Inherited properties can come with financial responsibilities such as existing mortgages, unpaid property taxes, maintenance costs, and insurance requirements. Be aware of hidden costs, including emergency repairs, property management fees, and legal expenses.
Inheritance is by far the best way to pass property to children. As long as it's your primary residence, you can keep the property tax basis in most areas, and your cost basis (for capital gains if/when you sell) is stepped up to the date of death. If there's a mortgage you can also assume it.
When a house is transferred via inheritance, the value of the house is stepped up to its fair market value at the time it was transferred, according to the IRS. This means that a home purchased many years ago is valued at current market value for capital gains.
Inheritance checks are generally not reported to the IRS unless they involve cash or cash equivalents exceeding $10,000. Banks and financial institutions are required to report such transactions using Form 8300. Most inheritances are paid by regular check, wire transfer, or other means that don't qualify for reporting.
“Cash is king when it comes to leaving an inheritance,” said Carbone. “It's the simplest asset to deal with in terms of a transfer.”
If you inherit a house, changing the deed is one of the first things you'll want to do. It's an important step that ensures your name is on the deed and proves your legal entitlement to the property moving forward. Here's a step by step guide that breaks down this process.
Parents can make an outright gift of a home to an adult child. Any gift that exceeds the 2024 annual exclusion of $18,000 will be subject to gift tax and require that a gift tax return be filed.
Cash is one of the best options to inherit because it is not considered taxable income by the IRA. Cash is also one of the most liquid assets, as you can use it immediately for anything.
That said, an inheritance of $100,000 or more is generally considered large. This is a considerable sum of money, and receiving such a windfall can be intimidating, especially if you have limited experience managing excess funds.
It depends on your personal circumstances. If you want to live in the home or use it as a rental property, keeping it obviously makes sense. If you don't want to do either — or if it needs significant work that you don't want to commit to — selling it will make more sense.
The appraiser or assessor analyzes real estate transactions that occur within a community and determine the factors that lead to the final sale prices.
Your inherited house could be a great primary residence or vacation home. The caveat: This is typically the most expensive option. Potential costs include the mortgage, taxes, maintenance, repairs and insurance, plus buying out any co-inheritors, if applicable.
While California may not impose an inheritance tax or an estate tax, there are still taxes associated with selling an inherited property: Capital Gains Tax: Capital gains tax is applied on a stepped-up basis, meaning it's only relevant to any increase in the property's value after inheritance.
Inheriting a home entails a range of financial responsibilities that can quickly add up. Property taxes, insurance premiums, ongoing maintenance costs and unexpected repairs can significantly strain beneficiaries' financial resources.
Timelines for transferring property after the owner's death vary by state and can range from a few months to over a year.
There are some benefits for people who choose to make an inherited property their primary residence. If you plan to live in the inherited home, you can apply to have up to $1 million excluded from the tax reassessment as long as you move into the home within a year of the transfer.
The choice depends on your financial goals, risk tolerance, and management preferences. Real estate typically offers more stable returns, potential tax advantages, and rental income but requires active management and larger initial investments.
Upon selling an inherited asset, if the inherited property produces a gain, you must report it as income on your federal income tax return as a beneficiary.
Many people worry about the estate tax affecting the inheritance they pass along to their children, but it's not a reality most people will face. In 2025, the first $13,990,000 of an estate is exempt from federal estate taxes, up from $13,610,000 in 2024. Estate taxes are based on the size of the estate.
Deposit the money into a safe account
Your first action to take when receiving a lump sum is to deposit the money into an FDIC-insured bank account. This will allow for safekeeping while you consider how to make the best use of your inheritance.
Immediately after receiving an inheritance, you should notify your local Social Security office.