The New Math on Inheriting Your Parents’ House | Kanebridge News
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The New Math on Inheriting Your Parents’ House

Rising costs are prompting more adult children to sell the homes they inherit from their parents

By VERONICA DAGHER
Fri, Jun 2, 2023 8:42amGrey Clock 3 min

One of the first things many 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.

Cash over sentimental value

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.

When Heidi Whaley and her sister, Melissa Mills, inherited their parents’ home, they chose to put it on the market. They recently listed the Charleston home for just below $3.5 million. The sisters, both retired, felt some sadness letting go of the home they grew up in and where their parents hosted many waterfront parties.

“My father wanted to build a house that would be strong, one which would be passed from generation to generation,” said Whaley.

Both sisters are empty-nesters with their own nearby homes, and said they couldn’t justify the expense of maintaining a nearly 4,000-square-foot house for the sake of fond memories.

Rising costs are a bigger part of the calculus these days when heirs decide whether or not to keep an inherited house, real-estate agents say. For instance, the higher cost to insure coastal homes in the Southeast is pushing more heirs in the area to sell, said Ruthie Ravenel, a Realtor in Charleston.

Inflation has also made repairs and upkeep on older properties more expensive, leading some to favour newer properties that may be cheaper to maintain and insure, she said.

I’ll keep the vacation home, though

The declining interest in keeping Mom and Dad’s home is part of a broader generational trend among inheritors, estate planners say.

Some tangible assets aren’t considered as valuable as they were in the past, thanks partly to changing tastes, said Wilbur with Wells Fargo’s estate services.

Renovation is expensive and what one generation sees as on-trend, the other may not. For example, the younger generation of beneficiaries mostly don’t want older traditional furniture. Instead, they prefer the modern, farm-style chic look, said Wilbur.

“While Mom and Dad’s home might be nice, the children may not want to live in it and would consider it too costly to renovate to their style,” she said.

Vacation homes and secondary properties, however, are more likely to be kept by heirs, at least for a few years, especially if it is in an appealing location, financial planners say. If multiple family members are inheriting a vacation house, there needs to be a way to split maintenance costs fairly and create a usage schedule that is to everyone’s liking, said Jeff Fishman, a financial adviser in Los Angeles.

Consider the taxes

Taxes remain a key reason many heirs sell relatively soon, financial advisers say.

Aaron Buchbinder, a real-estate agent in Boca Raton, Fla., is working with three brothers who inherited their grandmother’s condominium this year in Boca Raton and none of them live in Florida. They discussed keeping it and renting it out, but none of them wanted to keep it long term and preferred to sell because of the carrying cost of the homeowners association fees and taxes, said Buchbinder.

Heirs who wish to buy out their other siblings will want to use a reasonable method for valuing the home, said John Voltaggio, a managing director at Morgan Stanley Private Wealth Management. The family may decide to use the value reported on the estate tax return if it is recent, or they may want to obtain a few appraisals and use an average, he said.

The family members inheriting the property will also want to make sure they aren’t getting in over their head financially, with mortgage rates hovering around 7%.

“Many financial decisions today are very rate-dependent, so remove emotions or risk doing something you may later regret,” said Fishman, the financial adviser in Los Angeles.

A home’s cost basis—which is the starting point for measuring a future taxable gain—resets to market value, typically its value at the date of death, said Eric Smith, a spokesman for the Internal Revenue Service.

Any increase in value after death is taxed as long-term capital gains, and those rates are lower than the rates on short-term gain. But if a home is sold quickly, there is likely to be little gain if any and little to no tax, said Smith.



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AACCI’s Strategic Vision for Enhancing Australia-Arab Trade Relations

The Australian Arab Chamber of Commerce & Industry (AACCI) is fostering robust trade relations between Australia and Arab countries.

Mon, May 20, 2024 5 min

In an era where global trade and international relationships are more crucial than ever, the Australia Arab Chamber of Commerce & Industry (AACCI) serves as a bridge, for cooperation and growth between Australia and the Arab nations. Led by its Chairman, Mr. Mohamed Hage, the AACCI has taken on projects aimed at strengthening relationships and fostering development across borders.

This exclusive interview explores the initiatives implemented by the AACCI to expand its presence and influence in the region including the significant establishment of a new operational hub in Dubai. We also delve into how the Chamber embraces education through training and research, its participation in major international exhibitions, and its active support for both large corporations and small businesses.

Looking towards tomorrow, Mr. Mohamed shares his vision for broadening AACCI’s reach emphasizing the importance of the on-ground operations and cultural understanding in building business connections.

-Could you elaborate on the Australia Arab Chamber of Commerce & Industry, including its objectives and main areas of focus?

