What Happens When You Inherit a House in Maryland?
Disclaimer: This blog post and website provides general information on real estate and is not personalized advice. Maryland Estates, LLC, doing business as Creo Home Buyers, and its authors are not liable for the accuracy or use of this information; consult with a trusted real estate professional or attorney for personalized guidance regarding your unique situation.
When you inherit a house in Maryland, there are several factors to consider, including who is considered an heir to an inherited home and what happens if there is no will in place.
Additionally, taxes may come into play, such as capital gains tax, Maryland inheritance tax, and Maryland state estate tax.
Whether you’re wrestling with what to do with a house that’s inherited or are simply curious about what lies ahead, today we dive into what to expect when inheriting a house in Maryland.
Learn the ins and outs of the inheritance process, inherited property taxes, and what options you have when you inherit a home in Maryland!
Table of Contents
What Happens if There is No Will?
When someone passes away without leaving a will, it is known as dying intestate.
In these cases, Maryland’s intestate laws determine property distribution among close relatives, prioritizing close family members like a spouse. However, this may not align with the deceased’s heirs wishes, potentially causing conflicts and legal challenges.
Who is Considered an Heir to an Inherited Home?
In Maryland, an heir is someone who is entitled to inherit property and assets due to their relationship to the deceased or after going through the probate process.
This can include immediate family members, such as children, parents, or spouse, as well as other relatives or even close friends who have been named in the will or can make claim to the estate as a rightful heir.
It is also worth mentioning that in some cases, the assets of the descendent may be handed over to the state of Maryland. This would happen after someone dies but only if there are no surviving family members or designated heirs that come forward after a number of years.
Understanding Taxes When You Inherit a Home in Maryland
Inheriting a home in Maryland not only brings emotional and practical considerations but also tax implications. As an heir, you may be responsible for paying inheritance taxes on the property. The amount of tax owed depends on the value of the home and your relationship to the deceased.
Inheriting a home in Maryland may trigger capital gains tax if you decide to sell it. The IRS utilizes a stepped-up basis, reevaluating the property’s value at the time of inheritance, potentially reducing the tax liability. Maryland imposes a flat 5.75% capital gains tax when you sell the property, not during the inheritance process.
Inherited Property Taxes
In addition to inheritance taxes, as the new owner of the bequeathed home, you will also be responsible for making sure there are no unpaid property taxes. These taxes are based on the assessed value of the property and are typically due annually but may come due if you decide to sell an inherited property or change ownership.
Maryland Inheritance Tax
Maryland has an inheritance tax that is imposed on certain inherited property.
For homes valued at less than $30,000, there is no inheritance tax in Maryland. However, for homes exceeding this value, the tax rate ranges from 0% to 10%, depending on your relationship to the deceased.
Notably, usually you are exempt from inheritance tax if you are the deceased person’s spouse, child, or other lineal descendant, such as a parent, sibling, or grandparent.
Maryland Estate Tax
It’s worth mentioning that Maryland imposes an estate tax for properties valued above the threshold limit of $5 million. The estate tax rate ranges between 0.8% to 16%, depending on the property’s value exceeding this limit.
Understanding these tax obligations and any potential exemptions or credits that may apply is essential, and consulting with a tax professional is highly recommended to navigate these complexities effectively.
What are the Costs of Inheriting a House?
Inheriting a house in Maryland involves not just the legal aspects but also substantial financial responsibilities.
Here are the key points to consider:
- Mortgage: If the house carries a mortgage, it’s your responsibility as the heir to manage it. This entails either continuing the monthly payments, refinancing the mortgage, or selling the home to settle the balance.
- Property Taxes: As the new owner, you’ll need to cover property taxes based on the assessed value of the property. Understanding the tax obligations is vital to avoid unexpected costs.
- Homeowners Insurance: Ensuring the home has appropriate homeowners insurance in place is crucial. It safeguards your investment and offers protection in case of unexpected events.
- Maintenance and Repairs: Ongoing property maintenance and occasional repairs are your financial responsibility. Prepare for costs, especially if significant renovations are needed.
- HOA Fees: If the property is part of a homeowners association, you’ll need to manage HOA fees and adhere to association rules and regulations.
