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You've inherited a house: Now what?

It would seem that inheriting a house, especially one filled with good memories, would be an unqualified blessing.

But inheriting the family homestead and deciding what to do with it also can stir up all sorts of emotions, including unpleasant ones, and strain family relationships.

Before the all-too-common family wars break out in earnest, you'll want to calmly and (at least somewhat) rationally think through your options. If there is more than one heir, you'll also need to discuss the situation with the others, keeping in mind that everyone is likely to have different views on just how to proceed.

Before making any major decisions, first deal with any emotions you (and any other heirs) might have about it. "Emotion can be a liability," says Kay Shirley, a CFP and president of Financial Development Corporation in Atlanta, Ga.

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Put emotions aside
The early inclination is to hang onto a home because you (and possibly your siblings) are attached to it. That thinking can backfire.

"The good times can quickly be overcome by the bad," says Robert Weagley, a CFP and associate professor of consumer and family economics with the University of Missouri in Columbia. "Let it be a financial decision, as much as possible," he says.

For one thing, it can be easy to assume incorrectly that others share your emotional attachment. Realistically, some will feel strongly about keeping it, others will want to sell it and still others simply won't care.

Finances often come into the picture. Let's say the children who want to sell the old family lake home may reason that they're not going to use the home much anyway, and would like money from a sale to boost their kids' college funds. The siblings who want to keep the house may live closer to it, and be able to visit regularly.

Ultimately you should ask yourself how you would proceed if you had no previous connection to this piece of property. Think of it as an investment property. Would you keep it, sell it, rent it, renovate it or combine these options? Even if emotions enter into your final decision, at least you'll recognize the role they're playing.

To decide on a course of action, first assess the overall estate. It may be necessary, for example, to sell the house in order to settle outstanding medical bills.

Also consider the location of the house. If you live far from the property, moving into it or managing it as a rental property may be out of the question.

The condition is also a factor. If it's in disrepair or looks dated, you'll have to determine the amount of time and money you would need to invest so that it could either be inhabited or sold. Then, you'll need to decide what level of investment would be prudent.

Whether you keep or sell the property, you may need to spruce it up. Tackle the easy tasks first, such as removing clutter, trimming the shrubs and repainting walls that need it. These improvements cost little, but can boost the value of the house in the eyes of potential buyers.

Then, you'll want to think through any plans to do more. Hire a competent inspector who can evaluate the shape of the structure itself, as well as of the electrical and plumbing systems. This will help you put a cost figure on any renovation. In addition, disclosure laws in many communities require you to let buyers know of any defects.


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-- Posted: May 20, 2004
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