If you have suddenly inherited a house, you may not be prepared for all the questions and issues that can arise.
Also, if you make the wrong decisions, you will most likely encounter financial, emotional, and family problems before long.
Forewarned is forearmed, as they say, so here are some of the things that can go wrong when you inherit a house in New Jersey.
What can go wrong when you inherit a house in New Jersey.
I’m the taxman
You may end up owing more taxes than you were bargaining for.
Most people do not have to worry about estate tax because of the very high exemption (in the millions), and the estate tax was even temporarily suspended in 2010.
But, in addition, the step-up provision was mostly suspended in 2010.
So when considering what can go wrong when you inherit a house in New Jersey and when you intend to sell your house, you need to consider the stepped-up capital gains situation.
The step-up provides that you pay capital gains taxes only on the gains above the fair market value at the date of the decedent’s death.
It has absolutely nothing to with the price the decedent paid for the house, unless, of course, the step-up falls in one of the years when it was changed.
In that case, you may owe a lot more in taxes than ever you bargained for.
Mortgage alarms and surprises
The mortgage may turn out to be much bigger than you previously thought possible.
Generally in the past, when an elderly parent or relative passed away, the mortgage on their house had already been paid off. In these tough modern times, though, it is fairly common for elderly people to take out a reverse mortgage on their home in order to supplement insufficient retirement funds.
You need to be aware, then, that a reverse mortgage cannot be assumed by heirs.
And in the case of a standard mortgage, you can assume the mortgage only if you actually live in the house yourself.
So if you intend to rent the house out to someone else, you may first have to refinance it in your own name.
Pimping the house
The inherited house may be in dire need of not only repairs but also upgrades.
With respect to what can go wrong when you inherit a house in New Jersey, this one may well turn out to be the most costly of all.
Most of the time, people inherit a house from a deceased elderly parent or very close relative.
In addition to not having the physical ability to perform the maintenance and upgrades, many elderly people do not have the money for it either.
And even if they do, they may simply choose not to because they know they will not be living in the house for very many more years.
So if you do plan to live in the inherited house, this may not be such a huge concern for you.
But if, on the other hand, you intend to rent or sell the house, you will have to not only make repairs in order to make it presentable but also upgrade it, so as to bring it up to code and meet other legal and insurance requirements.
Installing a new HVAC system or re-wiring the house will involve a whole lot of money.
Some things are relative
You may have to deal with problems concerning relatives and joint-heirs who are competing to inherit the house.
But what if you are not the only heir?
That can be a really big problem.
Let us suppose that you and your siblings have inherited the house jointly.
If you want to sell the house, your brother may want to rent it to someone else instead, while your other brother is planning to live in it himself.
So you can see how this situation is like a tremendous powder keg just waiting for a tiny spark.
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.
The process, however, is very expensive, not to mention the emotional and familial consequences, which are likely to be highly unpleasant and bitter.
So, in conclusion, what can go wrong when you inherit a house in New Jersey?
Well, quite a lot, actually, that is if you’re not up to speed with the tricky tax laws, mortgages, and upgrade issues.
If you would like to know more about these issues or are in a position to sell a house and would like to do so as quickly as possible then do not hesitate to reach out to us here at Quick N Easy Offers.