Inheriting a House: Complete Guide to Your Options

Meta Title: Inheriting a House: What to Do Next (Complete 2026 Guide) Meta Description: Inherited a property? Understand your options — keep it, sell it, rent it. Plus tax implications, multiple heirs, and common mistakes to avoid. Keywords: inheriting a house, inherited property taxes, what to do when you inherit a house, stepped up basis

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Someone you loved has died. Now you own their house.

Grief makes everything harder, including financial decisions. This guide helps you understand your options so you can make the right choice when you're ready.

There's no rush. Take the time you need.

Immediate Steps (First 30 Days)

Secure the property. Change locks if needed. Check that insurance is active. Collect mail to prevent theft signals.

Locate the will and estate documents. These determine who inherits what and guide the probate process.

Contact an estate attorney. Even simple inheritances benefit from professional guidance. Mistakes here are expensive.

Notify the mortgage company. If there's a mortgage, the lender needs to know. You're generally protected from acceleration under federal law (Garn-St. Germain Act).

Keep paying essential bills. Mortgage, property taxes, insurance, utilities. Even during probate, these obligations continue.

Don't make rushed decisions. You have time to decide what to do with the property.

Understanding Your Tax Position

The single most important concept: stepped-up basis.

When you inherit property, your tax basis becomes the fair market value at the date of death — not what the original owner paid.

Example:

• Your parent bought the house in 1985 for $80,000
• At their death in 2026, it's worth $600,000
• Your basis is $600,000

If you sell for $620,000, you only pay capital gains on $20,000 — not $540,000.

This stepped-up basis is a massive tax benefit. It often makes selling shortly after inheritance nearly tax-free.

Option 1: Sell the Inherited Property

For most people, selling is the right choice.

Why sell:

• Liquid cash instead of illiquid real estate
• No ongoing management responsibilities
• Stepped-up basis minimizes taxes
• Clean distribution among multiple heirs
• Eliminates property across the country you can't easily manage

Timeline considerations:

• Selling quickly captures stepped-up basis with minimal appreciation to tax
• Selling too quickly (days/weeks) might leave money on the table
• Market conditions matter — but don't try to time the market

Costs to expect:

• Real estate commission (5-6%)
• Closing costs (1-2%)
• Repairs/updates for market readiness
• Carrying costs during sale process

Option 2: Keep the Property as Your Home

Sometimes the inherited home becomes your primary residence.

When this makes sense:

• You need/want to move anyway
• Property is in a desirable location for you
• Mortgage is paid off or payments are affordable
• Sentimental value is significant

Financial considerations:

• Can you afford property taxes, insurance, maintenance?
• If there's a mortgage, can you qualify to assume it or refinance?
• How does this home compare to buying something yourself?
• What are the opportunity costs of capital tied up in this house?

Primary residence benefits:

• If you live there 2+ years before selling, capital gains exclusion applies ($250K single, $500K married) on appreciation above your stepped-up basis

Option 3: Rent Out the Property

Converting inherited property to rental income is popular but often underestimated in complexity.

Potential benefits:

• Ongoing income stream
• Property appreciation over time
• Depreciation tax benefits (starting from stepped-up basis)
• Keeps the property "in the family"

Reality check:

• Are you prepared to be a landlord?
• Can you manage a property remotely?
• Local rental market strong enough?
• Does the property need updates to be rentable?
• Will rental income exceed all costs (mortgage, taxes, insurance, maintenance, management, vacancy)?

The math that matters:

• Monthly rent: $2,500
• Mortgage: $0 (paid off)
• Property tax: $600
• Insurance: $150
• Maintenance reserve: $250
• Property management (10%): $250
• Net monthly: $1,250

That $1,250/month sounds good until the roof needs replacing ($15,000), the tenant stops paying ($3,000 in eviction costs), or property values drop.

Being an accidental landlord is a business decision, not a passive inheritance.

