5 Smart Things to Do If You Inherit Property on Long Island
Inheriting a property is often a bittersweet proposition for more than one reason. The most obvious is that you’ve lost a loved one.
The less obvious reason is that while inheriting property can represent a windfall, it also adds a lot of complications you may not have been prepared to deal with. It’s important to take a deep breath, and try to look at the big picture, which includes all 5 of the following items.
#1) Understand who else is involved.
Did other relatives inherit a share of the property as well? If they did, you won’t be able to do anything without their consent and signature.
You may need to call a family meeting to discuss what each person wants to do with the property and why. And if everyone can’t agree, you might have to turn to a mediator, or even proceed with litigation.
Either way, it doesn’t make sense to start making decisions until you know whether you’re free to do so.
#2) Consider the most advantageous use of the property.
There are four things you can do with this property.
The most obvious is that you could move into it. If you’re struggling with high rental rates and the property is paid off this might be a no-brainer. If you already have a place to live or if the property’s Long Island location is inconvenient for your commute then it might not be such a good choice.
Second, you could become a landlord yourself, turning it into a rental property. Before you do, make sure you understand your rights and responsibilities as a landlord. Understand you can’t do it without a financial cushion of some sort. You’ll have to repair certain things that go wrong right away, and failing to do so because you don’t have the money won’t shield you from the consequences of that failure.
Third, you could use the home as a second home or vacation home. Just remember you’ll need to pay taxes and insurance on the home as well…and you’ve still got to account for repairs. This also might not make too much sense if you already live close by.
Finally, you can sell the home. This is a popular option when there are multiple owners, since splitting proceeds is a simple, straightforward process that’s difficult to argue over. If one co-owner really wants the home you could offer that heir the right to buy out your share of it instead. If the home needs lots of repairs you might not be able to sell it at its market rate, or you might have to pay to make those repairs.
#3) Investigate whether you’ll need a mortgage transfer.
If the property is paid off you don’t have to worry about this. But if it’s not, you will probably have to move the mortgage into your own name and start paying it just like your loved one did.
Otherwise, the home could be vulnerable to foreclosure, just as if you’d taken out the loan and failed to make payments on it.
#4) Explore tax implications.
There are a couple of different tax implications to factor into your calculations. Property tax is the most obvious, but you also have to account for estate taxes.
Depending on the value of the home you may have to pay capital gains tax as well. This will happen if you sell the home for a bigger sum than it was purchased for. If you sell the property at a loss you will be able to claim a capital loss instead.
#5) Talk to a real estate lawyer.
Even if you’re pretty sure you know what you want to do it’s important to loop in an experienced real estate lawyer. There may be hidden requirements, pitfalls, or problems you don’t know about.
At the very least, it will give you the peace of mind that comes with knowing you’re doing everything right with your inheritance.