I recently read a very good article written by a mortgage loan originator in Tennessee. The article is entitled “3 Things You Must Do after Inheriting a Home.“
The article states that after a home is inherited, there can be a feeling of “acquired wealth,” but you still need to assess the situation and take wise steps.
1. Determine the status of the Mortgage. The inheritor needs to determine if there is money owed on the house, and what the options are for either taking over the mortgage or re-financing in a new loan.
2. Determine if you want the House. The inheritor needs to determine whether they would want to live in the house, or keep it as a second property or a rental property. If they already have a residence they want to stay in and don’t want the responsibility of maintaining a second property, then they may not want to keep the house.
3. Is it in Good Condition? Depending on the current condition of the property, and how much money would need to be invested in the property to bring it up to a live-able (or a sell-able) condition, the inheritor may not even want to inherit the house at all.
From the legal perspective, it’s necessary to add one more very critical thing that must be done. In fact, this needs to be done BEFORE the title to the house is even transferred to the person inheriting the house:
Get the House Insured. The homeowner’s insurance on the house applies to the deceased owner. When the house is transferred to the person who inherits the house, the insurance does not transfer as well. If something happened to the property after the transfer (for example, a fire), or if something happened to someone on the property (for example, an injury), then there would not be insurance coverage for the loss or to cover the claim.
Before the Executor or Trustee transfers the title to the house, talk with your personal insurance agent, or the agent who currently has the insurance on the house, and make sure that there will be the right amount and kind of insurance on the house to cover you and the property once the title does transfer. Taking this quick and easy step can save a lot of time, money and headaches down the road.