Many families mistakenly believe that receiving an inherited property is as simple as listening to a reading of the Will and then that property magically belongs to you and you can do whatever you want with it.
Sorry to burst that bubble, but a reading of the will is not a real thing – that’s just in the movies. And just because your parents told you that the house is yours when they pass or even left you the house in their will, it does not automatically make it yours.
Before making any plans with your inheritance, you must first establish the status of the estate. Was there a Will? a Trust? Debt? Who is the fiduciary of the estate (as in who is in charge of distributing the assets and paying off debt)?
There Are 3 Main Ways To Receive an Inherited Property
1. Through the probate process
Many people might not be aware, but when someone passes away, their estate will most likely have to go through probate. Probate is a court-supervised process where a judge oversees the payoff of debts, distribution of assets, and submission of an estate tax return in Connecticut.
With or without a Will, full probate may take 6-12 months and might require the sale of the property that was left to you in order to pay off outstanding debts.
2. Joint ownership
One way for the house to pass outside of the probate process is it is owned jointly with rights of survivorship. Though commonly used when owning a property with your spouse, you can certainly own a property jointly with anyone.
With your name on the title as joint owner of the property, there is no waiting for probate. But an estate tax return must still be submitted to the probate court to clear the title. Many people are fooled when they hear no probate is necessary when an asset is owned jointly and when they try to sell or refinance the property, they are scrambling to get all of the necessary documents filed on time.
3. Living Trust
This may be the easiest way to streamline the inheritance process, while still allowing your parents full control of the property while they are alive.
By placing the title into a living trust, with you as trustee and the beneficiary, the property passes directly to you without court involvement.
The Living Trust may also be the better option if there are multiple heirs. Your parents could add detailed instructions as to what they want to be done with the house after their passing.
To Sell Or Not To Sell Your Inherited Property
That is as always a personal decision. It would also be a good idea to perform a title search, as the house may have liens on it that you are not aware of. A thorough look at the current market would also be recommended.
There’s a chance that the house came with a mortgage that you might not be able to afford. Even though the mortgage may be in your parent’s names, you still need to pay it or the bank can foreclose on the property.
And then there are taxes to consider… while there is no inheritance tax in CT, and estate taxes are owed only for estates worth $7,100,000 or more, there may be a capital gains tax if you sell the home.
If you decide to keep the property, you will now be responsible for the property taxes. If the property has been a family destination that you and your siblings want to keep for your children and grandchildren, you may consider creating a limited liability company or trust to own the property.
These legal entities allow you to put some structure in place for the management and expenses of the property, even as the family and number of owners expand.
And then compare that to the property taxes you would have to pay if you keep the home. Whatever path you choose, it won’t necessarily be the easier one.
Marketing Director & Probate Paralegal at RWC, LLC, Attorneys & Counselors at Law
Ukraine born and Israel / Miami, FL raised. University of Miami graduate in the Marketing field.
Mom to a girl, a boy, and a Siberian Husky.