When a home is passed on to adult children after the death of a parent, there are three typical paths that beneficiaries can choose: move into the house, sell the house, or rent it out. If you and/or your siblings recently inherited a house and are uncertain about the best way to deal with the asset, a Nashville estate planning attorney can help you work through the following considerations relating to the property:
Option One: Move into the House
- If you decide to move into the house, you may have to anticipate an increase in property taxes as the current market value of the house will be reassessed
- You may want to conduct a home inspection to check if there are maintenance and safety issues that must be addressed immediately. You can also calculate the cost of renovation and repairs. The good news is that if you grew up in the home or talked with your parent(s) on a regular basis, then you probably already know of any maintenance “quirks” that your parent(s) dealt with when deciding whether you want to take them on as your own.
- There can be complications if you have siblings who are also co-owners. If you want to live in the home yourself, the other siblings will need to be compensated. You may do this through rental payments, buying out their share by mortgaging or refinancing the property, or by making the house part of your share of a larger total estate.
Financial and legal obligations of keeping the house
By moving into an inherited home, you are therefore accountable for the property maintenance and all its corresponding taxes and insurance payments. You are also responsible for any legal obligations arising from homeownership. Make sure these are responsibilities that you are prepared for.
Option 2: Selling the House
- Unsettled financial obligations can make selling the inherited house a bit problematic. You need to pay all the remaining debts out of the total sales of the property. And it gets more complicated in instances when the money owed on mortgages, taxes, judgments, and/or liens is higher than the price of the property itself.
- If the house you have inherited hasn’t been updated in a long time, major cleaning and minor renovations can potentially work to your advantage. On the flip side, renovations, in general, will cut into the profit you are expecting. Make sure you are focusing on changes that will give you the biggest bang for your buck.
- You only have to pay capital gains tax on any appreciation in the home’s market value from the time you inherit it up to the time you sell it.
- You also would need to consider the commission of the real estate agent should you need one.
Financial and legal obligations of selling the house
You may have to deal with a lot of challenges to get the house in a saleable condition, but once you sell the property, you are free from the responsibility of paying for its maintenance, taxes, insurance, and any other legal matters related to homeownership.
Option 3: Renting the House
- You can generate a passive income through rental payments for the house. The demand and rate will depend on the location and condition of the property.
- It pays to check on any relevant city ordinances or homeowner’s association rules on renting.
- You could consider hiring a professional property manager to handle the marketing, leasing, and managing of the house if you want to minimize hassles and costly problems.
- You have to provide precautionary measures and repairs for any damages found in the house you are offering for rent. Being a landlord entails a lot of liability.
- If you consider making the property a bed and breakfast or vacation rental, know that management and maintenance costs can go way up in this scenario. And, you also have to perform duties similar to a Hotel Manager should you really push through with this idea.
Financial and legal responsibilities of renting out the home
You are legally and financially responsible for the house as the homeowner. Furthermore, you now have the responsibilities of being a landlord and you should seriously consider the additional accountability of renting out the home.
Inheriting a house can either be a blessing or a burden depending on the way you will handle it. If you are still undecided, it is wise to weigh your options thoroughly by discussing it with an experienced attorney who can give you a balanced perspective on the matter. We encourage you to schedule an appointment today with our Nashville estate planning and probate attorney, April, at (615) 846–6201 so you can best understand how the inheritance will affect you or your family.
Now that vaccinations have started and “normal” life is within our grasp, many couples are starting to resume their wedding plans. Those who have postponed their big day or got engaged during the pandemic are once again starting to put deposits on venues, purchasing gowns, and even planning honeymoons. However, as a Nashville estate planning lawyer, I want everyone to know that estate planning and prenuptial agreements should be part of the process along with selecting flowers and all the “fun stuff.”
