# Inherited House, Does it need Inspection?



## Tom738

mbrando1994 said:


> Hi all,
> 
> I live in Schuylkill County, Pennsylvania. In the next year I will most likely be inheriting a house (the house I grew up in) and do plan to move back into shortly thereafter. Does the property need to be inspected when the title is transferred or is this only mandatory if the property is sold?
> 
> I ask because I know for certain the house will not pass. Many issues such as outlets on the baseboard, two prong outlets, no gfci, and numerous others just to mention the electrical violations. This house was built in 1901. I have many plans to improve everything to bring it up to code (my ultimate goal). The issue is, I know if it doesn't pass I most likely will not be able to move into it. Any thoughts?
> 
> Thanks,
> Brandon


To my knowledge it is not mandatory anywhere--most contracts provide for inspection as a way to protect the buyer. 

Bottom line is hire a local real estate lawyer wherever the house is and trust their advice. It's cheap insurance. They can confirm that the estate does the paperwork for a fee simple conveyance correctly (easy enough but not worth messing it up), help you record the deed correctly, and tell you what to watch out for.

You may want to have someone do some due diligence on the house (e.g. a title search, check with local county for any on-record environmental issues, etc...) so that you know what cans of worms you are opening by owning the house, and so that you know if there's anything you want the estate to help you resolve (maybe they have access to old boundary dispute paperwork or anything else you might find useful in ten years).

Usually it's better to own a house than not (especially since you can ordinarily sell it for money), but very rarely there's something that makes it have negative value. It would have to be pretty massive--for example, massive environmental spill plus the building needs to be condemned and you're in a neighborhood where it's a cheap house to begin with. In this case you could potentially choose to not accept the house from the estate, and then it would go to the residual beneficiary or pass by the laws of intestate (i.e. not-having-a-will) succession.

An insurance company may also want to take a look at it to insure. Sometimes they do. An appraisal will also be necessary if you plan to take out a home equity line of credit or mortgage to finance the improvements you're planning. 

Bringing stuff up to modern code also isn't necessary to "pass" most inspections. An inspection by a home inspector is usually a near-worthless tool because their job is to get the deal closed by not red-flagging too many items. You want to go through the house with a good local contractor. And be clear about asking for advice--what *not* to do is as important as what to do.


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## mbrando1994

As of now, the house is being left to myself and my biological mother. Although we are in agreement that I will have sole responsibility of the house. (We've agreed on everything). I definitely am keeping the house to live in. I understand the issues there are and what needs to be done. I ran through the house pretty extensively to find any current issues.

As of now, I do not plan on taking out any loans to fund improvements. I am saving for that out of pocket. The mortgage is 100% paid off as well, this is one of the main reasons for wanting to live there. 

[quoteBottom line is hire a local real estate lawyer wherever the house is and trust their advice. It's cheap insurance. They can confirm that the estate does the paperwork for a fee simple conveyance correctly (easy enough but not worth messing it up), help you record the deed correctly, and tell you what to watch out for.

You may want to have someone do some due diligence on the house (e.g. a title search, check with local county for any on-record environmental issues, etc...) so that you know what cans of worms you are opening by owning the house, and so that you know if there's anything you want the estate to help you resolve (maybe they have access to old boundary dispute paperwork or anything else you might find useful in ten years).
][/quote]

I don't understand what is meant by this. I know really nothing about owning a home since I've never owned one. This is a row home in a pretty low wealth area. I unfortunately don't have funds to purchase or rent a better place yet. I also don't want to live at home with mom and dad either as I'm getting older. When you say 'estate' you are talking about the policy left by the passing of the insured correct? Right now that money is going to be split between my mother and I. If this isn't what you meant what exactly does it mean?

I live three doors away from this house and am 99% sure there are no known environmental issues or border issues with neighbors. The only thing that concerned me was not being able to live there as I make repairs. Since the amount of repairs that need to be done are quite numerous and would keep me where I'm at for years to come.


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## Tom738

Okay. A couple of things. This is all general, because I don't know your situation specifically. But:

When a person dies, their "estate" is responsible for handling their money and assets, doing things like transferring this house you're receiving. It's sort of a fake legal person, run by an administrator who's responsible for it. It will usually hire a lawyer and maybe an accountant to help, but that's up to the administrator.

