Banner
  • Utilizing Medical Malpractice Data to Mitigate Risks and Reduce Claims
  • Industry News
  • Law & Malpractice
  • Coding & Documentation
  • Technology & AI
  • Patient Engagement & Communications
  • Billing & Collections
  • Management & Administration
  • Staffing & Salary

Inherited real estate part one: A checklist for heirs

Feature
Article

What to do when you've inherited some property.

real estate |© Shisu_ka - stock.adobe.com

© Shisu_ka - stock.adobe.com

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.

You've inherited a house, now what?

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:

  • Vandals and trespassers destroying property including teens throwing parties in vacant houses that have lead to lawsuits and injuries
  • Thieves stripping homes for wiring and appliances
  • Squatters moving in, and in some cases requiring a months-long court eviction process
  • Devastating mold damage from undiscovered leaks and floods that affected the value of one property by over half a million dollars

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.

  1. Immediately insure the property heavily for both loss and damage and liability or injuries to third parties (seven figures minimum) naming yourself and/or the estate as the beneficiary. Remember that a property that is vacant for as little as 30 days may not be fully covered by traditional homeowners’ insurance and that properties used as rentals require special insurance for that purpose.
  2. Forward mail so you are getting any notices related to the property.
  3. Make sure mortgages, liens, property taxes, utilities, HOA dues, landscaping/pool, security and alarm and other required services are being paid by yourself or by the estate.
  4. Clear the home of personal property as soon as possible through an estate sale, gifting, donating and discarding. Clutter is dangerous and makes your valuable inherited property into a low value storage unit, possibly the worst use and reason I can think of to keep a house.

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):

  1. Sell the home in its current condition and make the asset immediately liquid
  2. Invest significant time and money in professionally remodeling the home and then try to sell it for maximum current market value
  3. Become a landlord and manage and rent the property; or typically the worst option
  4. Leave it empty for an extended period of time subject to all the risks outlined above while you figure out what to do.

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.

Recent Videos
Physicians Practice | © MJH LifeSciences
The fear of inflation and recession
Payment issues on the horizon
Strategies for today's markets
Syed Nishat, BFA, gives expert advice
Doron Schneider gives expert advice
Jay Anders gives expert advice
Jay Anders gives expert advice
Jay Anders gives expert advice
Related Content
© 2024 MJH Life Sciences

All rights reserved.