First, Take a Breath and Gather Facts
Inherited homes come with feelings and deadlines at the same time. Before anyone decides, collect the basics:
- Who owns it now? The will, a trust or the deed decides. Until the estate is settled, the personal representative (executor) or trustee may be the one with authority to act.
- What does it cost to carry? Property tax, insurance, heating fuel, electricity, internet, plowing, lawn care, septic pumping, dock and boat storage, association dues.
- What condition is it in? Roof, heating system, well and septic, water heater, electrical. Old camps often need more than they appear to.
- What is it worth? An appraisal as of the date of death matters for taxes, as explained below.
- What do the rules allow? Town zoning, condo or association rules, and lodging tax registration if you rent.
Your Three Main Options
| Option | Good when | Watch out for |
|---|---|---|
| Keep for family use | Everyone uses it and can share the costs | Uneven use, uneven payments, deferred repairs |
| Keep and rent | Demand is strong and the family will give up some peak weeks | Rules, taxes, wear, the work of hosting |
| Sell | No one can afford or use it, or the family disagrees | Timing, condition, emotions, splitting proceeds |
Many families end up with a mix: keep and rent for a few years, then decide again.
Stepped-Up Basis: Why the Date-of-Death Value Matters
For federal tax purposes, IRS Publication 551 says the basis of property inherited from a decedent is generally its fair market value at the date of death, or on the alternate valuation date if the estate's personal representative chooses that. This is the "stepped-up basis" people talk about.
Why it matters: if your parents bought a lake house decades ago for a small fraction of what it is worth today, your basis is generally the value when they died, not what they paid. If you sell soon after inheriting, the taxable gain may be small. If you keep and rent, depreciation generally starts from that new basis (building only, since land is not depreciable).
Two exceptions to know about from Publication 551:
- Jointly held property. If you owned the home jointly with the person who died, your basis is generally your original share at cost plus the deceased owner's share at its date-of-death value, not a full step-up.
- Community property. Publication 551 has special rules when a spouse dies in a community property state. If the family ever lived in one, ask your preparer whether they apply.
Get a written appraisal as of the date of death and keep it with your records. It is the number your preparer will need years from now.
State Estate Taxes, Briefly
These are paid by the estate, not by the heir, but they can affect whether the family has cash to keep the home.
- Massachusetts: under Mass. General Laws chapter 65C, section 2A, estates of people who die on or after January 1, 2023 owe no Massachusetts estate tax if the federal taxable estate is not more than $2,000,000. The same statute taxes the transfer of Massachusetts real estate owned by nonresidents.
- Vermont: the Vermont Department of Taxes says a return is required if the person who died had an interest in property in Vermont and the federal gross estate plus certain gifts is more than $5 million, or a federal estate tax return is required. A New Hampshire family that inherits a Vermont ski condo should check this.
Talk to an estate attorney or CPA about your own estate; these summaries are not complete.
How Families Usually Hold a Shared Home
When several siblings inherit, the form of ownership shapes everything that comes after. In plain terms:
- Co-ownership on the deed. Each sibling owns a share. It is simple, but without a written agreement, decisions about rent, repairs and selling can stall. In Massachusetts, for example, Mass. General Laws chapter 241, section 1 says any person owning a present undivided legal estate in land (other than a tenant by the entirety) is entitled to partition, meaning any co-owner can ask a court to divide or sell the property. Ask a New Hampshire or Vermont attorney how partition works there.
- An LLC or similar entity. The family members own the company, and the company owns the home. An operating agreement can set voting, contributions, use and buyout rules.
- A trust. A trust can hold the home and set rules for use and sale, sometimes created by the parents before death.
Each has legal, tax, insurance and lending consequences. The point here is not which is best; it is that a written agreement among owners prevents most family fights. It should answer who pays what, who decides on repairs, how rental income is split, who books which weeks, and how someone gets bought out.
The Family Calendar
If you keep the home and rent it, the calendar is where good intentions break down. A few rules that help:
- Decide family weeks early, before the booking calendar opens. Rotate the best weeks (July 4, Christmas, February vacation) year to year.
- Count family use honestly. For federal tax purposes, the Schedule E instructions count days used by the owner, a family member, or anyone paying less than a fair rental price as personal use days. Heavy family use limits rental deductions under the 14-day or 10% rule; see Airbnb tax basics for homeowners.
- Decide whether family pays. Some families charge themselves a cleaning fee; others pay nothing. Agree in writing.
- Lock an owner's closet for family gear, so guests and relatives do not clash over the kayaks.
Our guide to renting your home part time covers blocking dates and setting up the listing calendar.
When Renting Pays for the Upkeep
Renting an inherited home works best when it covers the carrying costs and leaves the family the weeks it cares about most. To test that:
- List every annual cost (the list at the top of this page).
- Estimate rental income season by season, after the weeks the family keeps, using our revenue estimate guide.
- Subtract platform fees, cleaning, supplies and any management.
- Ask: does this cover the carrying costs? Does it fund a repair reserve for the roof, furnace or septic?
If the answer is yes in an average year, keep-and-rent can protect a home the family loves. If the answer is no even in a good year, or if the house needs major work before guests would book it, compare the options honestly, including a long-term lease; see short-term vs long-term rental.
Lake Houses and Ski Homes Have Extra Questions
- Lake homes: dock condition and permits, shoreland rules that may limit changes near the water, septic capacity for larger groups, boat and water toy policies, and summer parking.
- Ski homes: winter access, plowing, a reliable heat source with a low-temperature alert, ski storage, hot tub care, and peak weeks the family will also want.
For a sense of what a large family lake home can look like as a rental, see Strolling Woods, the Webster Lake estate we manage in Franklin. The owner hub links the rule pages for New Hampshire, Massachusetts and Vermont.
New England Host Co is founder-led and makes decisions property by property, which suits families who want a say in how a home they care about is run. If you would like to talk it through, reach us through the contact page or at (978) 672-4578.
This page is general information, not legal or tax advice; check with an estate attorney, a tax professional or your town about your own situation.
FAQ
What Is My Tax Basis in an Inherited Vacation Home?
Generally the fair market value on the date of death, or on the alternate valuation date if the estate elects it, according to IRS Publication 551. Joint ownership with the person who died can change that.
Can One Sibling Force a Sale of an Inherited House?
In Massachusetts, a co-owner (other than a tenant by the entirety) is entitled by statute to ask a court for partition. Other states have their own rules. A written co-owner agreement is the best way to avoid it.
Should We Rent the House to Cover Costs?
It can work if demand is strong and the family will give up some peak weeks. Estimate income after family use and compare it with every annual cost and a repair reserve.
Does Massachusetts Tax an Inherited Home Owned by a Nonresident?
The Massachusetts estate tax statute applies to the transfer of Massachusetts real estate of people who were not residents. Whether tax is due depends on the estate's size and the credit. Ask an estate attorney.