Kevin L Belzer - A GUIDE TO SELLING YOUR INHERITED HOUSE

A GUIDE TO SELLING YOUR INHERITED HOUSE

A GUIDE TO SELLING Y O SELLING YOUR INHERITED HOUSE

Kevin L Belzer

Table Of Contents

Dealing with Inherited Homes: Best Practices for Families 1

Concepts to Know When Selling An Inherited Home

Distribution Among Family Members

Downsides to Inheriting

How Selling A House In An Estate Differs From Regular Home Sales

Determining the Value of an Inherited Home 37

Four Ways to Sell Your Inherited House

Inherited Home Sales & Taxes

Prepping an Older Home for Sale

10. Small Improvements Can Gain You Thousands 71

11. Marketing an Inherited Home

12. Using Curb Appeal to Sell Your Inherited Home for More 81

13. The Importance of Good Pictures

14. The Process of Selling Inherited Homes And The Splash Program

Testimonials Kevin was awesome from start to finish. Always kept me up to date with everything that was going on through the process. He gave great advice for pricing the home. I even got 15k over asking. He also stepped up and helped out with some yard work to get it looking perfect. His wife also came along and help make the inside perfect too. We had a little trouble closing but that came from the buyers side and title making some minor mistakes with paperwork. He was there to explain what was going on and not to worry. Thanks again Kevin for the awesome job!!! ~Robert Kevin was amazing. He took the time to make sure we had everything we needed and helped us through every step of the process. ~Jason Kevin worked above and beyond to help us get our home. He was incredibly helpful with each and every step of the process. He answered all our questions without hesitation and he took the time to be a real person, not just a realtor trying to sell a house. ~Jason and Stefanie I imagine this has probably been the most difficult sale for a home. Kevin did great job of communicating with us. Presenting our options. When we needed a change of lock box to combination Phil on a Sunday came out and change it. Little things big things. Divorce cases must be the most difficult ones. Kevin was a professional I would highly recommend him to my colleagues and friends. They bottom line we sold our house for best value. Thanks Kevin ~John

Kevin goes above and beyond when selling homes. He not only spends a lot of money to market the house but he also has the experience needed to negotiate and get top dollar. His passion and experience allows home sellers to know that they're in good hands when selling one of their largest assets. ~Phil Kevin was always ready to help us with any needs we had. Also always picked the phone up no matter what day or time. ~Joseph Kevin makes everything look easy. He’s knowledgeable, understanding, patient and inspires nothing but confidence. He’s our “realtor for life.” ~Karen Kevin was very attentive to what I needed in a new home and was very patient with me. ~Karen Kevin always answered any questions I had. He was always pleasant to talk to and he did everything he said he was going to do. ~Melanie E. Kevin has served me and my wife in a professional, honest, and friendly way. He helped us sell our home quickly and for more than we were asking. We would highly recommend Kevin to anyone wanting to sell or buy a home. I’d like to mention that he helped us purchase this house ten years ago and has assisted our son also. He is a nice guy and a great Realtor. ~ Chris and Kathy S. Kevin Belzer is the most professional expert in the field of real estate we have ever met. His honesty, integrity, and work ethic

are second to none. His focus is centered on client satisfaction and attaining the highest offer for a seller’s property by achieving optimum results. We are truly honored to have Kevin as our Realtor. ~ Pearl K. Kevin is very knowledgeable but it was his work ethics and tenacity that makes him above the rest. When a deal fell through by not fault of our own, Kevin worked over and beyond to get us the right house fast. We are in a better more beautiful house and we stayed on track because of Kevin. Kevin represents Go Sold Realty very well and we are blessed to have had the opportunity to work with him. ~ Bought a Single Family home in Gilbert, AZ. , AZ. Kevin went above and beyond my expectations. It was as if he took it personally to sell our house. Our first realtor had it listed for 4 months and had 7 showings. We fired our first realtor and hired Kevin with Go Sold realty. He got us a full price offer within 7 days of our house going live. He also had 8 showings during that week. I will absolutely recommend him to any of my friends or acquaintances in Arizona that are looking for a realtor. I just wish I had found him 4 months earlier. ~ Robert E. Kevin is a High Octane-Go-Getter! Knows the Valley really well and can tell you the ins and outs. Kevin picks up his phone and works hard through the entire process. Also, the people that he recomends are go-getters as well, we closed a week and a half early because his people were on top of everything!! ~ Edward Kevin helped me find my new home in AZ and I found him to be an invaluable resource, since I'm new to the area. He was always available to answer my questions about the buying process, and for information about the areas where I looked. I

