Inherited Property FAQ

Over time, we’ve seen some questions and challenges for heirs rise to the top more often than others.  Read below to get your questions answered, or contact us with specific questions!

“What do I do when a sister or brother lives in an inherited house and I want to sell?”

This will always boil down to what you can agree to with your sibling(s). You can’t force a sale of the whole house, but you can sometimes sell just your share of the house (very few buyers interested in this). You can use your best skills of persuasion to explain how it might benefit your sibling to buy out your share. Perhaps they would appreciate the simplicity of not having anyone else owning the house with them, or perhaps if they agree to sell, you can agree to help pay for moving expenses, etc. As a last resort, you can file a partition lawsuit which would likely result in a sale of the home to a 3rd party (expense and clunky process).

Inheritance Taxes: “What is the Federal Inheritance Tax? Do I have to pay it? And do I have to pay capital gains tax on inherited property?”

The tax reform of 2017 doubled the maximum amount you can inherit without paying taxes to $11.2 million (double that for couples). 40% is how much tax you have to pay on an inheritance, but only if you receive more than $11.2M.

The estate capital gains tax is a little different from how capital gains would normally work. If you decide to sell an inherited house, your cost basis for calculating how much your capital gains are is now starting at the value of the house when you inherited it. If Mom paid $115k for it in 1987, and even with deferred maintenance it’s worth $150k today, then you start at $150k. Now, you only pay taxes on what you get above $150k. (Bonus Tip: The best “bang for your buck” is to do some repairs/upgrades yourself and sell the house for even more. And the work you do is tax-deductible from the capital gains!)

“How do I sell inherited property?”

Selling a house after death of a parent can be simplified to these 3 steps”

  1. Decide on strategy for how you want to sell.
  2. Clear the title
  3. Find your buyer

Decide on Selling Strategy: There are many ways to sell an inherited house, just like any other house. You can download our guide on How To Sell Your House by submitting the info in the form to the right of this article, which would give you an all-encompassing guide. Due to the nature of the situation, you’ll most typically end up selling by one one of these two options: Selling for cash, As Is to an investor buyer, or doing some cleaning and repairs yourself and listing with a realtor. If you choose to take care of it yourself with a realtor, you can go anywhere from a clean-out and a couple repairs, to a full-blown renovation.

Clear the Title: As soon as possible, begin processing the estate. Probate is only necessary if assets and property still remain in the Deceased’s name. If you are researching early in the process of a loved one’s health, we recommend meeting with an estate planning attorney to save money and time down the road. They will help you set up trusts and accounts, or perhaps by transferring some property prior to the loved one’s passing. A will is perhaps the bare minimum of preparing to pass on an inheritance in this day and age.

The typical bottle neck with getting the title clear to sell is giving notice to creditors, as that takes 90 – 120 days in the state of Tennessee. NOTE: Some attorneys will shuffle some papers in a matter of days and tell you that you “have the right to sell the property now” or “you can sell the property whenever you want now”, but please be careful as simply having your name on the title of the property does not mean it is 100% clear title to the buyer. The key question for your attorney is: “What do we need to do to be able to convey warranty deed to a buyer?

Find Your Buyer: There are many ways, and you can research and decide on the best fit for you! Our How To Sell Your House guide also includes a lot of information on how to do this.

That’s all for now! Contact us any time if we can help you navigate this complicated process!

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