New York Estate Planning & Elder Law Blog
Parents believe that leaving their children the family home is a great boon but experience shows that beneficiaries are not happy with the bequest.
For many people in the United States chances are that their house is their most valuable asset. It makes sense then for most parents to leave their most valuable asset to their children. But this common inheritance is only a blessing for a small few of beneficiaries and a burden on most others.
Not A Quick Sell
When parents leave their home to another person they believe that if the beneficiary does not want it then they can just sell it. While that may be true, in most cases chances are slim to none that a house is going to be able to be sold just as it is today. Even assuming that the house is located in a desirable area where there may be a lot of interest from potential buyers, a house is a major investment in time, effort and money. Getting a house ready for market is very different from using a home as a primary residence. Renovating a house and preparing it to be sold may require a potential investment upfront that your heirs cannot or will not want to put forward. If the person you are leaving your house to does not reside close to your home, it will be a major hassle and expense for them to travel and back and forth to it.
While preparing the house for market and waiting for the right buyer there will be additional costs to the inheritor, such as mortgage payments. Even if the house is already paid off and in the clear, there is still the cost of insurance, real estate taxes and maintenance to keep up on before a house is sold.
Some May Keep It
Despite the potential pitfalls to your heirs there may still be those who wish to keep and maintain the residence. Who wants to keep the family home? It is a very small subset of people. Generally people want to keep a residential home when:
- It can generate substantial income as a rental property
- The inheritor would like to live in the house at a future time
- The inheritor already lives in the home
- The real estate market is depressed in the area but likely to rise in the future
- The home has been in the family for generations
No matter what you decide to do with the family home it is always a good idea to consult with an estate planning attorney before you make the final decision. Passing on the family home may result in a significant financial liability for your heirs depending on potential long term capital gains taxes depending on the current value of the home. An estate planning attorney will be able to help you with the financial and emotional issues that you may encounter when passing on the family home.
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