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have used many professional realtors through the years but I'd rate Kevin at the top! I recommend him highly if you are in need of a competent, energetic agent to represent you! Thanks, Kevin and the Go Sold team, for making my house purchase an enjoyable and effortless experience! ~ Terry in Tolleson, AZ I can't sing Kevin's praises enough. From start to finish, he treated me with patience and kindness. His professionalism is unsurpassed. He was willing to take my calls/texts any time of the day or night. I will recommend him without hesitation! Oh, and the "welcome home" basket was a perfect ending to my purchase. ~ Bought a home in 2014. e in 2014. Kevin was a pleasure to work with. Always responded promptly to our questions and is very knowledgeable. He kept us up to date on the different properties we looked at and he helped with our offer on the property we purchased. ~ Mark H. Kevin is the ultimate professional and a joy to work with. After no luck with several other brokers in this sellers market, and about 5 months of frustration, I randomly contacted Kevin regarding one of his listings. That particular house wasn't right, but Kevin immediately knew what I was looking for, and offered great insight and market knowledge. Another week later, we found the perfect house, had an accepted offer, and closed the deal in 5 days! It was an amazing whirlwind of an experience, but a very positive one. I'd recommend Kevin to anyone looking to buy or sell, he really is The Closer! ~ Bought a home in 2013. e in 2013. I was referred to Kevin by a friend of mine. He had nothing but good things to say. I took his word for it. He helped me sell my home and we are currently working together to close on a new

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home. Kevin is very professional, friendly, and responsive. He was always there to answer any questions or concerns I had. The time of day didn't matter. The entire process was easy and worry free. He took care of everything. I will recommend him to my friends and family. ~ Sold a home in 2013. e in 2013. I can't say enough about Kevin. He made my dream come true!! I had been looking online for a place in Sun Lakes, and he was the first to answer my email about the properties. I had a list of 10 properties, and he got all the stats about each place. Then he set aside a day (I'm from out of state) to show me all of the ones I requested. I never felt pressured or rushed. In fact, he made me feel important as if I was buying a million dollar home! His professional knowledge and personality are a winning combination and is an asset for the people he serves. I highly recommend him. ~ Deb R. Kevin did a great job. I have to say that he was very responsive and timely. I wish he could have brought the price down a bit. The selling realtor has done a poor job. In fact its been two months and the realtor time lock is still on the front door. Kevin was totally professional and committed to meeting our needs. If you need a realtor, you need Kevin Belzer. ~ Kathy G . Kevin showed his professionalism through every step in the process. He made this transition as easy as possible and got us the most for our house. If I were staying here, I would recommend him to everyone. ~ Scott M. I cannot say enough of Kevin's commitment and work ethic in helping make this happen and on a very short schedule. Contacted about one dwelling that was unsuitable, he found one

that was and worked day and night to make it happen on a very short timeline in order that a family with small children literally not have to move to a shelter, and for very little return. My sincere admiration and appreciation for his professional knowledge and labor that made this possible. My enthusiastic recommendation. ~ John M. This is my third time working with Kevin, because I would never choose a different realtor. We met with him on a Wednesday evening in his office, reviewed the process and what criterion we were looking for in a house. The first house he showed us that night met perfectly to what we were looking for. By Saturday morning we had the inspection, on Monday we had the appraisal, and the process was a breeze from there. We could not be happier with our new home! Kevin made the process extremely easy because of his expertise and very quick response time. He is totally willing to answer any questions, or find someone that can. He is really an above and beyond guy. Thanks Kevin, we love our new place!! - cThis is my third time working with Kevin, because I would never choose a different realtor. We met with him on a Wednesday evening in his office, reviewed the process and what criterion we were looking for in a house. The first house he showed us that night met perfectly to what we were looking for. By Saturday morning we had the inspection, on Monday we had the appraisal, and the process was a breeze from there. We could not be happier with our new home! Kevin made the process extremely easy because of his expertise and very quick response time. He is totally willing to answer any questions, or find someone that can. He is really an above and beyond guy. Thanks Kevin, we love our new place!! - cThis is my third time working with Kevin, because I would never choose a different realtor. We met with him on a Wednesday evening in his office, reviewed the process and what criterion we were looking for in a house. The first house he showed us that night met perfectly to what we were looking for. By Saturday morning

we had the inspection, on Monday we had the appraisal, and the process was a breeze from there. We could not be happier with our new home! Kevin made the process extremely easy because of his expertise and very quick response time. He is totally willing to answer any questions, or find someone that can. He is really an above and beyond guy. Thanks Kevin, we love our new place!! ~ Alex and Mike.

