Many people think that inherited properties are basically free money. However, managing or selling any inherited real estate involves dealing with several legal, financial, and practical issues.
If you’ve been named the beneficiary of an inherited property, read on to find out what to expect.
A beneficiary of inherited real estate faces a number of legal challenges. Surviving spouses have only to proceed with the legal transfer without many complications. Other beneficiaries have to work closely with the executor of the will to determine who gets what.
If there is a will, the executor will make sure that all of the deceased person’s debt is paid and the remaining assets distributed according to the will. However, if there is no will, the assets will be distributed according to state laws.
However, even with a will, large estates will often go through a will probate, which is a long and complex procedure.
If there are multiple beneficiaries, the process can take months and cause significant tensions among friends and family. Thankfully, this becomes somewhat easier if the deceased person left a detailed will.
Taxes and Mortgages
The moment you gain ownership of an inherited property, you may be liable to pay federal, state, and local taxes.
Inheritance tax laws differ by state. Some states, like Florida California, have no federal inheritance tax at all. However, you will still have to pay the federal estate tax, which depends on the value of the inherited property.
Estate tax is levied on the entirety of an estate before it is distributed to the beneficiaries. So, the property you are about to inherit might cost less than you might think. If you decide to sell your inherited property, you will have to pay capital gains tax based on the value of the property the day the owner passed away.
Practical Issues of Inherited Properties
Since the capital gains tax depends on the value of the property at the time of the owner’s passing, you may be able to pay less tax than a conventional house sale. However, there are certain exceptions that might increase the property tax.
If the house has a mortgage, you will have to pay it off as well. Moreover, the lender might demand an immediate repayment of the loan if a borrower dies.
That is why you should make sure you can cover property taxes and mortgage payments in time. Otherwise, you might lose the property before you can even sell it!
Figuring out how much property tax you will pay for your inherited property can be a pain, so you might want to consider teaming up with experts to sell your property fast and for a fair price.
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Since 2011, we have helped more than 600 Florida homeowners sell their property without spending thousands on realtor commissions. Contact us today to find out how we can help you sell your house without the hassle of realtors, repairs, and uncertainty.