If you’ve suddenly inherited a house, you may not be prepared or emotionally ready for the questions and issues that arise.
Plus, the wrong decision could lead to financial problems and issues amongst family.
Know What Challenges You Could Face!
Knowing what hurdles and obstacles may crop up is the first step and will benefit you greatly if you find yourself inheriting a property. So without further ado here are some of the things that can go wrong when you inherit a house in Florida.
You May Owe More Taxes than Anticipated
Most homeowners don’t have to worry about estate tax because the exception bracket is exceedingly high (in the millions), Plus, estate taxes were temporarily suspended in 2010.
However, another mostly suspended stipulation in 2010 was the step-up provision.
So, answering the question, “What can go wrong when you try to sell an inherited house in Florida?”, requires you to consider the stepped-up capital gains situation.
It has nothing to with the amount the decedent paid for the house.
NOTE: Unless the step-up falls within one of the years when it was changed. In that case, you may owe a lot more in taxes than you bargained for.
The Mortgage is Higher than You Thought
In most cases, when an elderly parent or relative passed away, the mortgage on their house was paid off. However, these days it’s common for retired individuals to take out a reverse mortgage on their home to help supplement their insufficient retirement funds.
The catch here is that a reverse mortgage cannot be assumed by heirs.
To make matters worse, taking over a standard mortgage requires you to live in the property. So, if your plan was to rent the property out in the hopes of making a little extra income, you may have to refinance the mortgage in your own name.
The House May Need Repairs and Upgrades
Out of all the things that can go wrong when you inherit a house in Florida, this one can add up significantly.
Typically homes are inherited from a close elderly relative, perhaps a parent or grandparent. Besides not having the physical ability to perform maintenance and upgrades, many elderly people don’t have the money for it either. And if they can afford it, they may simply choose not to because they’ve grown accustomed to the property AS-IS and would rather spend their money elsewhere.
If you plan to live in the house, this may not be a huge concern since you can take your time and fix what you want to.
However, if you intend to rent or sell, this is where things become complicated.
You’ll have to make repairs to ensure it’s market-ready and upgrades to bring it up to code so that it meets other legal and insurance requirements. Upgrades can involve installing a new HVAC system or re-wiring the house – two rather costly issues to fix.
You May Have Problems with Relatives and Joint Heirs
What if you’re not the only heir? That can be a problem.
Suppose you and your siblings inherited the house jointly. You want to sell, your sister wants to live there and your brother wants to turn it into a rental. You can immediately see how this can be the spark that ignites arguments that never seem to end.
In most states, joint heirs of a home are considered tenants in common, and one heir can force a sale if it comes to that. However, the process is expensive and the familial consequences are likely to be longlasting and difficult to bear.
So back to the question, “What can go wrong when you inherit a house in Florida?” Quite a lot, actually. Especially if you’re not up to speed on tax laws, mortgages, and upgrade issues.