Preface When I first ventured into the real estate industry years ago, I did so with the hopes of helping sellers like you avoid the headaches often associated with the home-selling process. In my years of experience, not only have I helped alleviate the stress of selling for numerous clients, but I’ve also accumulated years of knowledge to help them get more money for their homes in the least amount of time. I decided to share all of my expertise in one place with potential clients. And that’s why you’re receiving this book. I want to help you have the best possible home-selling experience. And by that, I mean I want you to 1. Get the most money possible for your home, 2. Sell in the least amount of time, and 3. Avoid the headaches most commonly associated with the home-selling process. Think of this book as my gift to you. It contains insider advice on the home-selling process to help you achieve your ultimate real estate goals, including: • Secret strategies to sell your home for more money • Marketing techniques employed by top agents • Advice on how to appeal to today’s buyers • And much, much more If, after reading through it, you want to hire me to help you sell your home, I’d be more than happy to meet with you to discuss a specific plan to sell your home. Happy reading!

~ Kevin Belzer

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CHAPTER 1 Dealing with Inherited Homes: Best ed Homes: Best Practices for Families

Dealing with an inherited home is a complex subject, and there are several complicated issues to resolve. A web search for “selling inherited property” returns more than 10 million results. A glance down the first page or two shows some of the issues: • Do You Pay Capital Gains Taxes on Property You Inherit? • What Taxes Are on an Inherited House? • If You Inherit a Home Do You Qualify for the $250,000 Home Sale Tax Exclusion? • What to Do When You Inherit Your Parent’s House, Home Inheritance Issues, and on and on. Additionally, it is not uncommon for a person selling an inherited home to have a sentimental attachment to the property, with the sale being the result of a recent death in the immediate family. This adds an emotionally overwhelming component to the transaction. 1

I have inherited properties in the past and can attest to the emotional roller coaster. Because of continuing property ownership obligations such as property taxes, insurance, utility bills, household and grounds maintenance—in addition to any issues with the settlement of the estate—a rapid sale is often necessary. Getting a loved one’s house ready for the market can be anxiety-provoking, emotional, and stressful. It likely includes clearing out once-treasured belongings and depersonalizing the rooms. Then there is the financial cost of making necessary updates to attract buyers. Sometimes heirs must deal with liens or hidden problems in the house structure or systems (i.e., electric, plumbing, and gutters), and there may be disagreements among beneficiaries about the sale price, or whether to sell at all. Family members drag their feet, distracted by images of growing up in the home, preventing them from taking appropriate action. They can’t let go. Everyone takes the time they need to deal with the passing of a loved one. Sellers in this situation need to take the appropriate steps to learn the market, educate themselves, and have a reliable real estate agent and tax attorney or Certified Public Accountant (CPA), an empathetic party who is there to help. This little book is meant to offer some proven tips that can help owners of inherited property approach the issue in a structured manner, with fewer problems and more satisfactory results for all stakeholders concerned. Here, we will discuss the different aspects of splitting the property with family members and the best practices involved.

BENEFITS OF SELLING

No matter if you are a single heir or one of multiple heirs to the property, selling it as quickly as possible will save money, time, stress, and the tiring effort involved in the settlement process. There are several benefits to selling the inherited property. For example, in some cases, along with inheriting property, the heirs end up inheriting unexpected commitments and difficulties with legal and financial implications. Every situation when someone inherits and then sells a home is typically different from each other. For example, if it is discovered there are environmental concerns or the mortgage is “underwater” (meaning the mortgage balance is more than the home is worth), heirs may even choose not to accept the home at all, allowing it to go into foreclosure. Those who do not want inherited property should consult a lawyer promptly, as disclaimer paperwork will likely have to be filed. Traditional home sales methods are a perfectly good option if you find that there are no outstanding mortgages and the property is in good shape and does not require major repairs or cleaning to sell. If you can easily afford any necessary repairs and cleaning while handling the selling process, then you can safely choose to sell an inherited property just as you would any other house. This is not to say that selling the property will always be complication-free, but even when issues arise, it may still be worth it to persist with the sale. When there are siblings or family members who share the property with you as legal heirs, there might be disagreement about how the settlement should proceed. Therefore, selling the property could save you the aggravation of dividing a singular property between many hands. Once the property is converted to money, the money can be more easily distributed among the heirs. One concern that you do need to address is the amount of time required to sell the property, since

it is uncertain when it may sell.

A short sale of the home can come to your aid if there are mortgage payments due which you are unwilling or unable to pay. If one or more heirs inheriting the property have an urgent need for cash, then a quick home sale is also a good option. Sometimes, you might receive some added tax benefits from selling the home. At times, you might also feel that you just want to get rid of the burdens an inherited home imposes by selling it quickly so you can get on with your life as smoothly as possible. If the property is in a different city or state, assuming the responsibility of maintaining a vacant house can be a burden that you may not be prepared to endure. If the house goes to probate, even if there are no residents, the property must be maintained. The property taxes, insurance premiums, utilities, homeowners association fees, and other ongoing costs must be paid by someone. Depending on how long the probate period lasts, families may need to pay for many months of maintenance, along with the legal fees and other expenses connected to owning and selling the property. At the end of the probate, you will also have to go through the effort and expenditure of repairing and selling the home. Under such conditions, if your benefits are lower than your commitments, it may be wisest to simply sell the home to investors.

