Dear Kim,
My mother passed away recently. It wasn’t entirely unexpected as she had been sick for quite a while, but to say that made things any easier would be a fat lie.
My father passed away a few years ago, and I am an only child. Now that some time has passed, her attorney reached out and informed me that my mother left everything to me. I now have a large house that I have no idea what to do with. My husband and I are very content with where we are and don’t want to move, but the house isn’t quite paid off yet. We’ve talked about potentially selling it, renting it out, etc, but we want to know our options before making a decision.
I’m not at all familiar with real estate or how these things work. What are my options in this scenario? I feel like my mind isn’t ready to think this through on my own right now.
Sincerely,
Looking For Inheritance Insights
Dear Looking,
Managing financial decisions while you are grieving the loss of a loved one can be very difficult. I would say to take your time to consider all your options.
The simple answer would be to sell the house outright, pay off the mortgage, and have the remaining cash for whatever you need.
Since there is a step up in basis at your mother’s passing, you wouldn’t have any capital gains to pay except the gains earned since your mother’s passing. That means that the cost of your mother’s house has raised to the current market value at her passing. If your mother had put your name on the deed of the house prior, you would have assumed her basis, which would be much lower than the value was at her passing.
You could keep the house and rent it out. The income would pay the mortgage and taxes, as well as allow money to pay for upcoming repairs. The downside is being a landlord, and not everyone is interested in that. I have several clients that have rentals and enjoy the income they bring in. Keeping the house would also allow you to relocate there if you changed your mind down the road.
Best of luck as you make your decision. I would say to take your time and don’t rush into anything.
Sincerely,
Kim
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