Typically, adult children have three options when they inherit a house from their parents: they can move in, sell, or rent it out. If you and/or your siblings have recently inherited a house and don’t really know what to do, we’d suggest contacting a Minnesota estate planning attorney to determine which of the following solutions is right for your family.
Option 1: Move into the Home
First, you or one of your siblings could move into the house. You should anticipate an increase in property taxes, as the current market value will be reassessed. You may also want to consider getting the home inspected for maintenance or security issues of immediate concern.
If your siblings are co-owners and you want to move in alone, your siblings will need to be compensated, either through rental payments, buying out their share through mortgage or refinance, or make the house a share of the larger, total estate. Keep in mind when moving into the house, you will be accountable for property maintenance, taxes, and insurance payments, as well as legal obligations of homeownership.
Option 2: Sell the House
The next option would be selling the house outright. If unsettled financial obligations exist, however, this could prove difficult. All debts must be paid out of the sale of the property, and in some cases, the money owed through mortgages, taxes, judgments, and/or liens can be higher than the property price. If you decide to do any maintenance, cleaning, or renovations beforehand, make sure to focus on areas that will give you the most return on investment.
Option 3: Turn the Property into a Rental
Finally, you may decide to rent the property out to generate passive income, though your rate and demand will depend on the property’s location and condition. Make sure to check any city ordinances or homeowner association rules in the area before deciding to lease out the home.
Hiring a property manager may also be a good idea, particularly if you don’t live near the residence. This person (or company) can handle the leasing and management of the house. It is your responsibility to ensure, somehow, that repairs and precautionary measures are met, and being a landlord affords you a whole new host of liabilities. If you are considering turning the property into a Bed and Breakfast or weekly rental, please keep in mind that maintenance and management costs increase exponentially to the level of traffic.
What Is Best for My Family?
Inheriting a home can be great, or sometimes terrible, and a lot of it depends on the decisions you make from the very start. We recommend using this short list to begin weighing your options, and then finalize your plan with the help of our experienced estate planning attorney who can offer a balanced perspective and draw up any legal agreements or estate planning documents that may be necessary to accomplish your goals. If you’d like to get started, we invite you to schedule an appointment with our Minnesota estate planning attorney at (763) 244-2949.