DEALING WITH F G WITH FAMILY MEMBERS

Disputes among siblings or legal heirs over the settlement of inherited property are common. Often, disputes over a property are dominated by past issues of sibling rivalry and are a fight for dominance. In the absence of parental guidance, adult siblings are left to face the scenario of ambiguity or disagreements over their rightful role.

It is essential that you work to ensure that disputes and disagreements do not lead to litigation. Litigation will only worsen the situation by causing issues with family members, and creating uncertainty and wasting time waiting for legal issues to be settled, as well as the usual expense and aggravation associated with legal hearings. The tremendous cost involved in litigation is certainly a wasteful expenditure. Litigation is not the peacemaker’s choice—prevent it whenever you possibly can. This situation can be avoided. By keeping the emotional heat down and a compromising frame of mind in the forefront, there is generally a solution that can be made for a peaceful settlement. Where creative solutions to these problems can be facilitated, there is mutual gain for all concerned. A good solution is for one of the heirs to buy the property from the others. Ordinarily, if you inherit the home with your siblings without any remaining mortgage, the rule is that ownership is to be evenly split unless otherwise stated in the will. If one of the siblings is interested in keeping it while the others want to sell it, the interested sibling can buy out the others using conventional financing. The cost involved in this process can be minimal and includes the appraiser’s fees and the closing costs. If this will work, you pay your siblings in cash for their shares and get the title of the property transferred into your sole name through a deed. Alternatively, a private agreement can prove useful under some circumstances. For instance, if you or your sibling cannot qualify for a mortgage, the one who does not wish to keep the house can finance the transaction. This will mean you will not need a home loan or incur out of pocket expenses.

For a private agreement, you make a promissory note to your

sibling for his or her share of the value as assessed by the appraisal. The amount due to him or her can be paid in monthly installments along with interest. With this arrangement, you can buy out the property over time. If necessary, you may also make a deed of trust that grants the power to foreclose if you default on payments. Renting the property could be the solution if none of the siblings are interested in keeping the property personally, but as a group the heirs see benefit in the house as rental or investment property. If you have a friendly relationship and can get along for a long period as co-owners of the property, you can rent out the property and take your share out of the proceeds monthly. If one of the siblings manages the collection of rental payments and arranges maintenance for the property, the effort can be rewarded by the others with an increased share. Whatever the terms are, though, it is advisable to record them in a written agreement to forestall future disagreements and conflict. Sometimes, though, the best arrangement under these circumstances is still to sell the property, subtract the expenses and costs involved, and the commissions paid, and then divide the resulting amount among you. Selling the property as soon as you inherit also helps save on the capital gains tax. Capital gains tax for sale of the inherited property is calculated on the property value after the death of the decedent. Since the difference may not be much if the time between death and sale is short, you may be left with nothing to pay in capital gains tax. A lawsuit for partition should be the last resort for you to settle the inherited property if you cannot come to an amicable agreement with your sibling over the settlement. If it comes down to it, you can file a lawsuit asking the judge to order the sale of the home and terminate your co-ownership. This is a complicated process and the judge usually appoints a mediator first, to get the property ready for sale. If you are at odds with each other, you

and your siblings might not be able to do this. Therefore, you will need to have an agent sell the home and mediate between you.

HOLDOVERS LIVING IN ESTATE

When inheriting a property, you might have to address the issue of holdovers living in the estate. If one of your siblings or yourself is living in the property, you need to come to an agreement with all the heirs regarding whether the concerned individual will continue to live there or will need to vacate. In the case of continuing to live there, the terms must be clearly drafted. If the right to remain there is mentioned in the will, then it cannot be challenged. If it has to be challenged for some reason, the necessary legal proceedings must be adhered to. If the decision is made to sell the property, then the property must be vacated in a definite timeline facilitating the sale. If the occupant wishes to continue residing in the property despite the sale, then it must be dealt with accordingly. If you are inheriting a property with tenants living in it, you must fulfill some responsibilities from the position of a landlord. If the property is sold, the legal rights of the tenants must be given due consideration. For complicated situations like this, consult an attorney.

SPLITTING UP ITEMS INS G UP ITEMS INSIDE

Decisions pertaining to the settlement of the property or the division of its contents among the legal heirs must follow the guidance given in the will. Where there is no will enacted by the owner of the property, then the state’s laws regarding intestate succession will come into play. If either the will or the law requires the estate to be divided equally, the heirs must act accordingly.

