{"id":1122,"date":"2020-12-07T18:00:27","date_gmt":"2020-12-07T23:00:27","guid":{"rendered":"https:\/\/www.deeds.com\/articles\/?p=1122"},"modified":"2024-04-25T23:20:27","modified_gmt":"2024-04-26T03:20:27","slug":"guide-to-selling-an-inherited-home","status":"publish","type":"post","link":"https:\/\/www.deeds.com\/articles\/guide-to-selling-an-inherited-home\/","title":{"rendered":"Guide to Selling an Inherited Home"},"content":{"rendered":"\n<div class=\"wp-block-image\"><figure class=\"alignright is-resized\"><img loading=\"lazy\" decoding=\"async\" src=\"https:\/\/www.deeds.com\/articles\/wp-content\/uploads\/2020\/12\/guide-to-selling-inherited-house.jpg\" alt=\"Image of a small, old house with a nice chimney. Captioned: Guide to Selling an Inherited Home\" class=\"wp-image-1123\" width=\"400\" height=\"223\" srcset=\"https:\/\/www.deeds.com\/articles\/wp-content\/uploads\/2020\/12\/guide-to-selling-inherited-house.jpg 800w, https:\/\/www.deeds.com\/articles\/wp-content\/uploads\/2020\/12\/guide-to-selling-inherited-house-300x167.jpg 300w, https:\/\/www.deeds.com\/articles\/wp-content\/uploads\/2020\/12\/guide-to-selling-inherited-house-768x427.jpg 768w\" sizes=\"auto, (max-width: 400px) 100vw, 400px\" \/><\/figure><\/div>\n\n\n\n<p>The roof is old. The house costs a fortune to heat. Over the\nyears, tree roots have insinuated themselves into the sewer line. The property taxes\nand insurance costs are high. <\/p>\n\n\n\n<p>You\u2019re handy at certain <a href=\"https:\/\/www.deeds.com\/articles\/diy-renovations-everything-you-wanted-to-know-or-not-about-permits\/\">do-it-yourself\nhome renovation tasks<\/a>.&nbsp;But this home needs an owner who\u2019s\ndedicated to home improvement. The time has come to sell your inherited house. <\/p>\n\n\n\n<p>Yes, in hindsight, it would have been better had you refused\nthe deed in the first place. But you\u2019d just lost a loved one, and your emotions\nwere in control. <\/p>\n\n\n\n<!--more-->\n\n\n\n<p><strong>\u261b<\/strong><strong> <\/strong><strong>If an inherited home has heavy\ndebts or expensive upkeep needs, or for other reasons, you may decline an\ninheritance.&nbsp;<\/strong><strong>Find out how beneficiaries may<\/strong><strong>&nbsp;<\/strong><strong><a href=\"https:\/\/www.deeds.com\/articles\/refusing-to-accept-a-deed\/\">refuse to accept a deed<\/a><\/strong><strong>.<\/strong><strong> <\/strong><\/p>\n\n\n\n<p>Back when you inherited, the probate court took the <a href=\"https:\/\/www.deeds.com\/articles\/should-you-remove-a-deceased-owner-from-a-real-estate-title\/\">deceased\nowner\u2019s name off the deed<\/a>, and you received the keys to the home. Fast-forward\na year and a half. Now you have your eye on a new condo property in the city. So\nyou call a local real estate agent and order an appraisal of the inherited home\u2019s\nfair market value \u2014 if you don\u2019t, relatives might second-guess your asking\nprice.<\/p>\n\n\n\n<p>Perhaps you inherited with a sibling who had no interest in\nthe home, but expects a share of the proceeds if you sell it. If so, you should\nbe able to sell the home and share its value, as expected. But you don\u2019t want\nto learn from hindsight again. Before selling, understand the costs involved.\nHow much debt needs to be paid off? How much money will you need for marketing\nthe home, including commissions, fees, and closing costs? To navigate the transaction,\nyou\u2019ve already hired a real estate lawyer. This attorney is a highly reputable\nand neutral expert \u2014 one with just the right experience to know which details\nare important and which aren\u2019t. Good move.