If you are inheriting a house from someone, their estate will need to arrange to transfer the title to you. Ordinarily title is transferred in a "fee simple conveyance." Conveyance just means transfer; fee simple means that you are conveying the *entire* right to the property, instead of something smaller like the right to rent the property or the right to own the property for a year or the right to live on the property until you die.

In order for a transfer to be effective, certain formalities have to be followed. Things like a signed deed that contains a legal description of the property. These can vary a bit from place to place.

You *also* want the transfer to be registered. This makes it harder for someone else to come along and say "No, honestly, see this fake deed I pulled out of my pocket? They sold me the property a day before they died so I should be the owner instead!"

You *also* probably have to do things like make sure that the mortgage is no longer filed as if it had not been paid off. Mortgages get registered too, so that nobody buys the house and doesn't realize there's a mortgage. When you finish paying off the mortgage, the bank sends you a document that you file to basically revoke the registration. So when you get a house, you want to make sure those kinds of old mortgages aren't still registered.

The same thing is true of "mechanics' liens" for work on the house somebody was not paid for.

And of course there may be back taxes.

So there are a few steps in transferring real estate. A real estate lawyer who does this all the time in your area knows what they are and can help make sure you get it right. The estate may have a lawyer, and they may also be fine and able to do it. They represent the estate, not you, so their duty is to the estate, not to you. They might not do as much real estate work as who you would pick, so they may miss something, but it's still their job to get it right for the estate. 

It may be that they or the estate administrator might also need to talk to a bank for you, for example, to get evidence that the old mortgage is paid off--that's an example of something you or a lawyer representing you would want to make sure was taken care of when you got the property, which the estate lawyer might or might not take care of properly otherwise. 

I gathered from your original post you were *inheriting* a home. Inheriting a home is different than buying one in some important ways. But you also refer to a life insurance policy. If you are getting the money to buy a home from a life insurance policy, then you are *buying* a home, which is different. I am going to guess you are inheriting the home and there is a separate life insurance policy which you and your mother are beneficiaries of (i.e. receive the money from). 

However, if the *house* will be split between your mother and you, you will want to make sure that your mother makes a new will so that if, god forbid, anything happens to her, you make sure you (or better, a "trust" for you) own the other half of the house, or at least can live in it for your lifetime. Trusts are fictional people, and if used right make it harder for creditors to go after the asset. (E.g. if you owe money, a trust can make it harder for them to take your house). Depending on state law and how good you are about debt, that can be important.

It's really important to find one or two people to help advise you or who you can bounce ideas off of. Maybe friends who have a little more financial or homeowning experience, that kind of thing. For discussions of necessary work, maybe a contractor you trust. 

Contracting. Dealing with contractors can be a big part of owning a home. A few key things: (1) almost always get multiple bids, at least for big jobs. It can save you 10% or more, which adds up. Just make sure you are very clear about the job and give everyone the same project to bid on. (2) A contractor who will tell you you should not do a big job is worth his weight in gold. Because that is what he saved you. Unless he just doesn't want to do a messy job, which sometimes happens.

Finally, the insurance money. Be very hesitant to go and spend it all to fix up the house immediately. Owning a house is a long-term investment, and it will always take however much money you throw at it if you're not careful. You need to be really savvy about deciding what makes sense to invest in. Different investments make sense if you intend to live there for five years than if you intent to live there for twenty. And it's rare that you should make an improvement to a home just because it would be better. That being said, it's really important to spend the money you need to spend--nickel-and-diming is bad; but deciding whether you really need a particular project done and how much you are willing and able to pay for it is really, really important.

I would focus first on things that cause imminent dangers (sewer gas buildup from uncovered pipe, charged electrical wires sticking out of the wall, broken glass in the front door, piles of stuff next to the baseboard heater) and on things that cause additional damage if they are not addressed (e.g. a leaky roof, plumbing leak, gutter problem, basically water intrusion of any kind). 

Then on core issues that will cost you more money if you don't address them now (especially if you'll be living there for time--lead pipes that need replacement, plumbing that hasn't been touched since the 50s, etc... ). While the walls are open might be a good time to do some other work, but be careful because the project can grow really fast. These projects can swallow massive budgets so you may need to prioritize. These can be big jobs and you *should* be getting multiple bids on them. How much of this makes sense DEPENDS on how long you plan to own the home.

