.png){kind=small}
.png)
When you inherit a home, you don’t just receive property, you inherit a list of legal, financial, and maintenance responsibilities. From managing documents to coordinating with family members, the process can get complicated fast without a clear system in place.
One of the biggest challenges? Managing the paperwork.
From deeds and tax records to utility bills and repair receipts, the documents tied to a home are just as important as the property itself. Keeping them organized not only makes the inheritance process smoother but also protects the home’s value and prevents costly mistakes down the line.
And if you’re wondering about tax terms like the “step-up in basis” on inherited property, documentation plays a crucial role. The rules around step-up in basis are well established, but heirs still need appraisals, receipts, and records of improvements to determine the home’s adjusted value. Without organized documentation, it can be difficult to show what the property was worth at the time of inheritance or what upgrades were made later.
What is a Step-Up in Basis (and Why Documentation Matters)?
When someone inherits a property, its value is typically “reset” to the fair market value at the time of inheritance. This adjustment is known as a step-up in basis, a specific type of cost basis calculation.
For example:
- If your parents bought a home for $150,000 years ago and it’s worth $400,000 when you inherit it, your “basis” becomes $400,000.
- If you later sell the property for $420,000, you’d only owe capital gains taxes on the $20,000 increase — not the $270,000 difference from the original purchase.
This step-up in basis can save heirs thousands of dollars in taxes.
But here’s the catch: you may need to prove the property’s fair market value at the time of inheritance and show documentation of any major improvements made afterward. That’s where record keeping becomes essential.
- Appraisals: Establish the home’s fair market value at inheritance.
- Repair and improvement receipts: Document upgrades that increase your basis even further.
- Photos, warranties, and logs: Provide supporting evidence of condition and value.
Without organized records, you could struggle to prove the true basis to the IRS, leading to higher taxable gains than necessary.
Key Records to Keep When Inheriting a Home
1. The Deed and Title Documents
Why it matters: These documents prove ownership. You’ll need them to transfer the property into your name, sell it, or refinance it. Missing paperwork here can delay the process for weeks or even months.
2. Mortgage and Loan Information
Why it matters: Even if the home is inherited, it may still have an outstanding mortgage or lien attached to it. Knowing the balance, terms, and lender requirements upfront helps you decide whether to keep the property, refinance, or sell. Without this clarity, heirs risk unexpected financial obligations or delays in transferring ownership.
3. Property Tax Records
Why it matters: Property tax assessments affect both ongoing costs and potential sale value. If you plan to sell, these records help establish consistency with county assessments, which can also connect to how step-up in basis is calculated.
4. Utility Bills and Service Accounts
Why it matters: Even if you’re not living in the home, utilities, internet, and other services may need to stay active. Tracking these helps prevent missed payments and service interruptions.
5. Insurance Policies
Why it matters: Homeowners’ insurance protects against risks like fire, theft, and liability, which don’t pause just because ownership is changing. If coverage lapses during the transition, the property could be left financially exposed in the event of damage or an accident. Reviewing the existing policy and updating it to reflect the new owner ensures continuous protection and avoids gaps that could be costly later.
6. Maintenance Records and Receipts
Why it matters: A well-documented maintenance and improvement history is critical. Not only does it build buyer confidence if you sell, but it also supports claims about the home’s adjusted basis after inheritance. For example, if you add a new roof, receipts may help clarify how the step-up in basis is applied when calculating capital gains.
7. Legal and Estate Documents
Why it matters: Wills, probate filings, and estate settlement papers are essential to transferring ownership and ensuring all heirs are on the same page.
8. Photos and Videos of the Property
Why it matters: A visual record provides proof of condition at the time of inheritance. This can be useful for insurance claims, estate valuations, or when applying the step-up in basis to document the property’s fair market value at inheritance.
Staying Organized with HouseFacts
The truth is, inheriting a home isn’t just about the property, it’s about the paper trail that comes with it. And keeping that trail straight can be tough when multiple family members, attorneys, and realtors are involved.
That’s where HouseFacts can help. Instead of dealing with scattered folders, emails, and sticky notes, you can:
- Store appraisals, receipts, and home records in one secure, digital hub.
- Easily share access with family members, agents, or attorneys when needed, while keeping sensitive information secure and private.
- Keep a clear record of improvements, tax documents, and expenses tied to the home.
- Build a digital “home binder” that makes future tax reporting (including step-up in basis calculations) far less stressful.
The Bottom Line
By gathering and organizing the right records from the start, you protect yourself, your family, and the value of the property. And with tools like HouseFacts, you can make the process far less stressful and far more efficient.
Ready to take control of your inherited property?
Discover how HouseFacts can help you organize and protect your home records.
