Settling a deceased parent’s estate can be an overwhelming task. It’s difficult enough losing a parent; figuring out what to do with all their stuff can be an added burden. What’s more, you might have siblings, and they might have families, so determining who gets what can leave your head spinning.

It’s likely that your parents already named beneficiaries. You and your sibling(s) will probably receive pre-determined share of various bank accounts, retirement accounts, trusts, and other assets. In this scenario, you’ll each get a check, and that’s that. However, your parents also probably have one asset that cannot be distributed evenly with such ease: their house.

Homes are an often-overlooked asset when it comes to settling an estate, but your parent’s home could actually be the biggest. And while you and your siblings might become equal owners of the deed, you might not all agree on what happens to the house. So, if you inherited your parents’ home after they passed, here are some options to consider.

Sell the House Outright

Whether you’re the sole owner or you and your siblings all inherit the home, this is probably your most likely course of action. Maintaining another property can be a huge burden—and that’s assuming you even want it.

What’s more likely to happen is that you and your siblings will sell the home. While inherited property doesn’t qualify for the home sale tax exclusion, you can benefit from a step-up in cost basis. A step-up in cost basis means that certain inherited assets become valued at the fair market value (FMV) at the time of the decedent’s death.

For example, if your parents bought their home in 1964 for $30,000, but it’s now worth $280,000, you’re not taxed on the $250,000 capital gain if you sell the home for $280,000. The step-up in cost basis means that at the time of your last surviving parent’s death, when the house transfers to you and your siblings via a transfer on death deed, the house immediately becomes valued at $280,000. If you then sell for $280,000, you don’t have a capital gain in the eyes of the IRS, so you won’t be taxed on it.

However, if you sell the house for $310,000, you could be on the hook for your share of that $30,000 capital gain. Tax issues can get complicated quickly, so it’s a good idea to reach out to your tax advisor or estate planning attorney.

Buy Out Your Sibling(s)

If you want to keep the house but your sibling doesn’t, you could simply buy them out. Whatever your reason, you could do so by restructuring a new mortgage against the property in your name.

Mortgages can be arranged where your sibling receives cash, and you receive full ownership of the property, along with any debt. The amount of the mortgage would need to be large enough to pay their share of the value after taking care of any existing debt, transfer taxes due to the changing of title, and closing costs. Once complete, you have the home and a mortgage, while your sibling has cash.

If the roles are reversed and your sibling keeps the house and buys you out, due to the previously mentioned step-up in cost basis, you may be able to avoid taxes on the money you receive from the buyout.

Use the House for Passive Income

Another option could be to keep the house as a source of passive income. If neither you nor your siblings plan on moving into the house but you’re not ready to sell it just yet, you could rent out the property to create an extra stream of income and allow it to appreciate even further.

This scenario could even still be used in conjunction with a buyout. Maybe you want to keep the house for a college-aged child. You could rent it out until your child is old enough or ready to branch out on their own. Maybe you want to keep the house as a second/vacation home and rent it out when you’re not using it via something like Airbnb or Vrbo.

Deciding what to do with a deceased parent’s home can be difficult. Every situation is different, and there could be any number of reasons why you decide to do what you do. Just know that you don’t have to make that decision alone, as the advisors at Wealth Enhancement have decades of estate planning experience and are ready to assist you with all your big decisions.