxes, and fees, and reduces the risk of familial strife.
At The Estate Planning & Legacy Law Center, PLC, we will build an effective and strong estate plan for you and your family to fit your unique needs. Our services alleviate wealth concerns and help you to enjoy life and focus on what really matters, your family. Contact us today to get started!