Owning a house can be complicated. Inheriting one can be more complicated. Although many inheritances proceed without major issues, unexpected legal, financial and family complications can turn a valuable asset into a burden. Whether you’re working on your estate plan or you’re expecting to inherit, recent headlines provide valuable lessons on what you want to avoid.
Liens That Cause Financial Headaches
According to Fox 45 News, a woman in Baltimore inherited a house from her late father. Then she discovered that a water bill for more than $200,000 came with it. The massive water bill appears to be the result of a master water meter for the entire community that, for some reason, is tied to the inherited house. The woman says she’s submitted evidence that the HOA should be responsible for the bill, but she’s been told that a lien will stay in place on her house until the bill is paid.
This situation is unusual, but liens are fairly common. When a homeowner owes a debt, the creditor can place a lien against the property. Although it’s possible to sell a property with a lien, it complicates matters, and the lien must be resolved before a title is issued to the new owner.
Community Age Restrictions
According to Inc., a 28-year-old woman moved into her father’s home to take care of him. After his death, she inherited the house. Now her age is a problem. The house is in a 55-and-up community, and the board is pursuing legal action to kick her out. She’s also being charged a $1,000 fee to cover the board’s legal expenses.
Age-restricted communities are common, and the rules vary. According to the Housing Equality Center of Pennsylvania, these communities are allowed under the Housing for Older Persons Act, which allows senior housing communities to exclude families with children as long as certain requirements are met. In a 55-and-up community, at least 80% of the occupied units must have at least one resident who is 55 or older. In a 62-and-up community, every resident must be at least 62 years or older.
Although these rules may be desirable for retirees who want to live in a quiet community with other retirees, they can create problems for younger heirs.
Family Disputes
According to ABC 7 Eyewitness News, a man murdered his niece, and authorities believe it was over a dispute involving the inheritance of a home. The previous owner of the house died in 2023 and left the house to her eldest granddaughter. The suspect was allegedly angry about this.
Inheritance disputes are never a justification for violence, and thankfully, most disputes never end in violence – but they can get bitter. Disputes involving real estate can be especially contentious because you can’t simply divide a house the way you can divide cash assets. Houses also tend to have emotional value, and some family members may want to retain access to a house associated with cherished memories.
Unexpected and Burdensome Costs
According to Realtor.com, two siblings were hit with a $48,000 tax bill after they inherited their family’s home and an adjacent lot in Austin, Texas. Property values had surged in the area, leading to a tax bill that was 90% higher than what their late father had paid.
Even if a house is paid off and there are no liens on it, homeownership is never free. Insurance, property taxes, maintenance and repairs can all add up. In some cases, an heir may not be able to afford to keep an inherited house. Although selling the house is usually an option in this case, heirs may be reluctant to sell a home that has sentimental value.
How to Avoid Problems with Inherited Houses
If you’re creating an estate plan that includes real estate, it’s important to think about what could go wrong with the inheritance. Although you may assume that your family members will be grateful to receive the property, reality can be more complicated.
- Determine what debts or financial responsibilities are associated with the house, including liens, mortgages, property taxes, insurance, maintenance costs and repair needs. Will the person you’ve chosen as your heir be able to manage these costs?
- Consider being frank with your family. What you do with your property is up to you. However, this doesn’t mean you need to keep your plans a secret. By discussing your plans with your family, you can explain your reasoning and set expectations. You can also address any concerns or issues, for example, if you’re planning to leave a house to someone who doesn’t want it or can’t afford it.
- Work with an estate planning attorney to create an airtight estate plan. An experienced attorney can help you plan for unexpected scenarios so that your assets are distributed according to your wishes.
Proactive estate planning can help preserve family relationships, reduce legal disputes and ensure that your property is transferred according to your wishes. Do you need to create or update your estate plan? Contact Skinner Law.