Pitfalls of Planning: Learning What You Don’t Know
Family members who are overtaken with grief are often unable to move forward and make decisions. If a house was not being well maintained while the parent was ill or aging, it might fall into further disrepair. When siblings have emotional attachments to the family home, things can get complicated.
The difficulty of selling a parent’s home after their passing depends to a large degree on what kind of advance planning has taken place. Much also depends on the heir’s ability to ask for help and working with the right professionals in handling the sale of the home and managing the estate. The earlier the process begins, the better.
Parents can take steps while they are still living to ward off unnecessary complications. It may be a difficult conversation but having it will make the process easier and allow the family time to focus on their emotions, rather than the sale of property. Here are a few pointers:
Make sure your parents have an estate plan to specifically addresses your real estate. Many Virginians don’t realize that simply naming heirs to property instead of empowering someone to first sell the property at your death is the very issue that can create family squabbling.
Be prepared for your estate to spend some money. Before a home is sold, there may be costs associated with maintaining the property and fixing any overdue repairs. If there is deferred maintenance it may need to be addressed before it can be sold.
Secure the property immediately. That may mean having the locks changed as soon as possible. Once an heir (or someone who believes they are or should be an heir) moves in, getting them out adds another layer of complications especially if they inherited an undivided portion of the property.
Get real about the value of the property. Have a real estate agent run a competitive market analysis on the property or, even better, consider an appraisal from a licensed appraiser. Avoid any accusations of impropriety by either the heirs or worse, by the Commissioner of Accounts if the property is controlled by the probate process. (Another good reason for a trust as your estate plan of choice!) Don’t hire a friend, family member and definitely not yourself even if you are qualified. This needs to be all business.
The biggest roadblock to selling the family house is often the emotional attachment of the children. It’s hard to clean out a family home, with all of the mementos, large and small. The longer the process takes, the harder it is.
Although you may need to complete repairs, this is not the time for any major renovations. There may be some cosmetic repairs that will make the house more marketable, but substantial improvements won’t impact the sale price. Remove all family belongings and show the house either empty or with professional staging to show its possibilities. Clean carpets, paint, if needed and have the landscaping cleaned up.
Keep tax consequences in mind. Depending on where the property is, where the heirs live and how much money is being inherited, there can be estate, inheritance and income taxes. It is usually best to sell an inherited property, as soon as the rights to it are received. When a property is inherited at death, the property value is “stepped up” to fair market value at the time of the owner’s death. That means that you can sell a property that was purchased in 1970 but not pay taxes on the value gained over those years.
Talk with an experienced estate planning attorney about what will happen when the home needs to be sold. As I mentioned, it may be better for parents to create a revocable trust in advance, which will direct the sale, allow a child to continue living in the home for a certain period of time, or instruct the one child who loves the home so much to buy it from the trust. Trusts are typically easier to administer after parents pass away and can be very helpful in preventing family fights.
Reference: The Washington Post (May 16, 2019) “With proper planning, selling a parent’s house can be a relatively painless process”