Along the way there may be some small, useful safety upgrades (adding a GFCI outlet to protect a circuit is cheap). Then on any serious backlogged maintenance issues you probably have.

Any money you don't really NEED to spend to save yourself money down the line and bring it up to minimum standards of safety and livability, put most of it into retirement or an equity account and let it generate money for you or your mom. 

I would just be really cautious about looking at it as the money you have to fix the house, because thinking about it that way makes you much more likely to spend all of it. It's much better to think of it as a nest egg to help you maintain the house and/or retire on one day. Take out some as you need it to do work (keep in mind some retirement accounts have rules around this), but it's a lot better to have an acceptably but minimally maintained house you can live in and maintain for thirty years than a house that is very shiny to begin with but you are forced to sell it in ten years because you can't afford the maintenance or you need to help support your mother and the house is the only valuable thing you have.

Expect maintenance to cost more than you expect. Expect projects to cost more than you expect. Budget for a buffer or emergency problem. Prioritize so that even if emergencies come up, you can get the most important stuff done.


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## Tom738

Oh--and do not be afraid to fire a contractor who does a terrible job--paying him to do more is throwing good money after bad, and you'll just have to pay someone to fix it later.

Always keep some money back until the job is completely done, or you will get screwed. Always look at the job yourself thoroughly, and preferably with someone who knows a little more than you, before you make the final payment.


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## joed

A house inspection is for your piece of mind when you buy. It assures you that all systems are fine or it alerts you to any potential problems. This can then be used to decline the sale or negotiate a better price.
Since the home is going to be yours no matter what, the inspection will only serve to possibly alert you to any work you may need to do once you move in to maintain the property.

It sounds like you probably already know the history of the house and any potential issues. It would be a waste of money in my opinion.


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## ZTMAN

Pottsville I assume?
Tom gave detailed advice and took a lot of time to explain a lot of things. Also consider the future. If you and your mom will own the home it will effect your ability to sell the home in the future. You will need her consent and signature. 
Work our issues up front, like who pays for maintenance, improvements and taxes and how is that taken into consideration if the home sells in the future. Ask the estate attorney the difference between ownership options, such as tenants in common, or joint tenants with right to survivorship.
Better to get the details fine tuned up front while every one is cooperating to avoid disputes down the road.


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## mbrando1994

Wow, you sir deserve a medal! That has to be one of the most helpful replies I've ever gotten on a forum! Thank you!

With that said, you've answered many of my questions. Very good point about a new will, since I'm assuming 50% ownership is not enough after the other half is deceased?

My dream is to eventually turn the house over for profit, however long that may be is uncertain if at all. I definitely would want to strive to own my dream home one day. Although currently, this house is, and will be for a while my living quarters. The settlement is not large. My grandmother was very cheap and even to date refuses to spend anything on simple fixes because "she won't be here soon". So the house is sort of in disarray. My mother and I have agreed to unequally split the settlement since she had more involvement with my grandmother than I did.

I understand completely what you're saying about the money. I know it's easy to have the mentality that it's 'repair' money. My plan with my portion is to pay off a good amount of my debt (which will help decrease my monthly expenses), address pressing repair issues, and work on an old outdated bathroom. I know the last one is more luxury but I am also putting money aside every week to supplement that project now.

Among the most important, a 100amp circuit breaker being insufficient to power my needs, it's overcrowded, unearthed, and not grounded anywhere apparent. Definitely a concern. As you mentioned GFCI receptacles and other upgrades are on my list. I've always been a computer nerd but only in the last 5 years 16-21 have I endeavored into home and auto repair. I've learned and experienced a lot and plan to keep learning. Plumbing is actually copper much to my surprise, only other issues are spongy subfloors in two upstairs rooms, a leaky basement, and numerous electrical violations. All of which I have a working plan to revitalize. I can feel it becoming overwhelming as you stated at times. I work on plans every week through budgeting and drafting different ideas. It's the better half of my coping mechanism of what's to come when this fateful day happens.

As stated, the estate is rather small and I will not have much left after addressing these issues. I do have a 401k with my employer however.

Once again I would like to express my most sincere gratitude to you! You seem fairly knowledgeable about these topics and have helped me a great deal!


