Inherited land comes up often in our business. Imagine this. Your Great Uncle Albert has passed away, and you were always his favorite. He never married, and had no children, so he delighted in watching you grow up. As he watched you grow, he worked hard and invested wisely, and had a lot of assets when he died, mostly in the form of land. His lawyer sets up an appointment for a reading of Uncle Alberts’ will, and you are asked to be at the appointment. As the will is read, you learn that dear old Uncle Albert left you most of his land, excluding the acre his house sits on. Now what are you supposed to do with inherited land that has no house in which to live?
Inherited Land To Do List
Before you do anything else, you will want to take care of the legal stuff.
Get the deed to the land in your name. This will require proof that the land has been bequeathed to you, such as a legal will. When a person dies, their will usually goes through a probate process, which is initiated by the executor of the will. Typically, you cannot do anything with your newly inherited land until after the probate process has ended, which usually takes about 90 days if the will is not contested. Other documentation, such as a death certificate, may also be required. *If you choose to sell your inherited land during the probate process you can just reach out to us and we will walk you through the process.
Make sure the land is not mortgaged. Sometimes, a landowner who has land mortgaged will have included “credit life” insurance with the loan. If this is the case, upon the death of the landowner, the debt is paid. However, if there was no such insurance on the mortgage, that mortgage is now your responsibility.
If there is no survey of the inherited land available, have a land survey done immediately. It is vital that your land borders are clearly defined. The cost of a survey varies from one area to another, and also depends on other factors, such as how much land needs to be surveyed, and whether you just want the corners of the property located and marked or if you want all the borders located and marked as well.
Get insurance on your new inherited land. Even land that has no structures on it can be insured. If lightning strikes a tree or a tree falls and destroys a fence, your insurance should cover it.
Pay your taxes. Tax laws are always changing, but the chances are good that you will need to pay taxes, also known as the death tax, on the land you’ve just inherited. You will also want to ensure that Uncle Albert did not owe any back taxes on the land. If he did, you will need to get that paid as well, and you will now need to pay local and county taxes on your land every year.
Find out if you have mineral rights to the land. You may own what is on top of the ground, but that doesn’t necessarily mean you own what is underneath the ground, such as water, gas, or oil. You need to know if you have mineral rights, as those rights could bring in extra money at some point.
Once you’ve taken care of all the legalities associated with your newly inherited land, it’s time to make some serious decisions.
Do you want to keep the land? Understanding that you now owe taxes every year on this property that does not have a house to live in, and that you may even owe money on the land because of Uncle Albert’s mortgage, do you have any desire to keep the land? If you feel you should cash out and not keep the land, hire a realtor and put it on the market.
If you want to keep the land, what are you going to do with it? If you are not living on the property, and you’re not doing anything with the property, that property is costing you a lot of money every year in taxes and insurance. Remember this rule for land: If it isn’t making you money, and it is not providing you a place to live, it is costing you money for nothing. If you don’t have any plans for the property, it may be better to sell it.
Other than doing nothing, your options are slightly limited. You can likely build a house on the land. If the land is zoned for commercial properties, you could put a building on the land for your own business, or lease the building out to another business. If you do not want to build on the property, and you don’t want it to cost you any money, the simplest thing to do is to contact a timber company and sell the trees and the topsoil. If you do not allow over-harvesting of the trees, and you replant more trees, this could be a source of income that should more than cover the expenses associated with the land.
The ultimate goal, from a financial standpoint, is to make sure that any costs associated with the inherited land, such as taxes, insurance, a mortgage, and upkeep, are covered by money you can earn back from the land. The only exception to this is if you intend to build a home on the property and live on it. That choice, of course, comes with a whole new set of decisions to be made.