Statistics show that more than 80 percent of people have homeowners insurance. This means that the house you inherit most likely has an existing insurance policy.
After you determine the mortgage and other debts on the property, you can now go ahead to see if your parents had an insurance policy on the house, and what it entails.
Insurance on Inherited Property
When you inherit the property, you also inherit a lot of liabilities, as well as damages.
Since you have become the new owner, you need to try and have the right insurance policy in place to make sure the house is protected.
If the home came with a homeowner’s insurance policy, you are in good hands because it saves you a lot of expenses.
With this kind of insurance, you can mitigate any costs that come with damages to the house the time it is still under the probate process. Additionally, if you are planning to renovate the home, you need to have insurance to cover costs in case someone gets hurt while working on the home.
You need to reach out to the insurance company so that you rest assured that the home is insured adequately. Call the homeowners agent and let them know that the owner of the home has died, and you need to have the policy updated. The agent might request a copy of the death certificate to certify this info.
You also need to tell the policy provider that since the owner died, you are now the primary contact, and you need all communication sent through you.
The agent will require a letter to prove that you are the legal administrator of the house. However, this varies from one insurer to the next.
Many providers decide to retain the policy until it expires. When you contact the insurance provider, make sure you ask about the time left on the policy and whether there are any due payments so that you don’t end up with an uninsured home.
When you understand more about the policy, the next step is to continue with the payment of the insurance premium. Make sure you submit the payments on time after you inquire about how to make the payments each month.
To keep this policy active, you need to protect the property. Insurance companies like seeing that a person is living in the home because then they are sure that the home will be well looked after. If you don’t have someone living there, it is ideal that you keep the house in proper condition.
Check on the house at least once every week to make sure it is ok. If you don’t have someone to do this, then ask the realtor to get a property manager for you.
Research Alternative Policies
If you aren’t happy with the current policy, you must get a new one. You don’t have an obligation to retain the existing policy, but if it is serving you well, then you can still keep it.
Your House and Tax
When you take the house, you need to be sure about the taxes that it comes with. An estate planning attorney can advise you on these taxes and what to do when you are faced with them.
Tax at the National Level
When you take over a house, the national government will only be concerned about taxes that come up due to the capital gains that you make. They don’t impose any inheritance tax on the house, and the good thing is that it won’t attract any income tax at all.
State Inheritance Tax
In most states, you don’t need to pay tax on the house, though some states charge this. If the asset passes down to you, it is exempted from inheritance tax in most states. You need to talk to your estate planning lawyer to give you a heads up on what taxes you need to pay.
The inheritance isn’t considered a taxable income, which means you don’t have to include the house on your income tax return.
Capital Gains Tax
This form of tax is enforced on the difference between the initial cost of the asset and the sum that you sell it for. If you dispose of the house at a loss, then you won’t be taxed at all. If you dispose of it at a profit, then you pay tax on the gain.
You need to understand the type of insurance on the house as well as the taxes you are liable for to secure the home. Work with the insurance company as well as an estate planning attorney to get the process right.