Inheriting a home or other property, like a business can be rather confusing and stressful. There will be a lot of things you may not understand, so there are bound to be a few questions you need to ask.
Taxes will play a large part in the inheritance. And there are different types of taxes that you may need to pay.
Tax Questions You Need To Ask
For the most part, inheriting property is never straightforward. There are often many questions that will arise.
Here are five questions you need to consider asking when you inherit property.
1) Do I have To Pay an Inheritance Tax?
An inheritance tax is based on the property or items you inherit. It will apply to everyone who is mentioned in the inheritance. The actual tax amount will vary from state to state.
The amount is calculated based on the value of the property. The threshold is usually rather high, so if the property you inherited is below that threshold, you may not have to pay anything. It can also depend on your relationship to the deceased.
Spouses and usually dependents can be exempt from paying these inheritance taxes. If the property comes from someone who is not a family member, you may find yourself with a high tax bill to pay.
2) Is There an Estate Tax?
An estate tax is a tax paid on the property before you can receive it. While you don’t pay it directly, it will come out of the deceased's estate.
This is often taken care of by the person designated to handle the estate. Estate taxes can vary from each state, so make sure you ask a licensed tax professional about it in yours.
Estate tax also has a high limit before it kicks in, so if the property value isn’t great, you may not have to pay anything.
3) Is There a Mortgage?
If there is still a mortgage on the property, you will need to address that. You will need to ask if there are enough funds to cover the mortgage in the deceased’s estate.
If there are not, you can find out if you can take on the mortgage to keep the property. This will be more complicated if there are other heirs involved. You will need to come to a mutual decision on this matter.
If there is a lot of money owed on the property, you may want to sell it to get out from under a daunting mortgage.
Unless you are in a position to refinance, which could help bring the monthly payments down to a more manageable level.