concern that the will may be contested. If a will is not challenged within the legal timeframe, the probate process is generally straightforward.
Taxes on Inherited Property
Understanding tax obligations is crucial when selling an inherited home. Tax laws vary by state, but the primary taxes that may apply include: • Estate Tax: Applies to large estates exceeding federal or state exemption limits. • Inheritance Tax: Some states tax heirs based on their relationship to the deceased. • Property Tax: Heirs assume responsibility for ongoing property taxes upon inheritance. • Capital Gains Tax: Owed when selling an inherited home for more than its market value at the time of inheritance. The "step-up" rule often reduces capital gains by resetting the property's value to its worth at the time of the previous owner's passing. Executors must file an estate tax return, and sellers must report the sale on their income tax return using IRS Schedule D.
Ownership and Title Transfers
Real estate ownership must be legally transferred before a home can be sold. The executor or probate court will issue a new deed naming the heirs as owners. Required documents may include: • The death certificate • The probated will (if applicable) • An executor’s or administrator’s deed If the property was co-owned, the surviving owner typically assumes full ownership without probate. However, if multiple heirs inherit the home, they must decide on its division or sale. 7
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