Inheriting real estate can be both a financial opportunity and a potential source of stress—especially when multiple heirs are involved. Deciding whether to keep or sell the property depends on a variety of legal, financial, and emotional factors. Below, we explore the pros and cons of each option, how the probate process plays into the decision, and the potential pitfalls of co-owning inherited property.

 

Option One: Keeping It

Real estate is probably the most common “legacy” asset, because it is a valuable asset that appreciates over time. Passing on real estate to children or grandchildren is one of the best ways to provide financial stability to the younger generations. In addition to providing a home, real estate may also provide rental income. In addition to the financial upside, the heirs may want to keep the property for sentimental reasons. Heirs typically receive a “stepped-up” basis in the property, which could reduce capital gains taxes if the property is sold later.
However, there are downsides to inheriting real estate, such as:

Upkeep and maintenance costs: Property ownership comes with ongoing expenses such as property taxes, insurance, and repairs.

Disagreements among heirs: When multiple people inherit a property, they may not agree on how it should be used or managed.

Limited liquidity: A home isn’t a liquid asset, which can be a challenge if heirs need cash to pay debts or expenses.

 

Pitfalls of Co-Owning Property with Other Heirs

Joint ownership among heirs often leads to logistical and legal complications. For instance, one heir might want to rent it out, another to sell, and another to keep it as a vacation home. If one heir is unable or unwilling to contribute to maintenance or taxes, tension can quickly build. All heirs typically must agree on major decisions, which can lead to deadlock.One heir may end up doing more work or paying more, leading to resentment or legal disputes.

 

Potential for Disputes

Inherited property is a frequent source of conflict. Disputes may arise over:

• Who gets to live in or use the property
• How expenses are shared
• Whether to sell or hold
• Distribution of sale proceeds, especially if improvements or maintenance were paid for unequally
• In some cases, one heir may need to file a partition action—a legal process to force the sale or division of the property—if no agreement can be reached.

 

Option Two: Sell it

Selling the property and splitting cash proceeds is a common way to deal with inherited property. A sale allows for easier division of the assets, eliminates ongoing responsibility for upkeep, and involves fewer financial risks. Any heir or heirs may buy out the other’s interests. Selling comes with its own expenses and pitfalls, including:

Emotional loss: Letting go of a family home can be emotionally difficult.

Timing the market: Selling during a slow market might mean a lower return.

Tax considerations: Although heirs benefit from a stepped-up basis, there may still be some tax implications depending on the sale price and timing.

 

Probate Implications

Real estate generally must pass through probate unless it was jointly owned with rights of survivorship or titled in a trust. Probate adds time and expense to the process, especially if the estate is complex or the property is located in a different state. If the heirs decide to sell the property during probate, the executor or administrator must seek court approval before the property can be sold. Selling after probate is completed is generally simpler, but still requires coordination among the heirs and clear title to the property.

 

Unsure Which Option Is Best For You?  Talk To An Experienced Probate Attorney

Inheriting property can be a blessing or a burden. Whether to keep or sell depends on your financial goals, family dynamics, and the practical realities of co-ownership. It’s always wise to consult with an estate attorney and financial advisor to understand your rights and responsibilities before making a decision.