- Utilities: Managing utility bills, such as electricity, water, and gas, is essential. Efficient use and budgeting help control expenses.
- Outstanding Debts: If the inherited house carries outstanding debts, like unpaid taxes or mortgage arrears, it becomes your responsibility. Assess the extent of the debt, and seek guidance from a financial advisor or attorney to determine the best course of action.
Navigating these financial responsibilities is essential for a smooth transition. Seek professional advice to make informed decisions and effectively manage the financial aspects when you’ve inherited a house in MD.
What to Do With an Inherited House
There are several options to consider when deciding what to do when you inherit a home:
Option 1. Live in the House
One option for handling a house that was willed to you is to live in the property yourself. This option may be appealing if you are looking for a new place to call home or if you have an emotional connection to the property.
Carefully consider the financial implications of living in the house. This includes potential costs such as Marylamd property taxes, homeowner’s insurance, maintenance, HOAs, and repairs.
Option 2. Make it a Rental
Another option when inheriting a house in Maryland is to turn it into a rental property. This can be a viable choice for those who are not interested in living in the bequeathed house, but still want to keep it in the family.
By renting out the property, you can generate a steady stream of income and potentially cover the expenses associated with the house, such as property taxes and maintenance costs. Additionally, turning the house into a rental can also provide tax benefits, as you may be able to deduct certain expenses from your rental income. You can also choose to rent and sell the rental property later.
Thoroughly research and understand the rental market in the area and to properly screen and select tenants to ensure a successful and profitable rental property.
Option 3. Sell the Home
One potential option for inherited Maryland property is choose to sell it. Selling can be a beneficial choice for those who are not interested in becoming landlords or living in the home.
By selling the property, you can receive a lump sum of cash that can be used for various purposes such as paying off debts, investing in other properties, or simply adding to their savings. Additionally, selling the house can help avoid responsibilities and costs associated with owning and maintaining an unwanted property in Maryland.
Ultimately, selling inherited real estate for cash can be a viable option for those looking to quickly liquidate their bequeathed asset and move on from the responsibilities of homeownership.
Sell an Inherited House in Maryland for Cash
When it comes to the house you inherit in Maryland, deciding whether to rent or sell probated property can be challenging.
Selling for cash offers a practical solution for those faced with property they’ve don’t want to keep.
This hassle-free process involves selling the property as-is, without the need for costly repairs or renovations, in exchange for a lump sum of cash (usually in the form of a check or wire deposit).
At Creo Home Buyers, we understand that navigating the complexities of inheriting a house can be both financially and emotionally challenging. That’s why we’re here to offer an easier way to sell a house in Maryland on your terms.
We specialize in providing hassle-free, no-obligation cash offers for inherited houses in Maryland. Our process is designed to alleviate your burden of managing unwanted property that you became heir to by selling quickly and on your terms.
Contact us today or simply fill in the request form below for your free cash offer, and let us help you make the most of property that was willed to you in Maryland.
In conclusion, inheriting a house in Maryland may present financial and emotional challenges, but with the right guidance and solutions, it can also be an opportunity to create a new home and continue a family legacy.
FAQ About Inherited Maryland Houses
Q: Do I need to go through probate if I inherit a property?
A: The need for probate depends on several factors, including the value of the property and whether there is a surviving spouse. It’s recommended to consult with an estate attorney to determine if probate is necessary.
Q: What happens if the house was placed in a living trust?
A: If the inherited house is held in a living trust, the trust document will dictate how the property should be handled upon the owner’s death. The trustee will oversee the distribution of the property to the designated beneficiaries.
Q: What is a reverse mortgage and how does that work?
A: A reverse mortgage is a type of home loan available to seniors that allows them to convert a portion of their home’s equity into cash. If the inherited house has a reverse mortgage, the loan will need to be repaid if the property is sold or transferred to another owner.
Q: What if there are multiple heirs?
A: If there are multiple heirs to the inherited house, they will need to come to an agreement on how to handle the property. This can include selling the house and dividing the proceeds or one heir buying out the others. You’ll also want to determine how property taxes will be split among co-owners or heirs.