<\/p>\n\n\n\n<p><strong><em>Note:<\/em><\/strong> If the deceased prior owner left a\nmortgage debt on the home, the mortgage was paid off in probate by the estate,\nor you refinanced. Perhaps you were allowed to assume the loan, under its original\nterms, or with modifications. The mortgage servicer can explain the terms that\napply to a specific loan upon the borrower\u2019s death. Several federal consumer\nprotection rules help relatives who inherit homes and wish to assume their\nmortgages. Consulting with a wills and estates lawyer in your state is an\nimportant move to protect your rights and interests. <\/p>\n\n\n\n<p><strong>\u261b<\/strong><strong> <\/strong><strong>Find out from <em>Deeds.com\n<\/em><\/strong><strong><a href=\"https:\/\/www.deeds.com\/articles\/what-happens-if-the-mortgage-on-your-home-outlives-you\/\">what\nhappens when a mortgage outlives the borrower<\/a><\/strong><strong>.<\/strong><\/p>\n\n\n\n<h2 class=\"wp-block-heading\">Death and Taxes: How the IRS Views the Home Sale<\/h2>\n\n\n\n<p>If you can sell the home profitably, guess what? The IRS\nwill be interested. If you profit on the sale, you\u2019ll declare your profit as a capital\ngain. Fortunately, heirs get the benefit of a stepped-up cost basis. If you, as\nan heir, decide to sell, the only taxed capital gain is the appreciation in\nvalue between the prior owner\u2019s passing and your sale now \u2014 that is, just the\ngain over the time <em>you<\/em> held the deed. The IRS doesn\u2019t tax the home\u2019s\nfull rise in value gain starting from when the deceased prior owner first\nacquired the property.<\/p>\n\n\n\n<p>To sum up: You\u2019ll pay capital gains taxes on an inherited\nhome <em>if you sell it.<\/em> The IRS taxes the difference between its fair\nmarket value when you inherited it to the price you get when you go to sell it.<\/p>\n\n\n\n<p>Now, there is a difference between short-term capital gains\nand long-term capital gains. Because you have kept your inherited home for more\nthan one year, you qualify for the lower <em>long-term capital gains<\/em> tax\nrate. <\/p>\n\n\n\n<p>Can you can hold out and live in the house beyond the\ntwo-year mark (or live in it for at least two years of a five-year period of\nownership)? If you live in the home more than two years, you may qualify for the\n<em>capital gains tax exclusion<\/em> when selling your primary residence. That\u2019s up\nto $250,000 in profit (that is, the rise in value from the time of the\ninheritance), tax-free. Couples get 250K <em>each<\/em>. This exclusion is only\navailable if you haven&#8217;t taken it on another house during the two years before\nyou sell.<\/p>\n\n\n\n<p>Before deciding to sell an inherited home, review the related <a rel=\"noreferrer noopener\" aria-label=\" (opens in a new tab)\" href=\"https:\/\/www.irs.gov\/faqs\/interest-dividends-other-types-of-income\/gifts-inheritances\/gifts-inheritances\" target=\"_blank\">forms, instructions, and updates from the IRS<\/a>. Check in with your accountant or tax specialist on the best timing for your home sale, based on current IRS and state rules. Whether you have made a profit or not, report the sale of your inherited home on\u00a0<a rel=\"noreferrer noopener\" aria-label=\" (opens in a new tab)\" href=\"https:\/\/www.irs.gov\/forms-pubs\/about-schedule-d-form-1040\" target=\"_blank\">Schedule D<\/a>\u00a0and\u00a0<a href=\"https:\/\/www.irs.gov\/forms-pubs\/about-form-8949\" target=\"_blank\" rel=\"noreferrer noopener\" aria-label=\" (opens in a new tab)\">Form 8949<\/a>.