With the “great wealth transfer” underway, many folks are expecting to receive an inheritance in the form of retirement accounts, investments, or the family home. But unless the home is held in a trust or has a transfer-on-death deed, the cost of inheriting a home could be substantial, according to a recent article, “Why Inheriting a Home in the Great Wealth Transfer May Not Mean Financial Security,” from Investopedia.
Knowing the costs, tax basics, and probate rules can help avoid the financial stress during what is often an overwhelming time of great emotions.
Inheriting a home also means inheriting the costs of homeownership, including home insurance premiums, property taxes, maintenance costs, and homeowners’ association (HOA) fees. This becomes even more complex if the home goes through probate, the legal process of settling an estate and appointing an executor after a person’s passing.
While the house is going through probate, the estate may have to pay the bills to keep the home running. If the home is not in a trust or deeded properly, it may take months or years to settle the estate. The bills, however, don’t stop.
When the plan is to leave the home to heirs, a conversation with an estate-planning attorney is necessary. Do you want the heirs to keep the home, sell it, rent it out, or have a family member live in it?
Each option has tax, maintenance, and emotional consequences, all of which need to be considered. Making these decisions while the family is grieving creates an additional burden that can be alleviated through prior planning.
On the plus side, real estate is subject to a step-up in cost basis, so the home’s price becomes the property’s value on the date of death. If parents purchased a home for $100,000 and it has appreciated to $500,000, heirs may be responsible for capital gains tax only if they sell it for more than $500,000.
If the plan is to fix up the home with the intention of selling it, a remodeling budget should include the capital gains tax liability.
When homes have been in the family for decades, there are many emotional strings attached. By addressing these in an estate plan, the family can be spared further emotional burdens.
Homeowners should have an estate plan, created with the help of an experienced estate planning attorney, to clarify their wishes for the home, plan for how it should be passed to heirs, and address how taxes and maintenance costs will be covered.
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Reference: Investopedia (July 4, 2026) “Why Inheriting a Home in the Great Wealth Transfer May Not Mean Financial Security”