Sentimental objects are invaluable to those they are valuable to and settling them should happen out of the legal conventions in agreement between the siblings. Since the value of sentimental objects is often subjective and cannot be decided by an appraiser, the real challenge comes when more than one sibling wants the possession. Negotiation and compromise are called for. A real estate agent can be appointed to decide the value of the property. The challenge here may revolve around how to divide the real estate among the heirs in a way that is acceptable to all parties. The two main approaches that the siblings could take include either selling the property to divide the proceeds or keeping the property and sharing its use. If the estate also features assets that cannot be distributed on pro-rata basis, an equal division of value is the solution. If a sibling wants to hold the property, then the others can get cash equal to their share of the property or other assets as it may be decided. Ultimately, everyone involved in the deal walks away with his or her share of the property in the right proportion. Dealing with the leftover items in the estate could be a laborious task and a bothersome job while attempting to settle a property. In this situation, you might need to categorize the items as those to keep, those to sell, those to donate and those to throw away. Remember that during an estate sale, people may be ready to buy even the oddest things. Therefore, make an effort to see that as many things as possible are sold or auctioned away to be converted into cash and distributed among the heirs.

CHAPTER 2 Concepts to Know When Selling An Inherited Home ed Home

There are a few legal concepts and other issues you should make sure you know about when selling an inherited home so that you can make informed decisions and avoid complications.

WILLS

Most houses that are inherited are passed at the owner’s death by the terms of that person’s “will.” A will is a person’s last chance to do whatever they wish with their property. It is a legal document with the authority to

dictate the disposition of a person’s property at death and is very difficult to contest, no matter how apparently unreasonable its 9

terms may be. Yes, someone of “testamentary capacity” (sound mind) really can leave a massive fortune to charity or a favored pet, bequeathing nothing to children or other relatives. Where the maker of the will is the sole owner of a home, that person enjoys complete rights to it (subject to liens or mortgages) and can draft the will in favor of legal heirs or anyone else he or she wants to inherit the property. An individual appointed to administrate the estate of a deceased person is the “executor.” The executor’s main duty is to carry out the instructions and wishes of the deceased. The executor is appointed either by the maker of the will or, in cases where there was no prior appointment, by a court. The executor will ensure that the transfer of titles happens as stated in the will. The existence of a will concerning the estate makes the process of inheritance indisputable and smooth. If there is no will in place, then the established state laws that govern “intestate succession” (death without a will) will dictate the handling of property and, if needed, a court will intervene to settle issues. The word “probate” carries negative connotations with many people such that they work and plan to avoid it. However, probate does not have to be a difficult or drawn-out proceeding. Currently some 35 states allow simplified probate proceedings, called “common” or “informal” probate. The difference between common and “solemn form” probate begins when the executor submits the will to the court. For example, when an executor chooses to pursue common form probate in New Jersey, that executor can file the will at the court clerk’s office and fill out an application for appointment to the executor position. Will witnesses do not have to be present. Where the executor chooses to probate the will by solemn form, a legal complaint must be filed with the probate court, asking the court to open probate proceedings.

Solemn form probate involves sending notice of the proceedings and a copy of the will to all the decedent’s heirs, whether mentioned in the will or not, as long as they would have inherited if he had died “intestate” (without a will). Common form probate does not require this step, although heirs can request a copy of the will from the executor. The solemn form probate notice includes a date for a court hearing in some states. All interested parties have the right to attend this hearing, where a judge will admit the will for probate if he or she determines it is valid and meets the legal requirements. With most estates, there is no reason for the executor to go through a solemn form probate if common form probate is an option. An executor generally chooses solemn form probate only if she believes an heir or beneficiary might contest the will. Solemn form probate restricts heirs and beneficiaries from filing a will contest after a court-ordered date. Often, judges hear potential will challenges during the initial court date, when they decide if a will is valid. The will is either declared invalid, or is declared valid and can proceed through the rest of probate uncontested. In common form probate, heirs generally have years to decide if they want to contest the will, which can leave the estate in legal limbo. Even after the estate settles and closes, there remains the possibility that an heir might file a contest to reopen it again. For example, Georgia allows heirs four years in which to contest a will probated by common form. Beneficiary distributions made through common form probate are not final until the challenge deadline passes (up to four years). This means a beneficiary can receive an inheritance, only to have no choice but to return it to the estate years later if another heir successfully challenges the will. With cash inheritances, the

