You may not be ready for the questions and issues if you have suddenly inherited a house. Making a wrong decision may lead you to encounter 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 MD.
What Can Go Wrong When You Inherit a House in MD
You May Owe More Taxes than Anticipated
Manu people is not concern about estate tax because of the very high exemption (in the millions), and the estate tax was even temporarily suspended on 2010. But also mostly suspended in 2010 was the step-up provision. So in considering what can go wrong when you inherit a house in MD and when you intend to sell it, you need to consider the stepped-up capital gains situation.
The step-up provides that you pay capital gains taxes only on the gains above the fair market value at the date of the decedent’s death. It has nothing to with the price the decedent paid for the house – unless the step-up falls in one of the years when it was changed. In that case, you may owe a lot more in taxes than you bargained for.
The Mortgage May Be Bigger than You Thought
It is normal for elderly people to take out a reverse mortgage on their home to supplement insufficient retirement funds. Most of elderly parents or relatives in the past, when they hand down their houses their mortgages are already paid off.
You need to be aware, then, that a reverse mortgage cannot be assumed by heirs. And in the case of a standard mortgage, you can assume the mortgage only if you live in the house yourself. So if you intend to rent the house, you may have to refinance it in your own name.
The House May Need Repairs and Upgrades
With respect to what can go wrong when you inherit a house in MD, this one may be the most costly. Most of the time, people inherit a house from a deceased elderly parent or very 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 because they know they won’t be living in the house very many more years.
This may not be a huge concern if you decide to live in an inherited house, but if you intend to rent it or sell it, you’ll have to make repairs to make it presentable and upgrades to bring it up to code and meet other legal and insurance requirements. A big amount of money is needed to install a new HVAC system or do a house re-wiring.
You May Have Problems with Relatives and Joint Heirs
If you are not the only heir this can be a problem. For example you and your siblings inherited the house jointly and you want to sell it, your brother may want to rent it and your other brother may want to live in it. You can see what a powder keg waiting for a spark this is.
In most states, joint heirs of a home are considered tenants in common, and one heir can force a sale if it comes to that. The process, however, is expensive, and the emotional and familial consequences are likely to be highly unpleasant.
So what can go wrong when you inherit a house in MD? Quite a lot, actually, if you’re not up to speed on tax laws, mortgages, and upgrade issues. It is best to contact a qualified professional to help head off these issue quickly.