What Happens When You Inherit a House With a Sibling in Massachusetts?

In a perfect world, siblings would always see eye to eye. But we all know that often isn’t the case. Inheriting property is already a complicated process to navigate. Inheriting a house with a sibling comes with its own unique set of challenges, especially if there are conflicting ideas over what to do with the property.

Unless your deceased loved one’s will explicitly states otherwise, inheriting property with a sibling means that ownership of the house is automatically divided equally between you. That makes you and your sibling equally responsible for decisions regarding the house.

It’s important to understand your options when it comes to inheriting a home with a sibling so you can make a mutually beneficial, well-informed decision.

So you inherited a home with a sibling, what do you do first?

If you recently inherited property, you might be wondering what actions to take first to get the process started on the right foot. Let’s discuss some essential steps to take as soon as possible after receiving your inheritance.

  • Determine if there is any outstanding debt on the inherited property, such as a mortgage: The financial status of the house is a key piece of information to uncover. For example, whether it is paid off or carries a mortgage.
  • Find out the home’s value: You can talk to a real estate agent for a fair market value appraisal on the property. You can ask the agent to appraise your house as it is or with potential renovations taken into account. Whether you and your sibling decide to sell or keep the house, you will need to know the home’s value.
  • Identify the active utilities: It’s important to find out which utilities are active on the property. That way, you can cancel any services no longer needed (such as cable, internet, or landlines). It’s a good idea to keep electricity and heat/AC services active if you plan to show the house to potential buyers or conduct renovations.

What Should You Do if You Inherit a House With a Mortgage?

One of the first things you should do when you inherit a home is determine whether there is an outstanding mortgage on the property. If this is the case, you have a few options:

  • Sell the house and pay off the mortgage with the sale proceeds.
  • Keep the home and pay off the mortgage from your other assets.
  • Assume the mortgage, which means you take over the payments and become the owner of the home
  • Determine if the mortgage is traditional or reverse

Suppose you inherited a home that has a reverse mortgage. In this case, your options are more limited because the total balance of the mortgage becomes due upon the death of the original borrower. If you want to keep the property, you’ll have to find a way to pay back the entire loan in a short period of time.

Options When You Inherit a House With a Sibling

When you inherit a house with a sibling, there are several options you need to consider.

  • Sell the house and divide the profits equally: This is often the most straightforward choice and might be the best option if the real estate market is booming. That way, you and your sibling can quickly get your hands on your share of the proceeds.
  • Buy out the other sibling, so you become the sole owner: If one of you wants to keep the property, but the other does not, a buyout might be the best option. For example, say you own 50%, and your sibling owns 50%. If you wanted to keep the home, you would buy out your sibling’s half (50% of the home’s value) and transfer the deed solely into your name.
  • Keep the house and continue to share ownership: If you feel you and your sibling could work well together as co-owners, you could choose to keep the house and rent it out to split the profits. If you decide to remain co-owners, it’s crucial to establish a formal partnership agreement so you can both be on the same page regarding shared responsibilities and upkeep costs.

Tax Considerations

One significant advantage of selling inherited property is the beneficial tax treatment. Specifically, you may not have to pay any capital gains taxes when you sell the house because the home’s value is “stepped up” to the date of death of the person from whom you inherited.

Therefore, you would only owe taxes on the difference between the house’s fair market value on the date of death and whatever the sale price ends up being.

For example, say your loved one passed away on August 20th, 2021, and the home value on that date is $500k. If you sell the house for that same amount, you will not owe any taxes. If you sell the home for $505k, you will owe taxes on the $5k gain.

It’s always a good idea to consult a tax or estate planning professional to help you understand the tax implications of your particular situation.

What If You And Your Sibling Can’t Come to An Agreement?

If you and your sibling can’t agree on what to do with the inherited property, your last resort is to file a partition suit with the court system.

What is a partition lawsuit?

A partition lawsuit asks the judge to order the sale of the property to terminate the co-ownership between you and your sibling – but the process is rarely that simple. Additionally, court fees and lawyer expenses tend to add up quickly during this process. It is often in your (and your siblings) best interest to try to settle things independently without having to involve the courts.

If You Inherited a House With a Sibling in Massachusetts and Aren’t Sure What to Do Next

We understand that inheriting a home with a sibling can be overwhelming – but you don’t have to navigate the process alone. We can help you gain clarity on your options and guide you in the right direction. To schedule a free, no-obligation call with our real estate experts or to receive a free cash offer for your home, please call or text us at 781-309-7085.

We buy inherited houses all over Massachusetts (in absolutely any condition!) and would love to discuss your situation and help as much as we can. To get in touch with us via e-mail, click here.

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