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## mbrando1994

Tom738 said:


> Oh--and do not be afraid to fire a contractor who does a terrible job--paying him to do more is throwing good money after bad, and you'll just have to pay someone to fix it later.
> 
> Always keep some money back until the job is completely done, or you will get screwed. Always look at the job yourself thoroughly, and preferably with someone who knows a little more than you, before you make the final payment.


Both my mother and gram learned this the hard way! They paid a bad contractor up front to repair a roof and install new drywall on the hallway ceiling (from leak damage). He fixed the roof, received payment, said he'd be back, and never returned. So there is now a chunk of ceiling just missing because of that.


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## mbrando1994

joed said:


> A house inspection is for your piece of mind when you buy. It assures you that all systems are fine or it alerts you to any potential problems. This can then be used to decline the sale or negotiate a better price.
> Since the home is going to be yours no matter what, the inspection will only serve to possibly alert you to any work you may need to do once you move in to maintain the property.
> 
> It sounds like you probably already know the history of the house and any potential issues. It would be a waste of money in my opinion.


Yes, I am completely aware of any immediate issues with the home. Just wasn't sure if there were any laws that mandate an inspection. I do not believe it would pass inspection.


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## mbrando1994

ZTMAN said:


> Pottsville I assume?
> Tom gave detailed advice and took a lot of time to explain a lot of things. Also consider the future. If you and your mom will own the home it will effect your ability to sell the home in the future. You will need her consent and signature.
> Work our issues up front, like who pays for maintenance, improvements and taxes and how is that taken into consideration if the home sells in the future. Ask the estate attorney the difference between ownership options, such as tenants in common, or joint tenants with right to survivorship.
> Better to get the details fine tuned up front while every one is cooperating to avoid disputes down the road.


Mahanoy City, so just north of Pottsville. It's a low wealth town but cheap living is a plus. My mother and I have always been on good terms and I'd hope it remains this way. We agreed that I would live there alone, have 100% responsibility of bills, taxes, insurance, etc. We have yet to sit down and have a formal meeting about it mostly since she's still in denial that this is imminent. My grandmother was diagnosed with oral cancer with x amount of days left (we don't know the amount because she refuses to be tested). It's a bad place we're in.

What is the difference between those two ownership options? I definitely agree doing these formalities now will help us out a lot in the future.


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## Tom738

mbrando1994 said:


> Very good point about a new will, since I'm assuming 50% ownership is not enough after the other half is deceased?


That's a legal question that depends on "enough to do what" and the form of ownership. You and your mother may own the land as "tenants in common" or as "joint tenants," and there is a massive difference. You may prefer one or the other. If you're tenants in common, usually you each own 50%, and when you die then the 50% is distributed as you say in your will. If you're "joint tenants," then the first one who dies usually loses all of it, and the other inherits all of it. State law varies a little. ZTMAN gave you some great advice there--talk to an attorney and work out in advance how it's all going to work, and make sure it goes into the form of ownership you both prefer.



> My dream is to eventually turn the house over for profit, however long that may be is uncertain if at all. I definitely would want to strive to own my dream home one day. Although currently, this house is, and will be for a while my living quarters.


Any sale you make is for-profit because you inherited the house, unless you put more money into it than it is worth on the market... Again, selling the house will be complicated by the fact that you and your mother have to agree. You may want to work out in advance under what conditions you will be willing to sell. Owning a home with no mortgage is a beautiful thing.

One note: keep track of all of your expenses. Start a folder for improvements and another for maintenance. If you happen to hold the house for a LONG time, if it is not your primary residence when you sell, or if you ever convert it into a rental, those records can reduce your taxes. This is also important in terms of who pays for what and any agreement with your mother about who gets paid back for money they've put into the house, etc...



> The settlement is not large. My grandmother was very cheap and even to date refuses to spend anything on simple fixes because "she
> won't be here soon." So the house is sort of in disarray.


But isn't it awesome that she's giving you a house? 



> My plan with my portion is to pay off a good amount of my debt (which will help decrease my monthly expenses), address pressing repair issues, and work on an old outdated bathroom. I know the last one is more luxury but I am also putting money aside every week to supplement that project now.


Bathrooms are usually a relatively smart thing to spend some money on because they often increase the resale value of the home--at the very least, upgrades in bathrooms usually don't cost you more than the benefit you get in terms of sale price. Although it also depends on your neighborhood and the like. 