money could easily be long gone by that point. Real estate and tangible assets might fall into disrepair. Executors generally will not risk this and will ask the beneficiary to sign a binding agreement to return the inheritance to the estate if necessary, or request solemn form probate. If the executor mentioned in the will is unable or unwilling to serve, then an appendix will be created to appoint the new executor. However, before the appointment of the administrator, there should be a declination letter from the executor (if he or she is still living and not incapacitated). In this event, the executor can be selected by a majority of the beneficiaries. For the sake of minors or incapacitated heirs, the court appoints a guardian ad litem, which is just a fancy way of saying someone to look out for the interests of the minor heirs. Probate is not required when there is no property to be divided under the terms of the will and testamentary letters are not necessary to take control of assets in that case. It is essential to file the will of the deceased with the probate court. Unlike bank accounts, real estate properties will not automatically pass on to a surviving co-owner. To transfer the title of an automobile, probate is not needed, but real estate transfers require it. In the absence of a will that names an executor, state law will list people who can legally discharge the responsibility. If there is a necessity for a probate court proceeding, then the court will choose the administrator based on a priority list. The “intestate succession” laws vary between states as to what happens to a deceased person’s property who dies without enacting a valid will. If the deceased person was married, the surviving spouse will get the largest share of the estate. In cases where there were no children, the surviving spouse inherits the

entirety of the property. The laws of every state dictate how children and other heirs inherit the property differently, though, and will need to be studied to make sure you fully understand the state laws that will be affecting you and your property.

TAXES

While the authors of a will pass on their property with the best of intentions, inheritors often must spend a great deal of money, effort, and time if they want to keep that property. The tax burdens accompanying inherited property are

frequently a matter of concern and confusion. When inheriting a home, you need to know what kinds of taxes are attached to the home and what your obligations are. Note that tax laws significantly differ from state to state, so you should make sure to understand the inheritance tax laws of your state. For simplicity, the broad categories of taxes applicable to inheritance are roughly summarized here: Estate Tax: The estate tax in the United States is a tax on the transfer of the estate of a deceased person. The tax applies to property that is transferred via a will or according to state laws of intestacy. Other transfers that are subject to the tax can include those made through an intestate estate or trust, or the payment of certain life insurance benefits or financial account sums to beneficiaries. According to the IRS, the estate tax is one part of the Unified Gift and Estate Tax system in the United States. The other part of the system, the gift tax, applies to transfers of property during a

person’s life. In addition to the federal estate tax, many states have enacted similar taxes of their own. These taxes may be termed an “inheritance tax.” If an asset is left to a spouse or a federally recognized charity, the tax usually does not apply. In addition, a maximum amount, varying year by year, can be given by an individual, before and/or upon their death, without incurring federal gift or estate taxes: $11.2 million for married couples (and half that for an individual). The annual gift exclusion amount is $16,000 for 2022. • Inheritance Tax: Heirs pay federal inheritance tax on the net worth of their inheritance. The net worth is the gross value less certain deductions, a mortgage that must be paid off on an inherited house, for instance, or a marital deduction for property inherited by a spouse. If the result is more than the IRS exempt amount for a given year, the heir must pay an inheritance tax at the federal income- tax rate for the non-exempt amount. • Property Tax: Heirs may have to pay property taxes as soon as they inherit real estate and will pay them for as long as they own the house. Many states cap how much the assessed property value can rise from year to year, but when someone buys or inherits real estate, it will be reassessed at current market value. Even if subsequent assessments are capped, the initial reassessment can result in heirs paying thousands of dollars more in taxes than the previous owner. Some states offer an exemption; California state law, for instance, says that if the heir is the spouse or child of the owner, there is no reassessment. • Capital Gains Tax: Capital Gains taxes are applicable when you decide to sell your inherited home for the fair market value or more. This means that you will have to

pay taxes on your profits from the sale of the property. This is assessed based on how much you sell the property for and what the value of the property was when you inherited it. Generally, you will not be required to pay any capital gains tax if you sell the property immediately after inheriting it, since the property value will not have had time to increase. • Reporting the Inheritance: It is necessary for the executor of the estate to report the inherited property by filing an estate tax return. The “cost basis” (which we will talk about more later in the book) of an inherited home is decided based on when you inherited the property. In most cases, the basis for an inherited home is the market value of the property on the date when the deceased person died. • Reporting the Sale: When selling an inherited home, you are expected to report the sale on your income tax. Subtract the amount you received from the sale from the base amount to calculate whether you gained or lost from the deal and report it on the IRS Schedule D form. You will also need to copy the gain or loss figure over to your 1040 tax return form.

NAME ON PROPERTY

When you inherit personal property, the process is simple and the procedure is straight-forward. The will or the court’s decision may be enough to directly transfer the property to you.