Option 4: Use a HELOC for Liquidity

If you want to keep the property but need cash (for repairs, other inheritance expenses, or personal needs), a HELOC on inherited property is an option.

Requirements:

• Probate must be complete (you need clear title)
• Property condition must meet lender standards
• You must qualify based on your income and credit

Use cases:

• Fund necessary repairs to sell at higher price
• Access cash while deciding long-term plan
• Pull equity to invest elsewhere (advanced strategy)
• Finance improvements for rental conversion

Caution: Don't take on debt against inherited property without a clear plan. The property was free. Adding leverage adds risk.

Multiple Heirs: The Complicated Reality

Inheriting property with siblings or other heirs creates challenges:

Everyone must agree. Selling, keeping, renting — all major decisions typically require consensus.

Buyouts are possible. One heir buys out others' shares. Requires cash or financing.

Partition sales. If heirs can't agree, any heir can typically force a court-ordered sale. Everyone loses in partition actions.

Operating agreements. If keeping jointly, document everything: who pays what, who manages, how decisions are made, exit conditions.

Emotional landmines: "Dad would have wanted..." arguments destroy families. Focus on practical outcomes, not interpretations of wishes.

The best advice: Decide quickly and cleanly. Prolonged shared ownership of inherited property rarely ends well.

Inherited Mortgage Situations

If the property has a mortgage:

You're not personally liable for the existing mortgage. But if payments stop, the lender will foreclose.

Options:

1. Keep paying as-is. Federal law prevents acceleration just because of death. Payments continue, terms unchanged.
2. Refinance into your name. Required if you want to change terms or need to remove other heirs.
3. Sell the property. Mortgage gets paid at closing from proceeds.
4. Let it go. If property is underwater or unaffordable, you can decline the inheritance or allow foreclosure. Consult an attorney first.

Reverse mortgage inherited: If the deceased had a reverse mortgage, the balance is due. You'll need to refinance, pay it off, or sell.

Common Mistakes to Avoid

Deciding too quickly. Grief makes people want to "handle things." But emotional decisions about real estate often lead to regret.

Deciding too slowly. Carrying costs add up. A vacant property deteriorates. Balance patience with practicality.

Ignoring the stepped-up basis. People sell inherited property years later and forget their basis adjusted. Track it.

Assuming rental will be easy. Becoming a landlord is a job, especially for distant property.

Fighting with siblings. Disagreements about inherited property have destroyed countless family relationships. Consider: is this house worth losing your brother?

Skipping professional help. Estate attorneys, CPAs, real estate professionals — these experts save money in the long run.

Estate Taxes vs Inheritance Taxes

Federal estate tax: Only applies to estates over $13.61 million (2024). Most people don't owe this.

State estate taxes: Some states have lower thresholds. Check your state.

State inheritance taxes: Six states tax heirs (IA, KY, MD, NE, NJ, PA). Amount depends on relationship to deceased.

Property taxes: The house still owes property taxes. In some states (California Prop 19), reassessment at inheritance can dramatically increase property tax.

Consult a tax professional. State-specific rules matter enormously.

A Framework for Deciding

Ask yourself:

1. Do I want the responsibility of this property? (Be honest)
2. Can I afford all the carrying costs? (Include surprises)
3. Does this property fit my life plan? (Location, lifestyle)
4. What would the person who left it want for me? (Usually your happiness, not a specific house)
5. If I sold it, what would I do with the money? (Sometimes that answer clarifies everything)

Take Your Time

You don't have to decide today. Secure the property, handle immediate obligations, grieve.

When you're ready — weeks or months from now — the property will still be there. Make decisions when you can think clearly, not while drowning in loss.

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Next Steps

When you're ready to explore options, check the property's current value and understand your equity position. Knowledge helps, even when decisions are hard.

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This article is for informational purposes only. Consult estate attorneys and tax professionals for advice specific to your situation.

Last updated: February 2026