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The New Math on Inheriting Your Parents’ House

Rising costs are prompting more adult children to sell the homes they inherit from their parents

By VERONICA DAGHER
Fri, Jun 2, 2023 8:42amGrey Clock 3 min

One of the first things many people do when they inherit their parents’ home these days is put up a for-sale sign.

Deciding what to do with a family property is often both an emotional and financial decision, but the rising costs of renovations, property taxes and utilities are making it harder for adult children to hold on to the real estate, financial advisers say. Higher home prices and mortgage rates have often also made it impractical for heirs to buy out their siblings, said Dick Stoner, a Realtor in Rockville, Md.

The high home prices of the past few years have made the decision to sell even more attractive. If inheritors can unload a house in a hot location for a high price, the proceeds from the home’s sale can help secure their finances and fund goals such as retirement, advisers say.

“For inheritors, cash is king,” said Paige Wilbur, Wells Fargo’s head of estate services.

Cash over sentimental value

Leaving a home to children remains a common way to transfer wealth, according to financial advisers and estate planners. There is no recent data that tracks home inheritance nationally.

More than three-quarters of parents plan to leave a home to their children when they die, according to a 2023 Charles Schwab survey of more than 700 American investors between the ages of 27 and 95. Some children may be reluctant to sell for sentimental reasons, but finances and simplicity of unloading a property often win out. Nearly 70% of those who expect to inherit a home from their parents plan to sell it, the survey found.

When Heidi Whaley and her sister, Melissa Mills, inherited their parents’ home, they chose to put it on the market. They recently listed the Charleston home for just below $3.5 million. The sisters, both retired, felt some sadness letting go of the home they grew up in and where their parents hosted many waterfront parties.

“My father wanted to build a house that would be strong, one which would be passed from generation to generation,” said Whaley.

Both sisters are empty-nesters with their own nearby homes, and said they couldn’t justify the expense of maintaining a nearly 4,000-square-foot house for the sake of fond memories.

Rising costs are a bigger part of the calculus these days when heirs decide whether or not to keep an inherited house, real-estate agents say. For instance, the higher cost to insure coastal homes in the Southeast is pushing more heirs in the area to sell, said Ruthie Ravenel, a Realtor in Charleston.

Inflation has also made repairs and upkeep on older properties more expensive, leading some to favour newer properties that may be cheaper to maintain and insure, she said.

I’ll keep the vacation home, though

The declining interest in keeping Mom and Dad’s home is part of a broader generational trend among inheritors, estate planners say.

Some tangible assets aren’t considered as valuable as they were in the past, thanks partly to changing tastes, said Wilbur with Wells Fargo’s estate services.

Renovation is expensive and what one generation sees as on-trend, the other may not. For example, the younger generation of beneficiaries mostly don’t want older traditional furniture. Instead, they prefer the modern, farm-style chic look, said Wilbur.

“While Mom and Dad’s home might be nice, the children may not want to live in it and would consider it too costly to renovate to their style,” she said.

Vacation homes and secondary properties, however, are more likely to be kept by heirs, at least for a few years, especially if it is in an appealing location, financial planners say. If multiple family members are inheriting a vacation house, there needs to be a way to split maintenance costs fairly and create a usage schedule that is to everyone’s liking, said Jeff Fishman, a financial adviser in Los Angeles.

Consider the taxes

Taxes remain a key reason many heirs sell relatively soon, financial advisers say.

Aaron Buchbinder, a real-estate agent in Boca Raton, Fla., is working with three brothers who inherited their grandmother’s condominium this year in Boca Raton and none of them live in Florida. They discussed keeping it and renting it out, but none of them wanted to keep it long term and preferred to sell because of the carrying cost of the homeowners association fees and taxes, said Buchbinder.

Heirs who wish to buy out their other siblings will want to use a reasonable method for valuing the home, said John Voltaggio, a managing director at Morgan Stanley Private Wealth Management. The family may decide to use the value reported on the estate tax return if it is recent, or they may want to obtain a few appraisals and use an average, he said.

The family members inheriting the property will also want to make sure they aren’t getting in over their head financially, with mortgage rates hovering around 7%.

“Many financial decisions today are very rate-dependent, so remove emotions or risk doing something you may later regret,” said Fishman, the financial adviser in Los Angeles.

A home’s cost basis—which is the starting point for measuring a future taxable gain—resets to market value, typically its value at the date of death, said Eric Smith, a spokesman for the Internal Revenue Service.

Any increase in value after death is taxed as long-term capital gains, and those rates are lower than the rates on short-term gain. But if a home is sold quickly, there is likely to be little gain if any and little to no tax, said Smith.



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Drew Barrymore is making an almost $8.5 million adjustment to her real estate portfolio with the listing of her home in the Hamptons.

The renovated barn, built in 1920, is asking $8.45 million and sits on 1.7 acres in the heart of Sagaponack, less than a mile from the ocean. It hit the market last week.

The actress and talk show host has owned the seven-bedroom home—which has appeared across her social media platforms—since 2019, when she paid $5.5 million for it using a limited liability company for the purchase, records in PropertyShark show.

Lena Yaramenko for Sotheby’s International Realty

Despite its transformation into a residence, the former barn still has plenty of period charm, from soaring ceilings and exposed beams to hardwood floors.

Lena Yaramenko for Sotheby’s International Realty

The hub of the 6,850-square-foot, light-filled home is the great room and adjacent breakfast nook and kitchen, the latter of which is separated from the rest of the space by a wall made from window frames. Glass doors open up from the great room onto a deck.

There’s also a living room with a brick fireplace, a pink-painted dining room with a sloping ceiling and a skylight, and a den. Plus a separate one-bedroom guest house with a living room and office area, according to the listing with Kathy Konzet of Sotheby’s International Realty – East Hampton Brokerage. Konzet wasn’t immediately available to comment.

Lena Yaramenko for Sotheby’s International Realty

The park-like grounds, complete with flowering gardens and rolling lawns, are home to a pool, pool house, a bocce court and plenty of areas for outside entertaining.

Barrymore, 49, began her career at just 11 months old when she appeared in a dog food commercial, and at 7, she starred in 1982’s “E.T. the Extra-Terrestrial.” As an adult she’s best known for roles in “Charlie’s Angels,” “Grey Gardens,” “The Wedding Singer,”and “50 First Dates.”

Her talk show, “The Drew Barrymore Show,” debuted in 2020. A representative for the star couldn’t be reached for comment.

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