Also on whether your debt interest rates are high enough that it makes more sense to pay off more of that.



> Among the most important, a 100amp circuit breaker being insufficient to power my needs, it's overcrowded, unearthed, and not grounded anywhere apparent. Definitely a concern.


I would usually put upgrading electrical service as optional, depending on wiring condition and calculated needs. 100 AMPS isn't what I'd want, but it's adequate for most needs. (I know senior software engineers with Fortune 500 companies who haven't gotten around to updating their houses running on 135 with primarily 2-wire plugs, and they don't run into a problem). At the very least, again, I'd make it a multiple-bid job. 



> As you mentioned GFCI receptacles and other upgrades are on my list. I've always been a computer nerd but only in the last 5 years 16-21 have I endeavored into home and auto repair. I've learned and experienced a lot and plan to keep learning.


Excellent! The real trick with homeownership is remembering to make the choices as investment decisions rather than just project management... Sometimes it would be really great to refactor the home like you would program code, to make it more elegant and maintainable, but it just doesn't always make sense to spend the money.



> Plumbing is actually copper much to my surprise, only other issues are spongy subfloors in two upstairs rooms, a leaky basement, and numerous electrical violations. All of which I have a working plan to revitalize. I can feel it becoming overwhelming as you stated at times. I work on plans every week through budgeting and drafting different ideas. It's the better half of my coping mechanism of what's to come when this fateful day happens.
> 
> As stated, the estate is rather small and I will not have much left after addressing these issues. I do have a 401k with my employer however.
> 
> Once again I would like to express my most sincere gratitude to you! You seem fairly knowledgeable about these topics and have helped me a great deal!


Happy to have helped! Good luck!


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## mbrando1994

Thank you for your best wishes! These folders you mentioned, I love that idea and will definitely be doing something like this. However, to save on taxes etc will the repair need to be done by a professional or does this include diy repairs done by the homeowner? 

The main reason I need a larger service is a combination of overcrowding of circuits. (Fridge is on same as microwave and entire second floor) and plans to add dedicated circuits for bathrooms kitchens etc. I'd say it's around an 80% necessity for me. I love fixing bathrooms and kitchens and that's where I'll most likely start. Once again thank you for all your words and advice !


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## Tom738

mbrando1994 said:


> Mahanoy City, so just north of Pottsville. It's a low wealth town but cheap living is a plus. My mother and I have always been on good terms and I'd hope it remains this way. We agreed that I would live there alone, have 100% responsibility of bills, taxes, insurance, etc. We have yet to sit down and have a formal meeting about it mostly since she's still in denial that this is imminent. My grandmother was diagnosed with oral cancer with x amount of days left (we don't know the amount because she refuses to be tested). It's a bad place we're in.


Note, also: you're making your plans based on what you think is happening. It's up to what your grandmother's actual will says, and/or state law if she didn't make one or there's confusion. What people say or remember doing is not always what they updated their will to do or say.

Be careful. How you deal with this vis-a-vis your mom or other relatives can have also have serious family drama repercussions. The formal side of dealing with all of this is important, but it's easy for someone suffering a loss to see you reacting rationally and assume you're inhuman or just after someone's money or so on. Depending on the family, I've seen it cause deep divides that lasted decades--centuries, really--and cut across generations.

Finally, writing down what you agreed to with your mom is important, because one or both of you can forget a detail over the years. You may want to make it a formal contract. For example, you've agreed to pay the bills, so if you ever fail to pay bills and she pays them, she should get paid back out of your half of the sale price. Do you get paid back for improvements you put in out of the sale price? Stuff like that. Again, local experienced atty can advise you on how to deal with mutual ownership.


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## mbrando1994

We have reviewed her will just haven't talked about mutual ownership. My mother actually wants to give me full ownership rather than own any of it. We haven't spoken about this for a month or so but that is her stance. The will states 50/50 split though


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## Tom738

mbrando1994 said:


> Thank you for your best wishes! These folders you mentioned, I love that idea and will definitely be doing something like this. However, to save on taxes etc will the repair need to be done by a professional or does this include diy repairs done by the homeowner?


