Financial Planning Checklist for Inheriting a Home

Written By: Ryan Rink, CFP®, EA, ChFC®, CLTC®

Inheriting a home can be both a blessing and a challenge. It often comes with a mix of emotions, practical concerns and a long list of tasks. Whether the house is a family home full of memories or a new property you’ve never seen before, navigating this process can be daunting. This checklist will serve as a guide to walk you through the steps you need to take when inheriting a home.

Review the Estate Documents

First, you’ll want to review the deceased person’s will/trust to determine who is the executor/trustee and will be the lead person throughout the process. It is often helpful to consult with an estate planning attorney when reviewing the documents to understand the legal implications of inheriting the property.  They can help with any potential probate issues and titling transfers.

Assess the Property

You’ll want to review the property’s current condition and inspect for any urgent repairs/issues. These can include, but are not limited to, broken windows, leaking pipes or electrical issues. Take note of the house’s overall condition, including the state of appliances, HVAC systems and structural elements.  Make a list of necessary repairs or updates. For additional security, you may want to consider changing the locks and garage codes. This will prevent any unauthorized access.

Handle Financial Aspects

Check if there are any outstanding mortgages, liens or property taxes owed on the house. Address these financial obligations to avoid complications.

Consider getting an appraisal to determine the current market value of the house. This is important for both financial planning and potential sale considerations.

You’ll want to contact various companies to make them aware of any ownership changes. Contact the homeowner’s insurance company to update the policy to reflect the new owner and assess if the existing coverage is adequate. Contact the utility companies (electric/water/gas/trash) to transfer accounts into the name of the new owner. Inform any service providers associated with the property, such as lawn care, security systems or cleaning services, of a change in ownership.

Sort Through Belongings

Be sure to take inventory of any personal belongings left in the house. Decide what to keep, donate or dispose of. You’ll want to review the estate documents to see if some personal property items are noted in either the will/trust or a personal property memorandum. For example, it may be noted in the documents that the deceased person wanted to leave a certain jewelry item to a specific family member.

Plan for Taxes

It’s important to understand the tax implications of inheriting a property. After someone passes, the property typically receives a ‘step-up’ in cost basis, meaning you would owe no (or very little) capital gains tax if you choose to sell the property. Be sure to consult with a qualified tax advisor to understand any potential tax liabilities.

The flowchart below provides a starting place for you to understand more about whether or not your inherited property receives a step up in cost basis.

Inheriting a Home - Step up in basis

 

Make a Plan for the Future

In many instances, the property will need to be prepared to be sold. However, that is not always the case. If you choose to keep the property, give some thought about how you might use it in the future, whether as a personal residence, vacation home or investment property.

If the property was inherited by multiple family members, you’ll want to set up a meeting to have an open discussion about future plans for the house. This can help avoid conflicts and ensure everyone’s expectations are managed. If possible, it’s best to keep family members informed about the status of the property, especially if it affects their interests or inheritance.

Seeking professional advice from a qualified financial planner, estate attorney, tax advisor and/or real estate expert can provide valuable guidance and support throughout the journey. If you have questions on what to do when inheriting a home, please reach out to your Shakespeare Financial Advisor at (262) 814-1600.