The Australia Arab Chamber of Commerce & Industry (AACCI) plays a fundamental role, in promoting business partnerships and trade between Australia and the 22 Arab countries. As a member of the Union of Arab Chambers affiliated with the Arab League, AACCI focuses on strengthening trade and investment ties, across these countries.

To nurture these connections effectively AACCI has outlined four objectives: facilitating trade and investment activities, certifying documents, educating stakeholders, and offering marketing assistance.

Our initiatives are designed not only to empower trade and investment endeavors but to also ensure engagement with specific sectors that drive these activities. With an understanding of the characteristics, strengths and preferences of each country, AACCI prides itself on its specialized knowledge customized to suit the distinct business environments of these nations.

– As the AACCI approaches its 50th anniversary, what have been some of the key milestones and achievements?

I believe one of AACCI’s accomplishments is the opportunities it has opened up for numerous Australian companies to access markets, in the region. Moreover, the strong bilateral trade relationship that has developed between Australia and the 22 Arab nations over the five decades has led to trade transactions amounting to billions of dollars.

This extensive trade covers industries such as food and beverages, luxury hotels and many more services. Each successive generation, within AACCI has built upon the foundation laid by its predecessors enriching their knowledge base and expanding their range of services.

– How does the AACCI leverage its diverse leadership team to enhance trade and investment opportunities between Australia and the Arab region?

Since taking on the role of chairman, my main focus has been on expanding our presence in the region. This led to the idea of opening an office in Dubai, which symbolizes our dedication to deepening our engagement in that area. We have successfully secured the license to open our first office in Dubai after 50 years, which will serve as a gateway to the GCC and North Africa.

I strongly believe that building two-way trade and investment ties requires more than a degree of business connectivity; it demands having local representatives present in each region. With trends emphasizing strategies the value of face-to-face engagements cannot be overstated.

Setting up offices in the region is essential for the Chamber to truly serve as a link and support system for business activities. Ultimately this expansion will bring benefits to our members and partners by providing them with access, to dynamic markets and diverse prospects.

– Can you discuss the significance of AACCI’s role in cultural and business exchanges between the two regions?

The importance of understanding cultures in our operations cannot be overstated. To address this, we have included a training platform within the Chamber to strengthen our cultural awareness initiatives. This new program offers our members access to modules on our website focusing on global business practices.

Furthermore, we have set up a Center of Excellence specifically dedicated to researching areas like food security and cultural awareness. These research endeavors are essential for promoting knowledge between the two regions.

By combining the resources of the Center of Excellence, our training resources, and the forthcoming local office in Dubai, we’re providing cultural awareness not only in the region but also in Australia. This approach ensures that our members are well equipped and knowledgeable boosting their effectiveness and involvement, in markets.

– What is the objective of your on-ground presence at conferences and events?

Participating in conferences and on ground events is very important for increasing awareness in industries like construction where knowledge of opportunities in the Arab world may not be widespread. When we see projects such as NEOM or notice the construction boom happening in the region it becomes important for organizations like the Chamber of Commerce to highlight these prospects. By taking part in large scale expos such as the Sydney Build Expo we position ourselves at the forefront of these advancements.

Our presence at these events enables interaction giving entrepreneurs a chance to visit our booth engage in discussions and learn more about the region in an approachable and personalized manner. This plays a role in simplifying the process and making opportunities concrete.

– With such a diverse membership base, how does AACCI tailor its services to meet the needs of both large corporations and small startups?

When it comes to discussing business it’s important to grasp how influence and vision come into play. Businesses looking to expand are often motivated by a desire to achieve something whether they are big companies or small enterprises. Small businesses typically aim to raise their brands profile while larger corporations seek recognition and market dominance.

Standing out in this area can be tough mainly because the key driving force is the passion to showcase the brand and products on a platform. This determination serves as a motivator for entrepreneurs.

At the Chamber we make a point of recognizing the needs of both big and small players by understanding each members individual situation. We ensure that every member is well informed about the opportunities and risks that come with expanding. For small businesses, this means being aware of the financial demands, while large businesses are advised on the necessity of both financial and emotional resilience.

– How does AACCI plan to expand or evolve its services in the coming years to further support its members?

The importance of having resources on the ground cannot be emphasized enough. Having local staff is key to establishing connections with the communities we serve. Without a presence in the area staying updated on events and activities becomes quite challenging.

This is why, as I’ve mentioned before, we have established an office in Dubai, staffed with personnel dedicated to supporting our members. This local office will help us effectively bridge the gap between Australia and the Arab world. And our members will benefit from insights and assistance from someone who truly knows the landscape.

In Australia we have equipped offices throughout the country staffed by individuals who play a significant role in our operations. This strong domestic network complements our efforts ensuring that we provide support to our members both locally and globally. This strategic approach is crucial, for nurturing business relationships and fostering continental understanding.

 

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