Inheriting your parent’s home is a combination of sadness, relief, and worry. The last one can be avoided if the right planning is done in advance, says a recent article, “6 lessons I learned from inheriting a parent’ s house” from Bankrate. When all these feelings are combined with navigating the inheritance among siblings, things can get complicated quickly.
Many people think children automatically inherit a house when their parents die, but this isn’t true. It’s possible for children to inherit without a will, but it doesn’t always happen. Every state has its own laws about who inherits what in the absence of a will. Without a will, there are often unpleasant surprises for the family.
Parents need to talk with their children to tell them if they have a will or estate plan and where the will can be found. If there is no will, parents need to meet with an estate planning attorney as soon as possible to ensure their wishes are documented.
Wills and estate plans are never completely done. Wills need to be updated as circumstances change over time. A will created while a parent is in their 50s may not reflect the family’s status ten years later. Let’s say one sibling is disabled and receives means-tested government benefits. If the sibling is left something in the will, their benefits could be cut off. If the sibling was well ten years ago, the estate plan didn’t include a special needs trust, which would allow the family to provide for the disabled sibling without putting their benefits at risk.
The general rule for reviewing wills is to review wills every three to five years. They may not always need updating, but they definitely need reviewing.
Heirs need to put everything in writing if they have been left assets like the family home as a group. Siblings will have different lives and needs, so inheritances need to be clarified and documented. A verbal agreement is asking for trouble, even in the best of circumstances. If something happens to a sibling and their spouse has a different idea of what they want to happen to their share of the house, for instance, the way forward won’t be pleasant.
It’s best to plan how your assets should be managed after death. Would a revocable trust work better to keep the family home out of probate? If the home is placed in a revocable trust upon the death of the owner, the ownership of the home goes to a trustee, avoiding probate. Depending on the terms of the revocable trust, the trustee may be able to have more discretion with how to handle or sell a house inherited by several people than an executor would.
Plan ahead and expect surprises. Inheriting a home isn’t great for every family, as it comes with costs. Property taxes, maintenance, and utility costs might make home ownership a burden rather than a blessing. Parents need to think carefully about whether or not inheriting the home will work for the family or the individual child or children inheriting.
Consulting with an estate planning attorney in advance can facilitate a discussion about how best to pass the family home onto the next generation or determine if it’s not in everyone’s best interests. Leaving a legacy of careful planning is as much a gift to the family as the home itself.
Reference: Bankrate (May 3, 2024) “6 lessons I learned from inheriting a parent’ s house”