When Inheriting the Family Home is a Bad Idea

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For many of us, our home is more than just a piece of property. It holds deep memories and emotional meaning, especially if we raised our families there. For this reason, estate planning discussions often include leaving the family home to the kids.

This can be a way to keep the property so family members can continue to enjoy it for generations to come. It also can be a burden. Preserving the physical space that produced those family memories comes at a financial cost.

An article on this topic from Kiplinger, published September 27, 2023, recently addressed this issue. The headline was, “Your Home Would Be a Terrible Inheritance for Your Kids.” The authors declared, “Houses make for terrible wealth transfer vehicles,” citing both financial costs and potential family conflict.

As a former real estate agent and an investor in real property, I can think of worse things than real estate to leave your kids – such as nothing. Still, there are some downsides to consider before including the family home in your will.

One of the biggest is the expense for upkeep. One client couple wanted to leave their beautiful Black Hills home to their kids jointly as a vacation home. I suggested they discuss the idea when the family gathered for Christmas. I added up the annual costs to maintain the home, including taxes, so they could ask the kids if they were prepared to cover their ongoing share. At our next client meeting I asked how the discussion had gone. “Oh, we can forget leaving them the house. When they saw the cost of upkeep, they all said it would cost less than half that amount to stay in hotels when they visited the Black Hills.”