For many people, owning real estate is part of a lifelong dream. When someone has worked to obtain real estate, it is typical for them to want to pass such an asset on to an heir or heirs so that others can enjoy the benefits of such property. In many circumstances, it may be more beneficial for individuals to explore selling inherited real estate. In order to make the most informed choice about whether to sell your inherited real estate, it is important to understand the effects your choice may have. Working with your own experienced estate planning attorney can help you make more informed decisions about real estate.
One of the first steps in handling inherited real estate is to wait for the probate process to run its course to determine what individual has the right to initiate a sale. An executor will distribute property according to the decedent’s Last Will and Testament, so you will need to wait for that process to conclude, too. If you are inheriting equal shares of real estate with a sibling or other beneficiary, then you need to consider how their interests and approach will affect your rights in the property.
If the real estate you have inherited is part of a trust, then the ability to carry out transactions related to such property is typically in the hands of the trustee. Depending on the structure of the trust, even as the beneficiary for the trust in which real estate has been placed may only make you eligible for proceeds from the use and/or sale of that property and may not entitle you to participate in the actual sale of the property.
In most circumstances, selling an inherited home will be treated as a capital gain or loss when it comes to income tax. That means it is extremely important to approach your decision regarding inherited real estate with a thorough understanding of what your options are and how those options will affect you and your family.
In order to determine whether a sale will qualify as a gain or loss, you need to determine the basis of the home. Basis is generally the fair market value on the day in decedent that you inherited the home from died. If you sell the home for over that amount, then you are considered to have had a capital gain. If you sell the home for less than that amount, then it would normally be considered a capital loss. Once the sale is finalized you will need to use the appropriate reporting method to include this type of capital gains, which is typically a Schedule D.
Other Steps to Consider
When dealing with inherited property, you will likely need to deal with the various assets inside of the property, too. That means you will need to set aside enough time to properly go through the decedent’s belongings and make determinations about how you will proceed with them.
Estate sales are a common solution to disposing of furniture and other assets in the home that you or other beneficiaries do not want. They can be arranged in many different ways, including being staged as a simple yard sale depending on the circumstances of your particular situation.
No matter what approach you do take to the assets and property within real estate, it is important to make sure that you dispose of any personal belongings you may not want or need before selling the home. Homes that are clean or staged are often more appealing to those in the market to purchase a home. You also want to make sure that any personal or compromising information has been removed from the home, including paperwork that may have identifying information that could lead to issues and concerns with identity theft.