What Can Go Wrong When You Inherit a House in Illinois?
Inheriting a house can seem like a blessing, a concrete manifestation of a loved one’s generosity. However, it can also come with complications and unexpected challenges, especially if you’re unprepared. Here are some common issues that can arise when you inherit a house in Illinois.
You May Owe More Taxes Than Anticipated
One of the first concerns that come up when inheriting a house is taxes. Depending on the property’s value, its location, and your personal financial situation, you may find yourself responsible for significant tax payments.
Firstly, there’s the inheritance tax. While Illinois does not impose an inheritance tax, the federal government does, though it typically applies to estates worth several million dollars. Even if the inheritance tax doesn’t apply to you, the estate itself may be subject to an estate tax, reducing the property’s overall value before you even take possession.
Additionally, there’s the issue of property taxes. As the new homeowner, you are now responsible for paying all future property taxes. Depending on where the house is located in Illinois, these can be substantial. If you weren’t expecting this expense, it could create a financial burden.
Finally, if you decide to sell the inherited house, you might have to pay capital gains tax on any profit you make from the sale. This is calculated based on the difference between the home’s “stepped-up” basis (its fair market value at the time of the original owner’s death) and the sale price.
The Mortgage May Be Bigger than You Thought
If the deceased still had a mortgage on the house, the debt doesn’t simply disappear. In most cases, the responsibility for paying off the mortgage falls to the estate. If the estate doesn’t have enough other assets to pay off the mortgage, it can get tricky.
As the new owner, you might be able to take over the mortgage payments, but this would mean that the monthly payments would become your responsibility. Before you agree to this, it’s essential to understand how much the payments are and whether you can afford them. If you can’t, the lender could foreclose on the property.
If the mortgage is too large for you to handle, selling the property might seem like the best option. However, if the real estate market is in a downturn, you might not be able to sell the house for enough money to pay off the mortgage, leaving you in a difficult financial position.
The House May Need Repairs and Upgrades
Another potential issue arises if the inherited house is older or hasn’t been well-maintained. Significant repair work or upgrades may be necessary to make the house livable or marketable. These could include essential repairs to the plumbing or electrical system, fixing a leaky roof, or dealing with an outdated kitchen or bathroom.
If you don’t have the money to cover these repairs or upgrades, you might find yourself stuck with a property you can’t live in or sell. Even if you can afford the repairs, the process can be time-consuming and stressful, particularly if you’re dealing with it on top of mourning your loved one.
You May Have Problems with Relatives and Joint Heirs
Inheriting a house can be even more complicated when you’re not the sole heir. If the property was left to you and your siblings or other relatives, disagreements can quickly arise about what to do with the house. One of you might want to live in the house, another might want to rent it out for income, and another might want to sell it as soon as possible.
Resolving these issues can take time and can strain or even damage familial relationships. It may be necessary to involve an attorney or mediator to help resolve these disputes in a way that’s fair to everyone involved.
In conclusion, while inheriting a house can be a significant financial boon, it can also bring several potential complications and burdens. It’s important to be aware of these potential issues ahead of time and seek legal and financial advice if you find yourself inheriting property.
If you’re overwhelmed by the complications of inheriting a house in Illinois, you might consider selling it to a cash home buyer like Tony Buys Homes. We can buy your inherited house “as-is”, allowing you to bypass the stress and expense of repairs and upgrades, and we can close quickly, helping you settle any debts and move on with your life. Visit our page about inherited houses to learn more.
