If you’ve just inherited a house, you have three real choices — sell it, move into it, or rent it out — but before any of those decisions matter, you need to secure the property, get the title into your name, and find out whether any debts are attached to it. What to do with an inherited house depends on the home’s condition, what you owe on it, your tax situation, and whether you inherited it alone or with other people. The first few weeks matter more than most heirs realize, because the steps you take (or skip) now affect your tax bill, your legal exposure, and whether you get to keep the home at all.
What to Do in the First Few Weeks
Change the locks on every exterior door and confirm the windows latch. An empty house attracts vandalism, squatters, and weather damage, so physical security comes first.
Call the existing homeowner’s insurance carrier the same week. Standard policies often limit or void coverage once a home sits vacant beyond 30 to 60 days, and the fix is a vacant-property endorsement or a separate dwelling fire policy written for unoccupied homes. Keep utilities on, especially heat and water. A house without climate control can develop burst pipes in winter or mold in warmer months, and both are expensive to repair. Electricity being on also makes it easier for inspectors, appraisers, and buyers to walk through later.
Then document the home. Walk through with a phone or camera and take dated photos of every room, the exterior, the roof, and any damage you can see. These photos become a baseline for insurance claims and, if you inherited with siblings, for settling later disputes about what condition the house was in on day one.
Getting the Title in Your Name
You generally cannot sell, refinance, or formally transfer the home until the title moves out of the deceased owner’s name. In most cases that happens through probate, a court-supervised process in which a judge confirms who inherits and authorizes the transfer. The executor named in the will — or an administrator appointed by the court if there is no will — receives a legal document, often called letters testamentary or letters of administration, giving them authority to act for the estate. Once authorized, the executor signs a deed transferring ownership to the heir or heirs.
Probate timelines and costs vary widely by jurisdiction. Simple estates with no disputes move faster than complex or contested ones. Some states let smaller estates skip formal probate through a small-estate affidavit, which lets heirs record the transfer directly with the county recorder without a full court proceeding.
Whichever path you use, order a title search before you plan to sell or refinance. It will flag outstanding judgments, old mortgages, and other claims that would otherwise surface at the worst possible moment.
Debts That Can Follow the House
Do not assume the home is yours free and clear. Creditors of the deceased generally have a limited window, often several months after the estate is opened, to file claims. Until that window closes, the executor usually cannot distribute estate assets, including the house.
Medicaid Estate Recovery
If the previous owner received Medicaid-funded long-term care, the state may have a legal right to recover those costs from the estate. Federal law requires every state Medicaid program to seek repayment for nursing facility services and home-based care provided to individuals age 55 and older.1Office of the Law Revision Counsel. 42 U.S. Code 1396p – Liens, Adjustments and Recoveries, and Transfers of Assets In practice, the state often places a claim against the estate that must be paid before the home passes to heirs.
There are protections. A state cannot impose a lien on the home during the owner’s lifetime if a spouse, a child under 21, or a blind or disabled child of any age lives there. After the owner’s death, states cannot recover from the estate if the deceased is survived by a spouse, a child under 21, or a blind or disabled child.2Medicaid.gov. Estate Recovery States must also offer a hardship waiver process. If the previous owner had Medicaid, contact the state Medicaid agency early to find out whether a claim exists.
Reverse Mortgages
A reverse mortgage, also called a Home Equity Conversion Mortgage or HECM, becomes due when the borrower dies. Once the lender sends a due-and-payable notice, heirs generally have 30 days to decide whether to buy the home, sell it, or surrender it to the lender. Heirs may be able to extend that timeline up to six months to arrange a sale or secure their own financing.3Consumer Financial Protection Bureau. With a Reverse Mortgage Loan, Can My Heirs Keep or Sell My Home After I Die? If the loan balance exceeds the home’s value, heirs can typically satisfy the debt by paying 95 percent of the appraised value rather than the full loan amount. Ignoring a reverse mortgage can lead to foreclosure, so respond to the lender quickly.
Other Liens
Check for delinquent property taxes, mechanic’s liens from unpaid contractor work, and any remaining balance on a traditional mortgage. Contact each lender for exact payoff amounts. If the estate’s total debts exceed its assets, the estate may be insolvent, debts are paid in a priority order set by state law, and the home may need to be sold to satisfy creditors before anything passes to heirs.
What the House Is Worth and What It Costs to Keep
Order a professional appraisal that establishes fair market value as of the date of death. That number is the most important figure in your file. It becomes your tax basis in the property under what the IRS calls the stepped-up basis rule, and it determines how much capital gain or loss you’ll recognize if you sell.4Internal Revenue Service. Publication 551 (12/2025), Basis of Assets
If the previous owner bought the house for $100,000 and it was worth $400,000 on the date of death, your basis is $400,000, not $100,000. Sell shortly after for $400,000 and your taxable gain is zero. One narrow exception: if you gave the property to the decedent within one year before their death and inherited it back, your basis reverts to the decedent’s adjusted basis rather than the fair market value.4Internal Revenue Service. Publication 551 (12/2025), Basis of Assets The stepped-up basis applies no matter what you decide to do with the home.5Office of the Law Revision Counsel. 26 U.S. Code 1014 – Basis of Property Acquired From a Decedent
Then get a separate home inspection. An appraisal gives you a value; an inspection tells you what you’d actually be taking on. Foundation cracks, outdated wiring, roof damage, plumbing failures, lead paint, and asbestos don’t always show up in a drive-by. Pull at least a year of utility bills and maintenance records so you know the real monthly cost of ownership. These numbers turn an emotional decision into a financial one.
