If you’ve suddenly inherited a house, you may not be prepared for the questions and issues that can arise. And if you make the wrong decisions, you can run into financial, emotional, and family problems before long.
Forewarned is forearmed, they say, so here’s some of what can go wrong when you inherit a house in NY.
What Can Go Wrong When You Inherit a House in NY
Taxes You Didn’t Expect
Most estates don’t owe federal estate tax because of the very high exemption, but New York has its own estate tax with a lower threshold, so larger estates should get advice. When you sell an inherited house, capital gains are generally figured from the home’s value at the date of death (the “stepped-up” basis), not what the decedent originally paid. Getting a date-of-death appraisal and talking to a tax professional before you sell can save you money and headaches.
The Mortgage May Be Bigger than You Thought
In the past, when an elderly parent or relative passed, the mortgage on their house was often paid off. These days, it’s common for elderly people to take out a reverse mortgage on their home to supplement retirement funds.
A reverse mortgage becomes due when the borrower passes away, so heirs usually need to pay it off, often by selling the home, within a limited time. If there is a regular mortgage, the lender must generally let heirs take over the property, but the payments still have to be made.
The House May Need Repairs and Upgrades
With respect to what can go wrong when you inherit a house in NY, this one may be the most costly. Most of the time, people inherit a house from a deceased elderly parent or close relative. Besides not having the physical ability to perform maintenance and upgrades, many elderly people don’t have the money for it either. And if they do, they may simply choose not to.
If you plan to live in the inherited house, this may not be a huge concern. But if you intend to rent it or sell it, you may have to make repairs to make it presentable and upgrades to meet code and insurance requirements. Installing a new heating system or re-wiring a house can take a big chunk of money.
You May Have Problems with Relatives and Joint Heirs
What if you’re not the only heir? That can be a problem. Suppose you and your siblings inherited the house jointly. You may want to sell it, your brother may want to rent it, and your other brother may want to live in it himself. You can see what a powder keg waiting for a spark this is.
Joint heirs of a home are generally treated as co-owners, and one co-owner can ask a court to force a sale (a partition) if it comes to that. The process, however, is expensive, and the emotional and family consequences are likely to be highly unpleasant.
So what can go wrong when you inherit a house in NY? Quite a lot, if you’re not up to speed on taxes, mortgages, and repairs. It’s best to talk with a qualified estate attorney and tax professional to head off these issues quickly.
We’re ready to help, and we buy inherited houses as-is so heirs don’t have to clean out or fix anything. Contact us by phone at (631) 926-0047 or fill out the online form.
Need to sell your house fast? Get a fair, no-obligation cash offer from Gull Group Inc. Call (631) 926-0047 or fill out our short form.