You save on taxes in different ways depending on circumstance. It's another complicated issue. Usually DiY repairs you can use to material cost but not the labor cost, since you didn't pay the labor cost. So if you install a new furnace, for example, that is a capital improvement that affects the adjusted basis of the home. 

"Realized gain" on a capital sale (like the sale of a home) is what is taxed. Realized gain is calculated (more or less) by subtracting adjusted basis from sale price. Adjusted Basis ordinarily just means cost plus a few adjustments to reflect what the property really costs, like an increase for a capital project or a bunch of small projects done at the same time that together are big enough to be a capital project. In this case a special rule applies and your basis in your half of the home, assuming you inherit half, would be the market value of one-half the home at the time you inherit it. (Your and your mother's joint basis would be the market value when your grandmother dies, or maybe on another date near then that the estate picks, IIRC). The estate may or may not appraise it and determine the value, and it may be useful for you to do so if it does not.

So your "realized gain" (in the entire home) goes down by $2,000 if you can show you installed a $2,000 furnace by yourself or by $4,000 if you can show you paid a guy $4,000 for labor and materials to install to install a new furnace. Capital gains tax is maybe 15% (can be higher) depending on your tax bracket, so that one receipt might save you 15% of $2,000-$4,000. Just make sure you know what the receipt is for.

I'm not sure offhand how you split the adjusted basis between co-owners if one puts in the money for improvements. You'd have to look that up or consult and accountant or attorney who deals with it.

If you are selling your primary home, there is usually a capital gains exclusion for the first $250K of realized gain (i.e. you don't have to pay tax on the first $250K of realized gain). But (1) this won't be your mother's primary home, so if she is alive and owns 50% when you sell she will owe capital gains tax on her part of the realized gain from dollar one. So the records are really more important for her. Also (2) if you hold the property for a LONG time, like fifty years, the value may go up by much more than $250K because the value of land increases and the nominal value of a dollar decreases. Also (3) you don't know if the $250K exclusion will be in place when you sell the house, so the records may be important for you. 

Also (4) you don't know for sure the house will be your primary home when you sell, so they may be important for you anyway.

If you turn the home into a rental, records showing basis become useful in a different way because you can start to "depreciate" the value. Don't worry about learning depreciation unless you decide to rent, but it's good to have good records in case you do. Basically you can use it to slightly reduce your tax burden in the years while you still own the house. Maybe your taxable income is reduced each year for up to 27.5 years by 3.6% of the value of the rental home you are depreciating. As a general rule, the bigger the adjusted basis in the rental home, the more you can depreciate.


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## Tom738

mbrando1994 said:


> We have reviewed her will just haven't talked about mutual ownership. My mother actually wants to give me full ownership rather than own any of it. We haven't spoken about this for a month or so but that is her stance. The will states 50/50 split though


Fundamentally it sounds like you have to sit down and decide who you want to own the house, who you want to get money if the house is sold, and what the best way is to own the house. These are all questions it is important to talk through right now with an experienced family law attorney from your state.

Make trust ownership be a part of that discussion. If you have significant debt you may have it in the future--and putting the house in a properly drafted trust or partially in a trust, at least in many states, makes it a LOT harder for future creditors to reach it. (It's called a 'spendthrift' trust, and is often used when people are given property who you don't know will be in great financial shape in a year or five). It costs something to set up but it protects you if you find yourself with mounting credit card bills and inadequate income in the future. How much the house is worth may also affect whether you decide it makes sense--are you going to pay $X to protect a house worth $Y?

Ideally that conversation should happen RIGHT now, before your grandmother dies, in case you want to ask her to change her will--because once you own 50% of the house you're not likely to get the same protection from creditors, at least in a lot of states. (Or your mom won't get protection of laws protecting the primary residence, since it's not hers). Self-settled trusts (ones you fund after owning the property) don't always get the same kind of spendthrift protection as trusts settled by other people. That being said as how it generally works, you *really* need to talk to an experienced family planning attorney from your state.

If it is not desirable or possible to amend the will after consultation with the attorney and your grandmother, you may also choose to change forms of ownership after you and your mother inherit. Lots of options, all with different consequences.

Maybe parts of those conversations are not possible because of family dynamics, and maybe it's not all necessary because of some quirk in your state's law. But you really need advice from a good or at least experienced local family law attorney who deals with wills, real estate, spendthrift trusts, etc...


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