Selling Inherited Property in Clarksville TN
Most people think that selling inherited property is a godsend. Providing the beneficiary a lottery-like reward with little to no detriment. The truth is being named as a beneficiary is not that simple and while the rewards are obvious. There are many challenges to overcome. Here are a few challenges that a beneficiary of inherited real property may face. Unless you’re the surviving spouse, in which case, the legal transfer of the property should occur relatively quickly and without tax penalties.
Receiving an inheritance in almost any other circumstance can be a long and complicated process. It can take the executor of the estate and the court many months to divide the deceased person’s assets, including the home. Often times, this is a very aggravating and stressful process for beneficiaries. You are not only dealing with the loss of a loved one but also may be struggling financially and need the money to stay afloat.
Too big and expensive to keep
It’s too much house to keep up and you can’t afford it, now what. Let me help you sell it.
Follow the will – Probate Clarksville TN
The first step in the process is to determine whether the deceased person has a valid will. If the deceased person has a valid will and the estate is worth more than $100,000, the court will follow the terms of the deceased person’s will and through the probate process, make sure the deceased person’s debts are paid and assets are distributed accordingly. If the deceased person does not have a valid will, his or her assets will be distributed according to the state laws of intestacy, which are default provisions that are commonly contrary to the deceased person’s wishes.
Creating a will is a smart decision; however, many people will be surprised to learn that simply having a will cannot avoid a court process called “probate” and sometimes, to the bewilderment of all involved, the desired beneficiaries of the deceased person are not the people who actually inherit the property. Not only will some of the beneficiaries of the deceased person not receive their inheritance, but going through probate takes the control of inheritance from the family that is very expensive, time-consuming, and “public,” so any interested party can see what the deceased person owned and who the deceased person owed money to.
What am I going to do with these bills?
It’s too much for me to upkeep and pays taxes on.
Selling Inherited Property in Clarksville TN
Once ownership of a home is transferred to you, Uncle Sam may deduct federal, state and/or local taxes (Delinquent Property Taxes) from the estate, if the estate net taxable is worth more than a certain amount.
There is no inheritance tax in California. The estate tax is under the federal estate tax law. Estate taxes are taxes that are levied on an entire estate before it is distributed to individuals, which is imposed on the value of the property at death. The federal government tax rates start at 45% for estates in excess of $3,500,000. If you were to inherit property worth $4 million, for example, the federal estate tax would be $225,000.
Selling Inheritance Property in Clarksville TN
Consider Selling Inherited Property in Clarksville TN
If you decide to sell an inheritance, you will probably be required to pay capital gains tax on the difference between what you net from the sale and your basis (basis equals purchase price plus improvements minus depreciation).
One positive thing about inheriting property is that it is taxed on the value of the property the day that the owner died. Therefore, the beneficiary gets a “step-up” in basis and pays less capital-gains tax. The current federal capital-gains tax is 15%. If the estate is a personal residence and you meet certain guidelines, you can be exempt from capital gains tax on the first $250,000. if single, or $500,000. if married.
Example: Let’s say John Doe buys his home for $10,000.00 in 1945. Sally Q inherits John Doe’s property on the day John Doe dies in 2010. At the time of John Doe’s death, the property is worth $350,000. Sally Q would pay no capital gains tax if she sells the property for $350,000. a week after John Doe dies as the basis of the property (value upon John Doe’s death) is equal to the value of the property upon Sally Q selling the property.
Unless you qualify for an exception under the law, most transfers of an estate called for a reassessment of the property, which will likely increase the property taxes paid on the estate. Therefore, as a practical consideration, a beneficiary of inherited real property must make sure that they will be able to pay the increased property taxes as they become due, or ultimately risk the chance of losing the property in the future for delinquent property tax payments.
Selling an Inherited Property in Clarksville TN
Understand the downsides of inheriting property
Selling Inherited Property in Clarksville TN
While inheriting real property can seem like a blessing, many find that they have to sell the inheritance property to pay the estate taxes due. In addition to a large amount of estate taxes that may become due after inheriting an estate, there is a quick nine-month statutory period after the deceased person’s death in which the beneficiary of inheritance must pay the estate taxes due.
Example: If a beneficiary inherits one parcel of land worth $10 million and the estate has no other assets, the beneficiary of the inherited property may have to sell the land to get the cash to pay the $2.9 million in federal estate taxes within nine months of the deceased person’s death.
Taxes on Inheritance
Taxes are not the only complications that a beneficiary of inherited real property encounters. Such as if the home still has a mortgage attached to it, it has to be paid off. Worse yet, some lenders treat the death of a borrower as a trigger for immediate repayment of the loan. However, if the loan provisions provide for survivorship of the loan through a trust or deed, the loan will remain outstanding and in effect.
Thus, a beneficiary must be careful and make sure they can pay the estate taxes and annual property tax payments, as well as the monthly mortgage payments.
Selling inherited Real Estate in Clarksville TN
Step 1 – Appraisal: The first step for a beneficiary of the inherited real property is to have the property appraised. This in turn, therefore, will establish the new tax basis in the event that the property is sold. During this phase Tax implications of selling the property can be assessed and evaluated. This will help determine if selling the property is the best course of action.
Step 2 – Determine Price/Terms: You will need to determine a price and terms to sell it. To help you with the price, terms, and overall transaction, you will need to enlist the services of qualified professionals.
Step 3 – Hire Professionals: Hire a real-estate broker as well as various consultants. Whereas these should include an appraiser, surveyor, real estate lawyer, and an accountant.
Special Notes on Selling an inherited home
Regardless of whether you decide to sell or not, you must get property insurance. This will help to avoid potential liability or loss via fire.
Selling an inherited House in Clarksville TN
One of the biggest issues any person who is Selling Inherited Property is to clear the property title. This can be a very time consuming and cumbersome process. The transfer of real property is exceedingly hard when more than one beneficiary is named. Unless the will is very clear about the percentage of ownership each beneficiary receives. It must include provisions about what will happen if one beneficiary wants to sell the home while the others do not. Otherwise, be ready for costly disputes to arise.
Clearing title is especially daunting when there are multiple family related beneficiaries (as is often the case). Familial ties can become strained. The intent of the deceased person is unclear and the beneficiaries have differing ideas of the wishes of the deceased.
Work with a Probate Lawyer / Selling Inherited Property in Clarksville TN
What one does with the inherited property obviously varies from person to person. Some people keep the real property for various reasons, sentimental reasons to financial ones. Others may desire an income stream and thus, Sell the Inherited Property and buy another one with the income. A tax-deferred “1031” real estate exchange can be a very beneficial tool to avoid property tax.
As you can see, there are some ups and downs to inheriting a home. I (Ron Dayley) can help you market and sell it as quickly as possible. Coldwell Banker CM&H is the oldest Real Estate Agency in the Clarksville TN area. With all the tools and contacts we have available to us, we will work as a team. We will sell your home fas and get you the best price that the market will allow Coldwell Banker Conroy, Marable & Holleman