<\/p>\n\n\n\n<p>One more thing. When you\u2019re ready to sell, you don\u2019t have to\nclean and renovate the house if you\u2019d rather avoid that task. Today, many real\nestate brokers offer <a href=\"https:\/\/www.deeds.com\/articles\/concierge-services-for-home-sellers\/\">concierge\nservices<\/a> to clean and upgrade homes for sellers, with no upfront\ncosts. <\/p>\n\n\n\n<h2 class=\"wp-block-heading\">Alternatives to Selling an Inherited Home <\/h2>\n\n\n\n<p>Some heirs will place an inherited home into a <a href=\"https:\/\/www.deeds.com\/articles\/holding-real-estate-in-a-trust-or-an-llc\/\">family\ntrust<\/a>, where it can generate a cash flow. If you\u2019re the lone homeowner,\nyou might keep your inherited home to live in, and rent your own home. Or vice\nversa. The point is, an inherited home can offer sustenance to you or others\nwithout being sold.<\/p>\n\n\n\n<p>Many inherited homes become rentals \u2014 including vacation\nrentals, local government rules permitting. Rental property income isn\u2019t taxed\nas heavily as normal income. If you\u2019re not landlord material, that\u2019s fine. You\ncan outsource that role to a professional property management company, with a\nsmall percentage of the monthly rent taken as a management fee.<\/p>\n\n\n\n<p>So, where do you start? If there\u2019s still a treasure trove of\nold objects in the house, you might pack up the photo albums and a few other\ncherished things, and distribute them to relatives and close friends. A couple\nof years after someone has passed, the letting-go process can be a lot easier\nto deal with. That said, it\u2019s worthwhile to nurture heirs\u2019 long-term\nrelationships by respecting the will and any itemized instructions with it. So,\nrefresh your memory on the will\u2019s words about personal items. Don\u2019t rush, and\nbe sure to get the other heirs\u2019 agreement on any decision you make.<\/p>\n\n\n\n<p>As for the other items in the home, hold an estate sale.\nLocals will enjoy browsing and buying. If you prefer not to do this yourself,\nhave an estate sale company plan and manage the sale. &nbsp;<\/p>\n\n\n\n<p>Then, get the home up to code. Some heirs decide it\u2019s worth\ntaking out a home equity loan for major upgrades, if the plan is to keep the\nhome as a rental property for many years. This takes good planning; you\u2019ll need\nto have a good idea that the cost of borrowing, renovating, and managing the\nproperty will, in fact, pay off. Is it in an area where homes are generally\nrising in market value? If rental income covers your costs, and the home\nbecomes increasingly valuable, you\u2019ll likely be in a good position 20 years\nfrom now. <\/p>\n\n\n\n<p><strong><em>Pro tip:<\/em><\/strong> All current owners should be willing\nto be borrowers on the home equity loan. If not, a payoff agreement should be\ncreated by a lawyer.<\/p>\n\n\n\n<p><strong>\u261b<\/strong><strong> Here\u2019s how <a href=\"https:\/\/www.deeds.com\/articles\/heloc-how-home-equity-lines-of-credit-impact-a-homes-title\/\">a home equity line of credit affects a home\u2019s title<\/a>.<\/strong><\/p>\n\n\n\n<p>Specific expenditures on rental properties are <a href=\"https:\/\/www.irs.gov\/businesses\/small-businesses-self-employed\/tips-on-rental-real-estate-income-deductions-and-recordkeeping\" target=\"_blank\" rel=\"noreferrer noopener\" aria-label=\" (opens in a new tab)\">tax-deductible<\/a>, but home improvements generally aren\u2019t. Rental properties depreciate over the years, according to tax policy. An owner should declare depreciation on the home according to the IRS schedule. When you eventually prepare to sell the house, speak with your tax professional about tax considerations.