I inherited a house – Inheriting a house involves a lengthy process. Sometimes, multiple beneficiaries are involved, and it’s unclear who gets what. There are estate & inheritance taxes to be paid. The law wants to ensure that you pay all taxes on time. That’s why there exists a probate process.
The probate process is designed so that you pay the taxes on time. Another purpose is to protect the “will of the deceased.” Without a proper procedure, it is easy to modify the “will” and divide the assets as you please. However, laws are here to protect the “will” of the departed soul.
In this article, we’ll help you manage & tips for selling an inherited property.
I Inherited A House
Selling an Inherited Property
Let’s say you are the only heir. You inherit a house directly, and you are not sharing this gift with anyone. There is no problem in that case. You can choose to keep the home, or you can sell it. It’s your choice.
However, let’s imagine a scenario where you inherit a house with a pending mortgage. There are multiple beneficiaries involved. Each person has a different opinion about the use of the property. Some say they would like to keep the house. Others would say they need to take their share in cash. These situations can get complicated, and the probate process is dragged over the years. It can be extremely challenging to reach a conclusion. In such cases, tips for selling an inherited property. Convert the asset into cash, and give the share to everyone involved.
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Some Tips to Help You Execute the Sale of an Inherited Property
Read the Mortgage Documents
A pending mortgage can create trouble. Generally speaking, the mortgage company can take over the house if the loan is not fully paid. You’ll need to clear the dues before you can sell your home. It’s best to talk with your agent/attorney and review the mortgage documents to see which rule will apply here.
Prepare for the Probate Process
Most of the time, the estate will have to go through the probate. The court will appoint an executor to manage the sale of the house.
The executor is responsible for protecting the assets. He must price the property accurately and sell it for a fair price.
Understand Tax Issues
There is no estate tax in Utah. You also don’t pay any inheritance tax, which is a good thing.
According to federal laws, you’ll have to pay a tax if the value of the estate exceeds $11.8 million, but it’s rare. Tax laws vary from state to state. If you are living in another state and you inherit a property in Utah, rules will be different.
Capital Gains Tax
You pay a capital gains tax when you sell the property for a profit. The fee is due if the sale of the house yields more than $250k or $500k if you are married.
However, this rule does not apply to inherited houses. The base price of a property is considered the cost of the house on the day you inherit the house. Let’s say your relative passes away in 2019. Then the price of the home in 2019 is the base price. You’ll pay capital gains tax if the value of the house continues to increase. If the worth of the house in 2019 is $500,000, you’ll pay capital gains tax only if the price of the home rises beyond $500,000.
Capital gains tax exemption is extremely helpful for old houses. Let’s say a couple, purchases a house in 1977 for $80,000. Later in 2017, their son inherits the house which is now worth $600,000. Imagine the taxes he would have to pay. However, because of capital gains tax exemption, he doesn’t pay any tax unless the price of the property is close to $600,000.
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