All marriages celebrate the joining of two lives together, a union of family and finances. And while estate planning is not exactly romantic, it can create a feeling of being protected even if the worst happens. Likewise, creating a prenup before the marriage can offer each partner security and confidence that all of their bases are covered as they enter into the union. Essentially, it sets forth how all property, assets, childcare, and spousal support would work IF the marriage did not survive. The prenup’s contents depend on the unique needs of each couple and the document is designed to protect each partner if the marriage were ending, whether through death or divorce.
Couples are encouraged to create an estate plan together, but each partner will need their own lawyer when creating a prenuptial agreement. The reason is simple; the prenup is meant to protect each partner separate from the other. It is also vital to select an attorney in the state where the couple plans to reside, as there may be different laws regarding support after a marriage ends.
A Nashville estate planning lawyer will be quick to point out that a prenuptial agreement is often a process that keeps marriages from ending in divorce, or protects the family after the death of one partner. Starting the marriage on a strong financial foundation can bind couples closer together. It gives them an open and honest place to discuss financial plans, ideas on fidelity, wishes for the future, and how each views the marriage before entering the contract.
If you or a loved one is getting married, please consider an estate plan and prenuptial agreement as part of the wedding plans. That way, as you walk down the aisle, you know that no matter what, your future is protected. Speak with our estate planning lawyer, April, by scheduling an initial call.
Have you ever wondered what is the worst that can happen if you become incapacitated or pass away without an estate plan in place?
If you have, you’re not alone. This is actually a common question that I receive as a Middle Tennessee estate lawyer, especially from those in close-knit families who believe that their kids (or other loved ones) will peacefully sort everything out when they pass away without needing any additional legal documents or guardrails in place.
Failing to Plan Makes Life Harder for The People You Love
The truth of the matter is that without a plan (or even the wrong plan) you make things much harder for the people you care about, even if everything goes as smoothly as possible and everyone gets along. Managing your affairs will also become much more costly and more time-consuming than they need to be if something happens.
You May Not Like The “Default Plan” The State of Tennessee Already Has for You
Remember, you are not obligated to create an estate plan; the state of Tennessee already has a plan that your loved ones will be forced to follow in the event you do nothing. The only way to override the state’s plan is to legally create one of your own.
What If You Are Incapacitated?
If a crisis happens during your lifetime and you don’t have a plan, you run the risk of losing flexibility and you may even lose control. Even if your loved ones want to help if you become incapacitated, they could be barred from getting involved with your affairs because of HIPAA laws or other privacy policies. If that happens, all decisions about your care and your future will be made by people who don’t know you or what is important to you.
Make Planning a Priority to Protect Your Family, Your Wishes, and Your Assets
The bottom line is that an estate plan is a roadmap that’s designed to make life as easy and hassle-free as possible for yourself and your loved ones in the event of illness, incapacity, or death. It’s one of the most loving gifts you can give. If this article has caused you to rethink your current plan for your affairs, we are here to help you. Simply contact our Middle Tennessee law office at (615) 846–6201 to schedule a consultation.
When was the last time you took a look at your Last Will and Testament? If it was five years ago or more, then you should consider dusting it off and reading through to make sure it’s up to date.
Remember, a lot can change in five years: the birth of new family members, marriages and divorces, or even significant changes in your finances are just some of the reasons you should revisit your Last Will and Testament, as well as the rest of your estate planning documents like your Power of Attorney and Advance Directive. If you notice your Last Will and Testament is out of date and you intend to revoke it, you should have a replacement ready to go.
If you want to revoke your Last Will and Testament due to changes in your family’s situation, you should speak with an experienced Davidson County Will lawyer. A Will lawyer can help you figure out the best way to change your estate plan, which will probably involve rewriting your Will, Power of Attorney, and healthcare documents.
Taking a look at your Last Will and Testament, as well as your other estate planning documents, at least every five years is a good habit to ensure your wishes are known to your family and you have the proper planning in place. If you believe you may have a problem with certain family members once you’ve changed your estate plan, you may want to seek the advice of an experienced Davidson County Will Lawyer to talk about your options.
If you would like to learn more about revoking your existing Last Will and Testament, or if you’d like to review your existing estate plan, please schedule an initial call with April Jackson.