The New Math on Inheriting Your Parents’ House

Inheriting a family property can present emotional and financial decisions for families, as renovations, property taxes, and utility costs are rising. According to financial advisers, adult children find it harder to hold on to real estate, making the decision to sell an attractive one.

Nearly 70% of those who expect to inherit a home from their parents plan to sell it, a Charles Schwab survey found, primarily due to taxes. However, this percentage does not apply to vacation homes and secondary properties. 

Other families have found that one sibling is interested in buying out the others. This requires a reasonable method for valuing the home. A home’s cost basis resets to market value at the date of death, and any increase in value after death is taxed as long-term capital gains. But if a home is sold quickly, there will likely be little gain or little to no tax.

For more information see Veronica Dagher “The New Math on Inheriting Your Parents’ House” The Wall Street Journal, May 31, 2023.

Special thanks to Joel C. Dobris (Professor of Law, UC Davis School of Law) for bringing this article to my attention.