In the case of inheriting real estate, things can be a bit more complicated. This is because the titling document showing ownership of the property must be modified to state that you are the new owner. Generally, in this case, the executor of the will or the administrator nominated by the probate court will issue a new deed that names you as the owner of the property. The documents you will need in this regard include the death certificate and probated will of the previous owner, if available. You must consult the original deed of the property to confirm that the property was not owned jointly at the time of the death of the deceased. If the property is/was owned jointly, then the surviving owner inherits the property in full. Therefore, you will have to confirm whether you can inherit it by reading the death certificate and determining the order of inheritance. If the person that you inherit the property from has died first and left behind a co-owner, then the property would revert back to the other owner, leaving you to establish your claim as the legal heir to the property. If the will lists you as the inheritor, then you will require an executor’s deed. If the inheritance is facilitated by the court in the absence of a will, then you must present an administrator’s deed. Both kinds of deeds must describe the property legally and mention your

name as the new owner. Along with the administrator who issued the deed, you need to sign the new deed in the presence of a notary public. If needed, you must also be able to produce a copy of the probated will as part of making the deed.

LIFE ESTATES

According to its legal definition, “life estate” is not ownership, but the right to use or occupy real property for one’s life. Often this is given to a person (such as a family member) by deed or as a gift under a will with the idea that a younger person will then take the property upon the death of the one who receives the life estate. Title may also return to the person giving or deeding the property or to his/her surviving children or descendants upon the death of the life tenant—this is called “reversion.” Examples of creation of a life estate include, “I grant to Sally Smith the right to live in said real property until her death,” or, “I give my daughter, Sadie Smith, said real property, subject to a life estate to Sally Smith.” This means a woman’s mother, Sally, gets to live in the house until she dies, and then the woman’s daughter, Sadie, will own the property. Creating a life estate is done by redrafting the property’s deed to include mention of the life estate with the remainder passing to somebody else. Like any other property transfers, both parties must sign this deed, have it notarized, and then submit it to the recording office of the state. Such a document should be prepared by a competent real estate attorney. Living trusts have come to replace the role played by life estates, which are not as commonly used today. However, there are some advantages to this form of inheritance. For example, this method is useful to the heirs as a means to increase the property’s value following the death of the decedent. A life estate can also help avoid probate, which is a legally required process to transfer

the property from the deceased to his descendants, but which can be sidestepped by using a life estate instead, since it is not technically an inheritance. A life estate can also be called an “instant transfer.” There are, of course, tax implications when using a life estate. Section 2036 of the Federal Estate Tax Code treats life estates as a gift. The gift tax must only be paid if the value exceeds a specified amount. If the property is sold after the end of a life estate, there is no net gain that needs to be reported on taxes because of the value step-up. In case your total property value is more than $1 million dollars or if the property is in a different country or state, though, you should absolutely take a cautious approach to drafting a life estate and retain the services of an attorney.

CHAPTER 3 Distribution Among Family Members

While drafting a will, its maker usually makes provisions for the major parts of his or her estate—cash, stocks, expensive jewelry, and heirlooms. However, it is common that people do not make provision for most of the more mundane personal property items in their will—furniture, automobiles, household effects, and the large number of other items acquired and stored over a lifetime. The usual provision is that the remainder of the estate be divided equally or equitably among the heirs. Dividing the personal property of a deceased family member is emotionally difficult and engenders hard feelings and disputes among heirs. To assist with this, an equitable process is outlined below:

SORT OUT ITEMS F T ITEMS FAMILY MEMBERS INTEND TO KEEP

This first step requires the time, energy, and fortitude to go

through every item in the house that you or your family members intend to keep. So closely following a loss, it can be painful endure inventorying and disposing of the possessions they have left behind. Before moving on to selling or auctioning the items, it is crucial to establish a boundary or limit to who among the family members possesses the right to keep sentimental items or properties, especially among siblings. If the will or law requires the property to be divided equally, then you must follow it. For better organization, you are encouraged to separate the items you wish to keep in a separate container or location to avoid confusion with other items you intend to sell, donate, or throw away. Mutual agreement between siblings or other family members can decide who will keep which sentimental objects without further dispute. A mathematical algorithm was developed to fairly distribute an inheritance among the siblings within a family. The algorithm developed is to divide the inheritance between them equally. For example, a deceased parent left an antique firearms collection to be divided equally between his four children. There was an uneven number of items of varying values. Each sibling wanted some of the same items. The solution was to have the collection assessed, item by item, by a professional dealer. This established a total worth for the collection, such that each sibling knew the dollar worth of his or her part. The collection was laid out in a room, each piece tagged by value. A coin flip decided which sibling would choose an item first, second, and so on. The siblings went around the room choosing until their value was reached. In the end, the siblings did not have the same number of items, but had each

received an equal share of the collection’s value.

