Planning matters

Inheritance – Part 3: Property

In Part 1 and Part 2 we discussed inheritance for both qualified and non-qualified investment accounts. For Part 3, we’ll take a look at some things to think about when you are leaving or inheriting property, such as homes, cars, land, art or jewelry.

When dealing with property, the first question to ask is how the property is titled. Some common types of ownership include:

  • Sole Ownership: If the property is titled to a sole owner the next step would be to find out whether or not the individual had completed a will. Property, unlike qualified accounts, does not have a beneficiary designation so it will pass according to one’s will. If there is no will, state law will dictate who will inherit property.
  • Joint Tenants with Rights of Survivorship (JTWROS): If the property is titled JTWROS, at the first owner’s death, the other owner becomes the sole owner and very little action is needed.
  • Tenants in Common (TIC): If property is owned TIC, each owner’s share will pass according to their will. The other owners will not take over the deceased’s share. This can become challenging because the new owner may not know the other owners or agree in how to handle the property.
  • Living Trust: If property is owned within a Trust, all activities remain the same until the death of the owner(s). At that point, the Trust dictates the beneficiaries of the property outside of probate.

It is a good idea for property owners to have a conversation with their loved ones about who will inherit their property and any wishes they may have. This will also help prepare those individuals to take over the responsibilities of the property after they inherit. For example, when an individual or individuals inherit a home, some responsibilities will include keeping the insurance and property taxes up to date, paying utility bills and maintaining the yard until it is sold or occupied.

It’s not uncommon for multiple people, siblings for example, to inherit a home. In this case, all parties involved must agree on what to do with the home. This is where having a conversation about intent ahead of the inheritance can be helpful. Many emotions can be tied to a property and it can be difficult to make decisions when also dealing with loss.

Another good reminder is to have property that you inherit appraised. This can easily be overlooked when inheriting items like art or jewelry. When you inherit property, the value as of the day you inherit it becomes your basis for tax purposes, so it is important to have a current assessment done.

If you have property or it’s likely that property will end up being a part of your financial future, talk with your planner about questions to ask now or conversations to prepare for. As with all types of inheritance, it’s best to have a plan so you can make the best financial decision at a time when emotions are high.

Written By Patricia Spies