<\/p>\n\n\n\n<p>Some heirs simply give the home to another relative or friend who needs it. If you do this, your <a href=\"https:\/\/www.deeds.com\/articles\/gift-deeds-and-gifts-of-real-property\/\">individual gift deduction is $15,000 in 2021. <\/a>Upwards of than that ceiling, each heir has to declare the gift, except when giving to a spouse. To stay of the right side of the IRS: If you individually give more than $15,000 in value in any year to any individual recipient (for couples who give or receive, the limit is $30,000), file <a rel=\"noreferrer noopener\" href=\"https:\/\/www.irs.gov\/forms-pubs\/about-form-709\" target=\"_blank\">IRS Form 709<\/a>. It\u2019s best to file it anyway, to prevent any later dispute about the gift home\u2019s value.\u00a0Filing Form 709 doesn\u2019t mean you\u2019ll pay any taxes on the gift if you subtract it from your lifetime gift tax exclusion: that\u2019s $11.7 million in 2021.<\/p>\n\n\n\n<p>Houses given to nonprofits are <a href=\"https:\/\/www.nerdwallet.com\/article\/taxes\/tax-deductible-donations-charity\" target=\"_blank\" rel=\"noreferrer noopener\" aria-label=\" (opens in a new tab)\">charitable donations<\/a>; these have their own set of rules.<\/p>\n\n\n\n<p><strong>\u261b <\/strong><strong>See more on <a href=\"https:\/\/www.deeds.com\/articles\/gift-deeds-and-gifts-of-real-property\/\">donations, gift deeds and gifts of real estate<\/a>.<\/strong><\/p>\n\n\n\n<h2 class=\"wp-block-heading\">A Few Parting Notes <\/h2>\n\n\n\n<p>After weighing the costs and benefits of your alternatives,\nselling your inherited home might be your best path forward. If it\u2019s just not\nthe home for you, and you\u2019re not thrilled about having it renovated, you can sell\nit. Bring in a real estate company with a concierge service. Or let willing\nbuyers consider the home as a fixer-upper, to upgrade in the style they\u2019d\nprefer. If you are not the only heir to the home, get a buy-in from your co-owners\non the selling plan. A signed agreement puts everyone on the same page.<\/p>\n\n\n\n<p>Note that tax rules and deductions do change over time. Be\nsure to check the updated Internal Revenue Code and consult with your tax\nspecialist to take advantage of any supportive provisions the government offers.\n<\/p>\n\n\n\n<p>And, once again, do seek neutral legal advice from an attorney who specializes in this area before selling an inherited home.<\/p>\n\n\n\n<p class=\"has-small-font-size\">Photo credits: <a rel=\"noreferrer noopener\" aria-label=\" (opens in a new tab)\" href=\"https:\/\/unsplash.com\/photos\/6jKK0dLR_o4\" target=\"_blank\">Jacques Bopp<\/a> and <a href=\"https:\/\/unsplash.com\/photos\/M9jrKDXOQoU\" target=\"_blank\" rel=\"noreferrer noopener\" aria-label=\" (opens in a new tab)\">Harli Marten<\/a>, via Unsplash.  <\/p>\n","protected":false},"excerpt":{"rendered":"<p>The roof is old. The house costs a fortune to heat. Over the years, tree roots have insinuated themselves into the sewer line. The property taxes and insurance costs are high. You\u2019re handy at certain do-it-yourself home renovation tasks.&nbsp;But this home needs an owner who\u2019s dedicated to home improvement. The time has come to sell [&hellip;]<\/p>\n","protected":false},"author":2,"featured_media":0,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"_jetpack_memberships_contains_paid_content":false,"footnotes":""},"categories":[71],"tags":[],"class_list":["post-1122","post","type-post","status-publish","format-standard","hentry","category-general"],"yoast_head":"<!-- This site is optimized with the Yoast SEO plugin v27.5 - https:\/\/yoast.com\/product\/yoast-seo-wordpress\/ -->\n<title>Guide to Selling an Inherited Home - Deeds.com<\/title>\n<meta name=\"description\" content=\"Yes, in hindsight, it would have been better had you refused the deed in the first place. 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