When family legacy meets financial reality

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Published Date 7/18/2025

"Sometimes the best return isn't just financial — it's peace of mind and the ability to sleep well at night." Financial advisor Andrew Constantinides captures the essence of one of life's most emotionally charged decisions: what to do with inherited property.

Even if you expect it to happen, receiving property from a loved one creates a complex web of emotions, memories, and practical considerations, says Kiplinger’s Kathryn Pomroy. “The choice between keeping, renting, or selling depends on your financial situation, emotional attachment, market conditions, and tax implications. When multiple heirs are involved, these decisions become even more challenging.” Your initial reaction will be the financial circumstances. If you’re facing difficulties, selling is most logical. While those seeking passive income might consider rental opportunities or as a long-term investment. Nostalgia, however, can cloud judgment.

First off, identify outstanding debts or taxes associated with the property. Seventeen states impose inheritance taxes, and existing obligations might force a sale regardless of your personal preferences. Think about your capacity for property management, all of which includes time, money, and proximity. If you feel that isn’t in your wheelhouse, you should consider professional management or selling outright.

If property repairs are an issue, think even harder. “Average annual maintenance costs for single-family homes range from three thousand to twenty-one thousand dollars, depending on age, size, location, and condition,” says Pomroy. “Major updates like roofing or HVAC systems may eliminate rental options if you can’t finance renovations.”

It makes sense to keep the property when considering long-term appreciation potential and preservation of family assets. If you want to live in it for at least two of the next five years after inheriting it, you’ll qualify for capital gains exclusions up to five hundred thousand dollars for married couples. Just don’t overlook taxes, insurance, maintenance, and utilities even when the home is vacant.

Rental properties are great for generating passive income while preserving assets for future generations. “Tax benefits include deductions for mortgage interest, property taxes, depreciation, and maintenance expenses,” says Pomroy. “Current market conditions favor rentals due to elevated home prices, low inventory, and high interest rates driving continued demand.”

But don’t minimize the efforts included with property management, with professional fees typically ranging from eight to twelve percent of rental income. “Landlords face risks including vacancies, problematic tenants, and costly repairs. Increasingly strict tenant protection laws add complexity to landlord responsibilities,” she warns. “For many with strong emotional ties, the prospect of tenants potentially mistreating a family home creates additional stress.”

Selling is often the simplest solution, especially if you lack the cash for extensive repairs or family members cannot reach agreement. It can minimize capital gains taxes, treating inherited property as acquired at current market value, and an immediate sale often incurs minimal tax liability.

Current market conditions? Take your pick, since they support both rental and sales strategies. Properties are typically selling within fifty-five days, while the probate process for inherited property transfer can take up to eighteen months.

Ultimately, no universal solution can save you from this decision-making. If the property resides in a high-demand rental area, it may justify keeping or renting it. If the property is in a state of decline requiring major repairs, it may make it a better candidate for immediate sale. The answer lies within the balance of financial returns, emotional attachments, personal goals, and individual circumstances.

Often the most valuable outcome comes not from maximizing profits, but from achieving peace of mind.

Kiplinger, TBWS

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