When you inherit property from parents, legal ownership transfers to you through one of four paths — a will and probate, a living trust, state intestacy law, or a transfer-on-death deed — and from the date of death forward you take on the mortgage, property taxes, insurance, and maintenance, along with a reset tax basis that becomes the biggest financial advantage of the whole process. The path your parents chose determines how fast you get clear title; everything else on this list applies no matter which path you’re on.
How Title Transfers to You
Through a Will
A will sends the property through probate. A judge confirms the will, appoints an executor, oversees payment of the estate’s debts, and then approves distribution to the beneficiaries. Most estates take anywhere from several months to over a year to close, and court filing fees to open a case run roughly $50 to $1,200 depending on the jurisdiction and estate value.
Through a Living Trust
If your parent placed the home in a living trust and titled it in the trust’s name before dying, probate is skipped entirely. The successor trustee transfers the property directly to the beneficiaries, usually within weeks. If the house was never retitled into the trust, it still has to go through probate even if the trust document names you.
With No Will
Without a will or trust, state intestacy law decides who inherits. Every state follows a hierarchy that starts with spouses and children and moves outward to parents, siblings, and more distant relatives. The probate court has to identify and verify the legal heirs, which generally makes intestate cases slower than a standard probate.
By Transfer-on-Death Deed
A growing number of states let property owners record a transfer-on-death deed naming a beneficiary who receives the property automatically at death. If your parent recorded one, you complete the transfer by filing a copy of the death certificate and an affidavit with the county recorder. Not every state recognizes these deeds, so it depends on where the property sits.
What to Do in the First Few Weeks
Secure the property physically. Change the locks if other people had keys, check for leaks or broken windows, and keep the utilities on so pipes don’t freeze and the house doesn’t deteriorate while the estate works through its paperwork.
Order a professional appraisal that establishes fair market value as of the date of death. This number is your stepped-up tax basis and you’ll need it whether you sell, rent, or keep the home. A residential appraisal typically costs between $300 and $600 for a standard single-family home, with complex or high-value properties running higher.
Once probate closes or the trust is administered, a new deed goes on record at the county recorder’s office to put the property in your name. The document might be an executor’s deed, a trustee’s deed, or an affidavit of heirship, and recording fees generally run $50 to $150. Until that deed is recorded, you don’t have clear legal title, which means you can’t sell, refinance, or insure the property in your own name.
The Mortgage Doesn’t Go Away
If your parent still owed money on the home, that debt survives them. Federal law does, however, keep the lender from using the death itself as grounds to demand immediate full payment. Under the Garn-St. Germain Act, a lender cannot trigger the due-on-sale clause when residential property with fewer than five units transfers to a relative as a result of the borrower’s death.1Office of the Law Revision Counsel. 12 USC 1701j-3 – Preemption of Due-on-Sale Prohibitions
You can keep making the existing payments on the original terms, or refinance into your own name, which some heirs do to lock in a better rate or to buy out siblings. Missed payments still lead to default and foreclosure, inheritance circumstances notwithstanding.
Reverse Mortgages Run on a Short Clock
A reverse mortgage changes the timeline sharply. The loan balance becomes due as soon as the last surviving borrower dies. The lender sends a due-and-payable notice, and heirs technically have 30 days to respond, with extensions of up to six months available if you can show you’re actively working to sell or arrange financing.2Consumer Financial Protection Bureau. With a Reverse Mortgage Loan, Can My Heirs Keep or Sell My Home After I Die
You have three ways out. Pay off the full balance and keep the home. Sell the property and use the proceeds to clear the debt. Or, if the loan balance has grown past the home’s current value, sell for at least 95% of the appraised value and the lender has to accept that as full satisfaction of the debt.2Consumer Financial Protection Bureau. With a Reverse Mortgage Loan, Can My Heirs Keep or Sell My Home After I Die Property taxes and insurance stay the estate’s responsibility until title transfers or the home sells, so those bills keep adding up while you decide.
Costs Start on Day One
Property taxes don’t pause for probate. If they go unpaid long enough, the local government can lien the property and eventually force a tax sale. Call the county assessor to find out when payments are due and whether any are already overdue.
Insurance is where many heirs get hurt without realizing it. Standard homeowner’s policies contain a vacancy clause that limits or excludes coverage once the property has been unoccupied for 30 to 60 consecutive days. If no one is living in the house during probate, a fire, burst pipe, or break-in may not be covered under the existing policy. Call the carrier right away to report the death and ask about a vacancy endorsement or a separate vacant-property policy.
Budget for utilities, lawn care, and routine upkeep. Homes owned by elderly parents often carry deferred maintenance — roof issues, outdated electrical, plumbing that’s been nursed along for years — so plan for some surprises.
The Tax Picture
Stepped-Up Basis Is the Big One
Instead of taking your parent’s original purchase price as your cost basis, the IRS resets your basis to the property’s fair market value on the date of death.3Internal Revenue Service. Publication 551 (12/2025), Basis of Assets Decades of appreciation disappear for capital gains purposes.
In practical terms: your parents paid $120,000 for the house in 1990, and it’s worth $450,000 the day you inherit it. Your basis is $450,000, not $120,000. Sell for $460,000 and your taxable gain is $10,000. Without the step-up, you’d owe tax on $340,000 of gain.