In the event of serious disputes over the equal distribution of items between heirs, the family can resort to working with a mediator to resolve a fair distribution of items or properties. This is an equitable system for when the family does not wish to liquidate the assets or rejects joint ownership between heirs. Each member submits his or her own prioritized list of items to the mediator. The mediator then prepares a list for each member of the family of the items allocated for each of them. Each member will then show their list of preferred items to the other members for negotiation and adjustment. If you come across any papers, be sure to thoroughly review each before proceeding to throw them out. Important key financial documents such as wills, trusts, addenda, real estate deeds, and titles should be kept. Beyond that, it is up to the heirs to decide which sentimental photos or other memorabilia they want to preserve.

SELL VALUABLE ITEMS O LE ITEMS OR PROPERTY AND DISTRIBUTE THE NE TE THE NET PROFIT EQUALLY

In a scenario where you and your siblings have inherited real estate from your deceased parents, it is important to seek mutual terms as to whether the property should be sold and the profit divided immediately, or if you wish to keep the property as rental or investment income, or simply share the use of the house. In some circumstances, one sibling may want to keep the home while others have no interest in it or want it sold for the financial gain. An equal division of value can still be obtained if there are other assets in the estate. Through this agreement, the one who wants the house gets to keep it while the others get cash or other assets, but ultimately everyone receives an equal value of assets.

Another option would be that the sibling who wants the house would have to buy out the other siblings’ interests in it. In all of this, it is wise to seek professional advice from real estate investors, agents, and attorneys. They can give personal perspectives from experience on how to sell your house at the highest possible value in the market, and can help you make sales decisions. Nowadays, it is a more convenient and customary practice to sell any unwanted items online for extra cash rather than simply discarding them. You can hire an estate appraiser to estimate a value for furniture, jewelry, and antiques. Such professionals can provide you an estimate for any valuable items, usually charging an hourly or per-project fee, depending on the location of the house and the type of appraisal you want. Another traditional method is to hold an estate sale. Here is a tip on maximizing profit from an estate sale in your neighborhood: price every single item you want removed from the house. You never know what people might collect or buy on impulse! Seek extra hands to help you conduct the business aspects, such as running the cash box or promoting and selling items. Often, an estate sale is not one day, but perhaps three or four. Make sure to do “telephone pole” and online advertising in your community to get the word out about your sale. This will help to attract customers from areas close-by to come to your sale. Some cities require some sort of permit for holding a sale; ensure that you comply with the local authorities. It is helpful for the customers if you post signs or directions in the neighborhood to assist people in directing them towards your sale—be thorough! Good signage is always appreciated, and

helps make sure people actually make it to your house instead of going on an impromptu tour of the neighborhood and returning home with empty hands. If you are unable to sell all your remaining items by the last day of your sale, it is recommended that you set a 50% discount price, or simply give items away to ease your disposal burden. An alternative to a DIY estate sale is to hire an estate sale or auction company to handle the sale for you. They generally get paid based on a percentage of the sales after they have quoted it with you upfront. Expect to pay 30% to 50% of the entire profit of the sale. Another option is to hire an estate liquidation company to handle a sale. A liquidator is someone you can hire to clear off any items you don’t intend to keep and have decided to sell, discard, or donate. Like searching for a real estate agent, it is important that you do a background check on the company, search for contact information, and call previous clients regarding their opinions and experiences working with them. Typical estate liquidators keep about 35% to 40% of the sales profit, but this percentage can vary depending on services offered. Have a discussion with the company regarding the research, appraisal, and pricing of your items, the duration of the sale, and how much negotiating with buyers the company will do.

DONATE ITEMS TO THOSE IN NEED

At a certain point, you may find yourself wanting to donate items. Donation is a generous, charitable act that helps those in need instead of simply throwing items into a dumpster. You have a variety of options when donating, including orphanages, veterans’ organizations, homeless shelters, disaster victims, and a depressingly wide range of other choices. Items that you no

longer need can include almost anything, such as furniture, household effects, clothes, books, cutlery, or toys. Sometimes you can request a transport service truck if you wish to donate many items or particularly large ones. It is a wonderful way to give back to the community and to be rewarded for a kind act. Furthermore, you can get tax deductions for your contribution. The available tax deduction to the donor depends in part on the donor’s items value, which is the value of the items for taxation purposes at the time that it is inherited. If a charitable donation is not specifically authorized in a will or trust, the estate may not properly take a deduction for the donation. The estate is not eligible for deductions for the transfers to charity by the beneficiaries; however, the individuals may donate items which were passed to them from an estate and can claim a charitable deduction on their personal tax returns.

THROW AWAY ANY REMAININ Y ANY REMAINING ITEMS THAT HAVE NO SIGNIFICANT OR SENTIMENTAL VALUE

After you had gone through the process of separating items for yourself, for your family members, for sale, and for donation, the last step to clear the remaining items would be to simply throw them away. Depending upon the size and amount of material to be discarded, this may mean taking it out to the garbage or engaging a commercial clean-out and hauling service.

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