Will there be fewer sales in California due to kids moving into inherited homes? Or could there be more sales, due to the high home values and the difficulty of paying off the other siblings? Hat tip to the WSJ!
One of the first things people do when they inherit their parents’ home these days is put up a for-sale sign.
Deciding what to do with a family property is often both an emotional and financial decision, but the rising costs of renovations, property taxes and utilities are making it harder for adult children to hold on to the real estate, financial advisers say. Higher home prices and mortgage rates have often also made it impractical for heirs to buy out their siblings, said Dick Stoner, a Realtor in Rockville, Md.
The high home prices of the past few years have made the decision to sell even more attractive. If inheritors can unload a house in a hot location for a high price, the proceeds from the home’s sale can help secure their finances and fund goals such as retirement, advisers say.
“For inheritors, cash is king,” said Paige Wilbur, Wells Fargo’s head of estate services.
Leaving a home to children remains a common way to transfer wealth, according to financial advisers and estate planners. There is no recent data that tracks home inheritance nationally.
More than three-quarters of parents plan to leave a home to their children when they die, according to a 2023 Charles Schwab survey of more than 700 American investors between the ages of 27 and 95. Some children may be reluctant to sell for sentimental reasons, but finances and simplicity of unloading a property often win out. Nearly 70% of those who expect to inherit a home from their parents plan to sell it, the survey found.
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Jim I’m an estate planning attorney and this is 10x more true since Prop 19 passed a couple of years ago. Other than a modest break for inheritance of primary residence for kid who will make it their own primary residence, generally property tax getting reset based on FMV which really disincentivizes holding the property.
I agree with Dr.K. Prop 19 in affluent areas like Coastal North County San Diego has hurt children wanting to remain the owner’s of their parent’s home because of the property tax increase. Prop 13 is being chipped away at slowly.
To be fair, any chiild who inherits their parents’ and grandparents’ house and declares they are owner-occupying will also transfer the old property-tax basis too.
The previous law was that you got the old tax-basis whether you lived there or not.
The Dude was used as the example of why the change was necessary – too many rich people taking advantage:
https://calmatters.org/economy/2018/08/prop-13-jeff-bridges-property-taxes-inheritance-estate-california/
Everyone is entitled to their opinion on whether the new law is a fair compromise (it was approved by 51% of the voters). Just don’t be surprised if the realtor lobby – the biggest – will keep slamming more legistature through that benefits realtors.
This was the realtors’ play to create more inventory for us. They don’t care how you feel about it – realtors just want more commissions!
If you are 55 + and want to trade up, this was a win for those people and it has created more sales for sure. There are pluses as well. Before one had to buy a cheaper home than they sold.
Jim only the first $1m (roughly) of FMV is protected even if the kid makes it their primary residence. So for a property worth $2m the inheriting kid will get a break but still see a big increase