One boundary worth stating: most inherited homes do not trigger federal estate tax, because the exemption applies at the estate level and only to very large estates. State-level estate and inheritance taxes are a separate matter in roughly a third of states, often with lower thresholds, and inheritance tax rates can depend on your relationship to the deceased.
Selling the Home
If the title is clear and the numbers point to selling, this is often the cleanest option. A real estate agent experienced with estate sales can help you navigate disclosure requirements, which are tricky for inherited properties because you may have limited knowledge of the home’s history. Clear out personal belongings, clean, and prepare for showings.
When you sell for more than the stepped-up basis, the difference is a taxable capital gain reported on Schedule D of your federal return.6Internal Revenue Service. Gifts and Inheritances Inherited property is automatically treated as long-term regardless of how quickly you sell, so it qualifies for long-term capital gains rates — 0, 15, or 20 percent for 2026 depending on your taxable income.7Internal Revenue Service. IRS Releases Tax Inflation Adjustments for Tax Year 2026, Including Amendments From the One, Big, Beautiful Bill Net proceeds pay any remaining estate debts first, with the balance distributed to heirs.
Moving In
If you move into the inherited home and use it as your primary residence for at least two of the five years before selling, you can exclude up to $250,000 of capital gain from income, or $500,000 if married filing jointly.8Office of the Law Revision Counsel. 26 USC 121 – Exclusion of Gain From Sale of Principal Residence Stacked on top of the stepped-up basis, that exclusion can shelter a large amount of appreciation. Your ownership clock starts when you inherit; the time the previous owner lived there doesn’t count toward your two years.
If a mortgage remains on the property, federal law generally prevents the lender from calling the loan due simply because the home transferred through inheritance. The Garn-St Germain Act bars lenders from enforcing a due-on-sale clause when a property passes to a relative on the borrower’s death, when a spouse or child becomes an owner, or when the transfer happens through a will or intestate succession.9Office of the Law Revision Counsel. 12 USC 1701j-3 – Preemption of Due-on-Sale Prohibitions You can keep making payments at the existing rate and terms without refinancing. The lender is not required to put the loan in your name, though. If you want it in your name — useful for building credit or tapping equity — you’ll need to refinance. Call the servicer early to set up communication and confirm how payments should be made.
Budget for ongoing costs. In many jurisdictions the assessed value resets when ownership changes, which can push your property tax bill above what the previous owner paid. Failure to pay property taxes leads to a tax lien and, eventually, foreclosure by the local government. If the home sits in a homeowners association, dues keep accruing whether anyone lives there or not, and unpaid HOA fees can also become a lien. Add insurance, routine maintenance, and any deferred repairs the inspection flagged.
Renting It Out
Converting the home into a rental means complying with local rules. Many municipalities require a rental license or certificate of occupancy before a tenant moves in, and that often includes a safety inspection against current building codes. Draft a written lease covering rent, security deposit, maintenance responsibilities, and term. Screen tenants with credit and background checks. Swap the homeowner’s policy for a landlord or dwelling fire policy that includes liability coverage — a standard homeowner’s policy does not cover rental activity.
Rental income gets reported on Schedule E of Form 1040.10Internal Revenue Service. Tips on Rental Real Estate Income, Deductions and Recordkeeping Deductible expenses include mortgage interest, property taxes, insurance, repairs, advertising, and utilities you pay for the tenant. Security deposits are not income when received, as long as you intend to return them; they become income only if you keep part of a deposit because of a lease violation.
The biggest non-cash deduction is depreciation. Residential rental buildings are depreciated over 27.5 years using the straight-line method, starting from your stepped-up basis minus the value of the land, which cannot be depreciated.11Internal Revenue Service. Publication 527 (2025), Residential Rental Property Open a dedicated bank account for rental income and expenses so recordkeeping doesn’t become a problem at tax time. If your rental expenses exceed your rental income, passive activity rules can limit how much of the loss you deduct against other income.
If You Inherited the House With Siblings
Co-heirs usually take title as tenants in common, each owning a percentage share they can sell or transfer independently. Unlike joint tenancy, there is no automatic right of survivorship, so each heir’s share passes through their own estate rather than to the other co-owners. Disagreements about what to do with the property are common, and there are a few workable paths.
Buyout
The cleanest fix is one heir buying out the others. Start with an independent appraisal to set fair market value, calculate each person’s share, and have the buying heir pay the others their proportion. Those heirs then sign over their interest in the deed. Financing a buyout often requires a specialized probate or estate loan rather than a conventional mortgage, since the property may still be held in the estate’s name. Home equity loans and cash-out refinancing become options once title is fully in the buying heir’s name.
Partition Action
If heirs can’t agree, any co-owner can file a partition action asking a court to either physically divide the property (rare for a single-family home) or order a sale and split the proceeds. Over 20 states and the District of Columbia have adopted the Uniform Partition of Heirs Property Act, which adds protections for family-owned property: a mandatory independent appraisal, a right for non-selling heirs to buy out those who want to sell, and a preference for open-market sales over below-value auctions. In states without those protections, a court-ordered partition sale can bring in well under market value.
Mediation and Occupancy
Before anything reaches a courtroom, consider mediation. A neutral third party can often get heirs to an agreement on selling, renting, or buying out shares without the cost and delay of litigation. If one heir is living in the property while the others want to sell, the occupying heir may owe fair-market rent to the other co-owners for the period of exclusive use.