Inheriting a house, especially in Florida can be a complex process, and depending on the situation can involve a lot of emotions. In most cases a person will inherit a Florida property when a loved one passes away, this can put a lot of unexpected financial decisions on a person but we are here to help guide you through this process.
Ways you can inherit a house in Florida
Inherit a House by Will
Inheriting a house by a will is probably the most common situation when a loved one passes away. When inheriting a Florida house in this way it’s important to note that the house has to go through probate court, in many situations, it takes 4-6 months to clear up the legal and probate proceedings. In this time you may be expected to keep up on the payments and taxes for the house.
Inherit a House by Trust
A Trust just like a will allow you to name a beneficiary for your property upon death. There are several types of trusts such as a recoverable trust which can be changed often and living trusts which span the length of your life. Trusts are often good for larger assets like houses, they are generally considered much more secure than Will’s and usually accompany a Will. It’s important to know that with Florida homestead rules a Florida Probate court will still need to clear the property title, this is still much easier than the normal probate process.
Inherit a House by Deed
A Deed is different from a Will and accomplishes separate things. A Deed can transfer ownership of a property while a Will sets out possessions and property to be distributed upon death. So in some situations, you can inherit a house with a Deed without anyone passing away, other times a family member may reverse a life estate and set you as a “Remainderman” where you take joint ownership. Getting a house through a Deed in Florida means you can skip probate proceedings and is far easier to sell the property.
Do I have to pay tax on an inherited property?
A lot of questions come up about what you are financially responsible for once you inherit a house. Inheriting a property in Florida does not automatically trigger any kind of tax liability, but you must decide what you want to do with the property which could cause you to incur different types of tax repercussions.
Typically capital gains taxes are a way to tax you based on the profits you earn from the sale of an investment property. In the case of inheriting a home, you can be protected from the majority of capital gains taxes by something called the step-up tax basis. The way step-up tax basis works is that you inherit the home at fair market value on the date of inheritance and only pay taxes on any gains between the time you inherit the property and sell it. This means selling the property increases the chances you will end up paying taxes on it.
What to do after inheriting a Florida home?
There are a lot of options when you inherit a home in Florida, it all depends on your financial status, the condition of the home and how much time you want to spend. A lot of people opt to sell the home for cash, this can be a quick way to deal with the property especially for family members who are out of town or state.
Current state on the properties mortgage
In most scenarios there is a mortgage on the property, depending on the state of the mortgage this will greatly affect what you end up doing with it.
Mortgage paid off by the estate: This is a very common scenario where the trust or estate requires the montage to be paid off with any money in savings accounts, 401ks, or other financial accounts. This is the best-case scenario for anyone inheriting a property and gives you the most options moving forward.
Due-on-sale clause: Some mortgage companies require the remaining loan amount to be paid if the original loan signer transfers the property to someone else. In this case, the person inheriting the property will have to get a loan themselves to pay off the current mortgage or sell the property in full and pay off the remaining amount. In some cases, family members can assume the mortgage payments if this was written into the loan.
Underwater Property: Depending on the timing and location sometimes inherited property can be worth less than the loan out on it making it underwater. The mortgage company in some cases may let you do a short sell on the property, selling it for less than what is owed on the loan. This frees the person who inherited the property from the financial burden the property could put on them.
Reverse Mortgage: A reverse mortgage is typically taken out by someone who is in retirement and needs more money, the homeowner gets ongoing cash payments for the equity in the home and pays off the loan when moving out. In this scenario, the beneficiary has a limited time to pay off the loan upon the original owner’s death. Reverse mortgage companies are notoriously shady and difficult to work with which is why a lot of family members opt to sell their inherited house for cash when dealing with reverse mortgages.
Does the inherited property need repairs?
Another very common situation is inheriting a property that needs repairs before anything can be done with it. The best thing to do when you inherit a Florida home is to get an inspection to learn about any big-ticket repairs the house may need before selling, renting or living in the home. In some situations the house may not be up to code and be difficult to sell to a private party, knowing this early may free up options to sell the house for cash to a company like Gold Leaf Home Buyers.
Multiple stakeholders in the inherited property
In a lot of cases, people inherit the property with multiple stakeholders, this is typically brothers, sisters, cousins or other family members. The more people involved in inheriting a Florida property the more difficult things become in deciding what should be done.
A few things you can do to simplify the situation.
Sell the property: This is the first and obvious solution, sell the property, and split the profits between all stakeholders.
Rent the property: If all stakeholders want to deal with renters and upkeep on the house, renting the property can provide a good return while the house increases in equity.
Promissory note: If some of your stakeholders want to sell the property but you want to keep it, you can create a promissory note which is essentially paying your stakeholders in monthly installments plus interest to own the property.
Buyout: If one stakeholder does not agree with the others a good option is to buy that person out in either cash or financing the value of the home.
In a scenario where none of the above are options then you will need to file suit for partition and get the courts involved in deciding what should happen to the property.
The fastest way to deal with inherited property
Ultimately the fastest and easiest way to deal with an inherited property is to sell it, in a lot of cases family members that inherit property are out of town or state which can make the process difficult. Selling your inherited property to a company like Gold Leaf Home Buyers makes the process fast and easy, we can buy your inherited property within 7 days of requesting an estimate.