What do I need to consider when inheriting a property that I want to use as my own home?

The community of heirs: The first hurdle

In the rarest of cases are you the sole heir. Most often, when inheriting real estate, you end up as part of a community of heirs. This means joint ownership: all decisions regarding the inherited property must be unanimous.

The agreement and the market value

If you want to take over the inherited property , you have to buy out the other owners' shares. But what is the inherited property worth?

• Tax value vs. market value: When inheriting real estate, never rely on the official tax value or the insured value. These are often far below the market price.
• Estimate: To avoid disputes, you should commission an independent appraiser to determine the market value of the inherited property .
• Division of inheritance: If the inherited property is valued at 1 million Swiss francs and you are two heirs, you must pay your sibling 500,000 Swiss francs (less any existing mortgages). This "equalization payment" is the purchase price for your share of the inherited property .

Financing: Re-mortgaging inherited property

Many people believe that inherited real estate is debt-free. This is often a mistake.

• Existing mortgages: When you inherit real estate, you generally assume the existing debt. Check the loan terms and interest rates. If these are unfavorable for the inherited property , it's often worthwhile to exit the loan early by paying a prepayment penalty.
• Capital required for payout: To pay out the co-heirs, you usually need to increase the mortgage on the inherited property . The bank assesses your affordability for the inherited property just as rigorously as for a regular purchase. You must prove that you can afford the inherited property .

Taxes: Where the state also earns a share of inheritance property

The tax law surrounding inherited real estate is complex and varies from canton to canton.

Inheritance tax

Whether inheritance tax is payable on real estate depends on the degree of kinship.

• Spouses and descendants: In almost all cantons, they are exempt from inheritance tax. You can inherit real estate tax-free.
• Distant relatives: If you inherit from an aunt or uncle, the inheritance tax on real estate can be as high as 40%. This can force you to sell the inherited property to pay the tax.

Real estate capital gains tax and tax deferral

A significant advantage of inheriting real estate : The capital gains tax is deferred.

• The principle: Normally, capital gains tax is levied on property transfers. In the case of inherited real estate, the state suspends this tax (tax deferral).
• The risk: If you sell the inherited property later, you'll have to pay the tax retroactively – calculated based on the deceased's ownership period and your own. So, with the inherited property, you're essentially inheriting a latent tax liability. This must be taken into account when paying out the other heirs! If you pay out the full market value without deducting the latent tax on the inherited property , you'll pay too much.

Condition and renovation: The reality check

Old houses have charm, but also flaws. An inherited property often comes from a time with different building standards.

• Energy-efficient renovation: Check the inherited property for heating and insulation. New laws (e.g., MuKEn ) could require you to replace the old oil heating system in the inherited property soon.
• Investment needs: An expert report will reveal whether the inherited property contains asbestos, old pipes, or a leaky roof. Calculate these costs before taking possession of the inherited property . Often, an inherited property is cheaper than new construction, but only if you realistically estimate the renovation costs.

Emotional value vs. market value

In no other transaction is the price and value as far apart as in the case of an inherited property .

• The trap: You're attached to the roses in the garden of the inherited property . Your siblings only see building land.
• The advice: Try to view the inherited property as a neutral object. Would you buy this house if it weren't your inherited property ? If the answer is "no," selling it and dividing the proceeds is often a healthier solution than desperately trying to take on the inherited property .

Land registry and notary

The transfer of ownership of an inherited property is formally effected through registration in the land register.

• Inheritance process: Upon the death of the testator, you automatically become the sole owner of the inherited property .
• Transfer of ownership: To be registered as the sole owner in the land register, you need an inheritance division agreement. Only once this agreement has been notarized will the inherited property belong to you alone. The notary and land registry fees for transferring ownership of the inherited property are usually borne by the estate.

Conclusion

The question "What do I need to consider when inheriting a property?" is multifaceted. Inheriting real estate is both an opportunity and a responsibility. It often provides access to homeownership that would be unaffordable on the open market. However, inheriting real estate requires an agreement with the other heirs, sound financing of any equalization payments, and an awareness of potential tax liabilities.

Don't be blinded by the sentimental value of inherited property . Assess the building's condition objectively. Insist on a fair appraisal of its market value to avoid family disputes. And remember: the tax deferral on inherited property is a temporary gift – the bill will come due when you sell later. Those who plan their inherited property strategically can transform it into a true home.

If you would like to have the market value of your inherited property objectively determined or are looking for support in calculating the latent capital gains tax on real estate, Loft offers neutral valuation tools and data for a fair division of inheritance.

Glossary

• Inheritance of real estate: A property that passes to one or more heirs upon the death of the owner.
• **Community of heirs: The entirety of all heirs who are joint owners of the inherited property** until its division (joint ownership).
• **Compensation payment: The amount of money that the inheriting heir must pay to the co-heirs in order to acquire their shares of the inherited property .**
• Tax deferral: The regulation that, in the case of an inheritance of real estate, the capital gains tax is not due immediately, but only upon a later sale.
• Fair market value: The objective market value of the inherited property , which should serve as the basis for paying out the co-heirs (as opposed to the lower tax value).