While an inherited home is often something that you receive from parents when they name you as an heir to claim the possession of the property at a certain point in time, it is important to understand that there are several ways that you can legally inherit a home.
Common ways to inherit a home
If you have inherited a house through a deed, you do not need to go through the probate process. Thus, once the “deed” goes through this process, and a new deed for the property has been registered and recorded, the title will be yours.
Another way a home can be inherited is through the process of a will. A “will” can only be executed after the death of the original owner of the property, known as a testator. If the testator stated in their will that the property was to be left to you upon his/her death, you will still need to undergo probate to ensure that you are officially registered as the sole owner of the property.
One other common way of inheriting a home is through a trust agreement. In essence, a trust agreement allows for a third party to hold and direct assets, or the property in this case, for an individual or a group, known as a “beneficiary.” While trusts offer many benefits, such as the potential to forgo the probate process, reduce time spent in court, and more, trusts can sometimes be complicated to navigate. Therefore, if this is the way you inherit a home, it is advisable to speak with an attorney in order to understand how this process works.
What Should I Look Out for When Inheriting a House?
Inheritance tax is a tax levied to the inheritors who have received the assets of the deceased individual. More specifically, inheritance tax is calculated based on a percentage of the value of a home that is determined by the state that the property is located in. However, only six states charge inheritance tax, which means if your home is located in Washington D.C., you do not need to worry about this tax.
Capital Gains Tax
Capital Gains Tax is a tax collected by property sales or investment if you decide to sell it within one year of acquiring it. Therefore, if you choose to sell your inherited property in this timeframe, you’ll have to pay capital gains tax based on your filing status and a percentage of your personal income. Examples of the capital gains tax rates for Washington D.C. can be seen here.
Therefore, once you have considered the additional fees you need to look out for before taking possession of the home, you should make a decision on what you will decide to do with the home. Three options that you can consider are: (1) Move in (2) Rent it or (3) Sell it
What Are My Options Once I Have Inherited the House?
If you choose to move into your inherited home and make it your primary residence, you need to be aware that you will become responsible for any outstanding mortgage payments, all property tax and insurance payments, and any required maintenance, as well as other financial and legal responsibilities in the future. While choosing to move in to the property could yield the lowest cost in terms of the actual taxes that you will owe, you still need to be aware that keeping the house as your own can still be costly expense.
While turning the home that you inherit into a rental property can provide you with extra income, it is also important to understand that this additional income may increase your own taxes. In addition, as a landlord, you will be required to oversee the management of the property, make property taxes and mortgage payments on time (the latter of which will be higher due to this being an investment property), and make repairs and improvements as needed.
Lastly, choosing to sell your inherited home is sometimes the best option for acquiring cash quickly and freeing you as the owner of the property from the burden of financial and legal responsibilities. While this option is generally the easiest in terms of your own responsibilities and generating cash quickly, it is important to be aware that outstanding mortgage payments, required renovations, closing costs, real estate agent commissions, and property taxes will likely need to be paid before you list your home for sale.
If I Choose to Sell My House, Who Will Buy It?
If you choose to latter option and would like to sell your inherited home, you have come to the right place. While selling your inherited home quickly and for a quality price can sometimes be tricky, if you choose to sell to Congressional Home Buyers, we can make it easy.
If you are looking to sell your inherited home in the Washington D.C. area, Congressional Home Buyers offers an incomparable home buying experience that is tailored to meet your needs. Our sales associates can walk you through every step of the sales process, such as helping you determine whether or not to sell your house as-is or to make improvements, or help you understand how to maximize the value of the sale of your inherited home. Therefore, our sales process consists of three easy steps: submitting the basic information of the property, receiving an informal, non-committal offer, and executing a sales contract and scheduling a closing date. Ultimately, this process can be completed in as quickly as 5-10 days, and we’ll make sure to make the process as easy and stress-free as possible.
Start today if you are interested and see what what we have to offer!