What could be better than inheriting a home? It may be the best thing to ever happen in your life. On the other hand, it may be a nightmare.

Inheriting a house can bring about a range of emotions. You might be sad because someone you love has passed away, and it can be overwhelming to know what steps to take next and what the financial implications are. But you may also be excited because a house can be a huge asset.

So what should you do if you inherit a home in Berks County?

If you find yourself in this situation, you basically have three options. The first is to sell it, the second is to move there, and the third option is to rent it out to someone.

Initial Considerations

You should first consider the legal and financial obligations that come with inheriting a house. There may be debt obligations, for instance. Also, you should consider the tax liabilities that come with inheriting property, including capital gains and estate taxes.

If you inherit a residence, you don't have to pay federal inheritance tax. The Pennsylvania Inheritance Tax is 12% for transfers to siblings, and 15% for transfers to others (except charities, exempt institutions, and government entities that are tax-exempt). 

You could be required to pay tax on the difference between the fair market value when you inherited a home and the selling price when you sell the home. You could pay taxes based on the difference between the fair market value when you inherited a home and the selling price.

You might be able to qualify for an exemption if you keep the house.

Is There Currently a Mortgage?

If you inherit a home and it’s paid for, you'll have less to worry about financially.

If the house has an open mortgage, you might assume it and take over the payments, which would mean that you pay off the debt based on the original terms of the mortgage.

Some loans, such as reverse mortgages, require the remaining balance to be paid upon death or at the time of sale. That means that as an heir if there is an outstanding reverse mortgage, you will have to sell the home in order to pay off the remaining debt.

Did You Inherit a House with Your Siblings?

A complicated scenario occurs when more than one sibling or other family member inherits a house. This means that their different viewpoints need to be considered based on what is in the best interests of the property.

An option when there are multiple stakeholders is a buyout. In such a case, one sibling can buy out the other sibling for whatever reason.

Selling the home and splitting the profits is the easiest option. You could also rent it out and split the profits.

If you cannot agree, you may have to file a lawsuit for partition. This lets you ask a judge to order the sale of the property. You'll have to pay legal fees, and this takes time. Generally speaking, you'll get less money if you do this.

Can You Move into the House?

If there are no complicating factors or the owners of the property agree to it, you might be inclined to move into a house you inherit. However, a mortgage will be a consideration and can help you determine whether or not it makes good financial sense.

You have to consider the mortgage payment as well as property taxes and any other costs associated with keeping the home.

If you don’t have debt obligations, you may have the option to sell your current home and move into the new place without having to take on debt.

Many factors go into deciding what to do after inheriting a house, from how many people share it with you to whether it's currently debt-free. Be sure to research all financial implications before making any decisions.

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