One exception worth knowing. If you gifted appreciated property to your parent within one year before their death and then inherited it back, the step-up doesn’t apply, and your basis reverts to the decedent’s adjusted basis before death.3Internal Revenue Service. Publication 551 (12/2025), Basis of Assets The rule exists to stop people from shifting assets to a dying relative to manufacture a basis step-up.
Capital Gains When You Sell
If you sell for more than your stepped-up basis, the profit is treated as a long-term capital gain regardless of how long you held the property.4Internal Revenue Service. Gifts and Inheritances Long-term rates run 0%, 15%, or 20% depending on your taxable income.5Internal Revenue Service. Topic No. 409, Capital Gains and Losses Heirs with moderate incomes often land in the 0% or 15% bracket, especially after the step-up has already erased most of the gain.
If You Move In
Live in the inherited home as your primary residence for at least two of the five years before you sell, and you can exclude up to $250,000 of gain from income, or $500,000 if married filing jointly, under Section 121.6Internal Revenue Service. Topic No. 701, Sale of Your Home Your ownership clock starts when you inherit. Stacked on top of the stepped-up basis, this exclusion makes the eventual sale nearly tax-free for many heirs.
Estate and Inheritance Taxes
Most families owe no federal estate tax. For 2026 the exemption is $15 million per individual, and married couples can effectively double it; only value above that threshold is taxed.7Internal Revenue Service. What’s New – Estate and Gift Tax About a dozen states plus the District of Columbia impose their own estate taxes, often with lower exemptions. Six states — Iowa, Kentucky, Maryland, Nebraska, New Jersey, and Pennsylvania — impose a separate inheritance tax paid by the person receiving the property. Maryland imposes both. Check the rules in the state where your parent lived and the state where the property sits, because they aren’t always the same.
Keep, Sell, or Rent
Selling is the cleanest option and gives you cash. Factor in agent commissions, closing costs, and any capital gains tax above your stepped-up basis. Inherited homes often need work, so decide whether repairs will pay for themselves in a higher price or whether an as-is sale makes more sense. Heirs who live far away, or who need to split proceeds among siblings, usually end up here.
Renting generates ongoing income but makes you a landlord, with the tenant screening, maintenance calls, vacancy risk, and legal obligations that come with it. Rental properties do bring tax deductions for depreciation, repairs, insurance, and property taxes. Many out-of-town heirs hire a property manager, which typically costs 8% to 12% of monthly rent.
Moving in eliminates your current housing cost and starts the Section 121 clock. You’re still on the hook for taxes, insurance, maintenance, and any remaining mortgage. If the house is somewhere other than your current city, the choice is about more than money.
When You Inherit With Siblings
Co-owning siblings share both the benefits and the costs in proportion to their shares. Property taxes, insurance, and repair bills get split, and so does any rental income. Trouble usually starts when one sibling wants to sell and another wants to keep the house, or when one sibling lives in the home while the others feel they’re subsidizing free rent.
A written co-ownership agreement handles this before it becomes a fight. Spell out how expenses are divided, how decisions on repairs and improvements get made, what happens if someone stops paying their share, and what the long-term plan is. Doing this in writing early is far cheaper than resolving the disagreement later.
Buying Out a Sibling
The cleanest fix when siblings disagree is for one of them to buy out the others. Get the property appraised, and the buying sibling pays each selling sibling their proportional share of that value. For the sellers, this is a sale of inherited property — they’ll owe capital gains tax on anything above their stepped-up basis.4Internal Revenue Service. Gifts and Inheritances If the buyout happens soon after the inheritance, the appraised value and the stepped-up basis are usually close enough that the tax is minimal.
Partition as a Last Resort
When siblings genuinely cannot agree and no one can buy the others out, any co-owner can file a partition action asking a court to force a resolution. The court can order the property sold and the proceeds divided. Partition is expensive, slow, and tends to produce a below-market sale price because court-ordered sales don’t attract the same competition as a normal listing. Treat it as a last resort after direct negotiation and mediation have failed.
Medicaid Estate Recovery
If your parent received Medicaid-funded long-term care — nursing home stays, home health aides, or similar services — the state is legally required to seek repayment from the estate after your parent’s death. Federal law requires every state to run an estate recovery program for benefits paid to individuals age 55 and older.8Office of the Law Revision Counsel. 42 USC 1396p – Liens, Adjustments and Recoveries, and Transfers of Assets The family home is usually the estate’s most valuable asset, which makes it the main target.
Federal law protects certain survivors living in the home:
- A surviving spouse, for as long as the spouse is alive.
- A child under 21, while the child remains in the household.
- A blind or disabled child of any age.
- A sibling with an equity interest who lived in the home for at least one year before the parent entered a care facility.
States must also offer a hardship waiver process for situations where recovery would cause undue hardship.9Medicaid.gov. Estate Recovery The criteria vary by state, and the waiver is worth looking into if the inherited home is your primary residence or if a forced sale would leave you without housing. If your parent received Medicaid benefits, talk to an elder law attorney before assuming the house is yours free and clear; the state’s claim may need to be resolved before you can sell or refinance.