According to Coldwell Banker Global Luxury’s 2026 Trend Report, roughly $2.4 trillion in U.S. real estate is expected to change hands over the next decade as baby boomers pass assets to their heirs. Gen X is first in line, with the average heir receiving an inheritance in their mid-to-late 40s. For many, that inheritance will include a home.
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Inheriting real estate comes with financial obligations that can catch most heirs off guard, and the decisions you make in the first few months matter more than most people realize.
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The Tax Advantage Most Heirs Miss
When someone dies, the IRS resets their home’s cost basis to its fair market value at the time of death. So if your parents bought their house for $100,000 in 1987 and it’s worth $600,000 when they pass, your cost basis is $600,000, not what they originally paid.
Sell it at that appraised value, and your taxable gain is zero. Capital gains tax is calculated as sale price minus cost basis, and if those two numbers match, there’s nothing to tax.
Most heirs don’t know this. Some make expensive decisions because of it. “I’ve sat across from people who took out second mortgages to hold onto inherited property because they were scared of the tax bill,” said Ryan Duffy, an estate planning attorney at Estate Planning of the Carolinas. “The whole time they probably could’ve sold it and owed nothing.”
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The Costs That Start Before You’re Ready
Property taxes, utilities, homeowners association fees and any remaining mortgage don’t pause for grief or probate. One often-overlooked risk is that most homeowner policies become void when the named insured dies. Heirs who don’t address coverage immediately can find themselves holding uninsured property when something goes wrong.
Deferred maintenance is another blind spot. Older homes often need significant repairs before they can be listed, rented or insured.
Hidden debt can surface too. “Reverse mortgages, home equity lines, and unpaid contractor liens can surface after death, leaving heirs liable for obligations they didn’t know existed,” said Anna Blood, a family law attorney and founder of Blood Law PLLC.
Keep, Rent or Sell
Each path has real trade-offs. Selling soon after death typically means little to no capital gains tax. Renting changes your tax picture and adds landlord responsibilities. Keeping it means absorbing all carrying costs indefinitely.
If multiple heirs are involved, disagreement can escalate into a partition action, which is a court-forced sale that serves no one. Duffy recommended getting a professional appraisal within 90 days. “Not Zillow. A real appraiser who walks the property,” he said.
The Move To Make Now
Talk to family about the property, the mortgage and the estate plan before it becomes your problem. Understand how the title is held. A properly funded living trust lets a home transfer directly to heirs without probate. Heirs who never formally transfer the deed create a legal problem that compounds with time.
The wealth transfer is already happening. The heirs who come out ahead treat it like a financial decision from day one.
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This article originally appeared on GOBankingRates.com: Should You Expect To Inherit a Home? What To Know Before the Transfer Happens
