Inheriting the Family House? Consider These Financial Questions
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Why is the family home one of the biggest assets parents leave to children?
Here's your Money Briefing for Friday, June 2nd. I'm J.R. Whalen for The Wall Street Journal. The family house is among the most expensive assets many Americans pass down to their children when they die. But rising costs are leading more adults to sell the homes they inherit.
If you're the inheritor, can you afford this house? We're dealing with rising costs of renovation. Property taxes are higher in many areas of the country. Utilities are more expensive.
We'll talk to Wall Street Journal personal finance reporter Veronica Dagger about what options you should consider after the break.
Among the items that parents pass down to their children is the family home. But that often comes with emotional and financial questions.
How common is inheriting a house and do heirs usually keep or sell it?
Wall Street Journal personal finance reporter Veronica Dagger joins us to discuss. So, Veronica, why do parents often choose to leave the family home to their children, and how common is it?
Well, it's a common way to transfer wealth. There's no recent data that tracks home inheritance nationally, but we hear from realtors, we hear from advisors that people continue to do this. It's a nice way to leave a legacy financially to your family, and you're hoping also maybe the people hold on to the house. That's often not the case, though. More than three-quarters of parents plan to leave a home to their children later. when they die. And that's according to a 2023 Charles Schwab survey. But on the flip side, children are often reluctant to sell, but finances and simplicity of unloading the property often win out. So nearly 70% of those who expect to inherit a home from their parents plan to sell it.
And that's according to the survey as well.
What financial costs should inheritors evaluate before keeping the house?
So people want to get rid of the house.
Yeah, leaving the house to the kids is one thing, but do the kids actually want to take on ownership of the family home? It sounds like there should be a conversation or two about the house as part of an inheritance. What kind of financial questions should be on the list?
got to think about if you're the inheritor, can you afford this house? We're dealing with rising costs of renovation. Property taxes are higher in many areas of the country. Utilities are more expensive. Not to mention, there's no official stats on this. But in general, what I hear from advisors is that people tend to inherit the home longer when they're in their 50s or 60s, sometimes a little earlier. But by that point, many inheritors already have their home. They're already established in a state, perhaps a different state than where their parents have the home. And so this would be an additional cost. And these are people who don't need another home to take care of. And so it's not so attractive to people.
How do location and insurance challenges affect the decision to keep an inherited home?
Even though it is a tight real estate market, these people already have homes, so they don't necessarily need it. If you have school-age kids, you don't want to have to uproot your kids and move across the country just so you can say, oh, yeah, I took on my parents' home. So the high prices of homes have also made it very motivating for heirs to sell. If you can get top dollar for your parents' home that is in a hot location, why wouldn't you sell it?
And then financially, if the parents have owned the home for decades, then the mortgage could be already paid off. And that would ease the financial burden on siblings if they wanted to keep it in the family.
Absolutely. However, there's still the financial upkeep of that, right? Even though the mortgage is paid, you still have to pay those property taxes. Those aren't going away. And you still have to deal with all the other costs. Again, if you're in a different state, you have to deal with security. Say you're going to be renting this out to another family, you have to make sure they're going to pay their bills, going to maintain the property properly. If the house is going to sit empty, who's going to watch it? How are you going to make sure squatters don't come around? I So there's a lot of considerations to think about. In general, a lot of the heirs we speak to are saying, you know what, I appreciate the gift from mom and dad, but I'd rather take this house, sell it, than use the proceeds to do something like fund my own retirement or my travel goals or my kid's college education.
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Chapters
7 chapters
1
Why is the family home one of the biggest assets parents leave to children?
0:02–0:58
2
How common is inheriting a house and do heirs usually keep or sell it?
0:58–1:54
3
What financial costs should inheritors evaluate before keeping the house?
1:54–2:50
4
How do location and insurance challenges affect the decision to keep an inherited home?
2:50–4:30
5
Why might heirs prefer selling the inherited home instead of renovating it?
4:30–5:49
6
How should siblings handle valuing the house when one wants to buy the others out?
5:49–6:58
7
What emotional and long-term financial risks come from keeping an inherited house?
6:58–7:11
Speakers
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