What to do when you've inherited some property.
A record estimated 75 trillion dollars in assets is passing to baby boomers and their heirs, including a very significant amount of residential real estate. We provide an executive summary of issues to be aware of to ensure these assets remain safe and profitable.
Like many of our readers I have an interest in real estate investing both from a professional standpoint for my clients and personally an investor. Seeing both sides of what is happening as many successful people are inheriting the homes of their parents and grandparents has been a learning experience that has provided some expensive lessons. In the metro-Phoenix and Scottsdale Arizona area, as just one example, we are seeing homes that were originally purchased for low six figures in the 80s and 90s routinely selling for $1 million (or significantly more) depending on location, condition and if they are at both current aesthetic and functional standards.
Get (and keep) control
The first step is to get legal control of and access to the home through the trustee if the home is owned by a trust, or through the probate process, depending on how well the Grantor planned their estate and the conveyance of the property to you. If title is being transferred to you outright, remember that inherited real estate is generally a separate property asset of the inheriting spouse, so pay careful attention to how you have title transferred to avoid accidentally gifting half your inheritance to your spouse. This “comingling” of assets can happen several ways including by transfer to both of your names, to an LLC you both own or even a joint trust. Conversely, make sure that the way you hold the property, if you decide to keep it, does not expose the home to your own personal and professional risks.
Secure the property
As soon as you are able, I suggest you or your agents secure the property and conduct an inventory (including pictures) of the home, its contents, and condition. I have personally walked through multiple homes for sale that have been vacant for extended periods of time in some of the best neighborhoods imaginable, that have both incurred significant damage and created significant liability and expenses for the new owners or the estate from sources including:
Handle the business details
You will need to immediately manage a number of property details and incur a variety of expenses related to holding the property that will need to be paid by you or the estate.
Finally, decide on an exit or business strategy
We see inheritors consider three primary options, assuming they don’t want to personally occupy the home (rare):
Attorney Ike Devji has 20 years of legal experience focused exclusively on asset protection, risk management and wealth preservation. He helps protect a national client base with more than $6 billion in personal assets, including several thousand physicians. He is a contributing author to multiple books for physicians, a Physicians Practice contributor for over a decade and a frequent national CME presenter. Learn more at www.ProAssetProtection.com.