Selling an Inherited Property Lexington KY

Inheriting a property can be challenging both emotionally and financially. You might face costly upgrades and repairs, tax implications, and potentially complex probate procedures if there’s no will. However, inherited properties also present a valuable opportunity for real estate investors and buyers seeking a property they can personalize at a discount. What does it take for a homeowner to sell an inherited property? Are there specific steps involved in this type of sale? This article will guide you through the process of selling an inherited property, aiming to help you maximize your profit.

How To Sell An Inherited Property in Lexington KY

So, you’ve inherited a property and are uncertain about the next steps. In most states, the inherited property will need to go through probate, where the courts determine the legal owner. Probate is a legal process that transfers ownership of the estate’s assets to the beneficiaries and/or heirs. The duration of this process can vary significantly depending on the presence and terms of a will. If there was a will, probate may be relatively quick; if not, it could be more time-consuming.

Determine the Executor

For inherited properties with a will, establishing the executor of the estate should be straightforward. One of the most important aspects of a will is establishing an executor that is able to carry out the deceased’s wishes through the process of probate.  Any assets listed in a will can’t be sold until the will is validated by the Court but, once approved, the executor of the will is allowed to act on the wishes of the deceased. But if the will is contested or there is no will, the process might take longer as the Court gets involved. 

The probate court will appoint someone not associated with the family as an administrator to the estate. These administrators play a similar role as an executor; they are responsible for carrying out the wishes of the deceased as stated in the will, as well as paying off any of the estate’s debts and distributing any assets. They may also determine if any real estate assets will need to be sold to pay off the estate’s debts, including back taxes, mortgages, etc.

Working with Lawyers and Real Estate Agents

Probate is not a simple process which is why you’ll want an experienced lawyer to help you navigate the potential pitfalls of selling an inherited home. But once you have the probate court’s okay to move forward with the sale of the property, working with a real estate agent that has dealt with inherited homes before will be your next smart step. An experienced agent with probate experience will understand the nuances and regulations for this type of sale. They can help you find the right buyer to help you get top dollar for the inherited property. They also will be a helpful guide to let you know what is worth spending time and money to fix up and upgrade, and what is a waste of your time. Listening to their advice may be the difference between selling a property quickly and for a profit, or being stuck with a house that sits on the market for too long and sells for below market value.

Resolve Any Debts

When you hear the word “inheritance” do you think of a mysterious great-aunt leaving you a million-dollar mansion in the woods, or do you understand the reality of having to deal with a property that might have liens against the title, years of back taxes, as well as a mortgage that leaves you with the ability to make much of a profit after a sale? Sadly, dealing with a loved one’s passing often means dealing with their debt, whether that’s in the form of taxes, a mortgage, or maxed out credit cards. Any assets you inherit must go to paying off that debt first before you can see one dime of the estate. While a house may seem like a huge asset, it also can be a huge money pit. An experienced estate advisor can help you research your options when it comes to dealing with an estate.

Clean & Restore the Home

Once ownership has been decided and the property is considered yours, your next step will be to decide whether you want to live in it, rent it out, or sell it. Many times, when a loved one passes they leave behind a house that is not in the best of shape. Whether the property hasn’t been kept up in the past decade and needs major cleaning and repair, or there were never any upgrades done and the house will need to be completely renovated to make it “market ready”, this is the part of an inheritance that is often forgotten about.

Do all heirs have to agree to sell the property?

Heirs don’t have to agree to sell an inherited property if ownership has been established by a will or the probate court. However, if ownership is still unclear—such as in estates without a will or with a court-appointed administrator—then all heirs must agree to the sale. This also applies to properties auctioned by the court to settle estate debts. If a buyer acquires a property at auction but one or more heirs disagree with the sale, the transaction will be put on hold until the dispute is resolved and a settlement is reached.

How to Settle a Disagreement

There are several options for resolving disagreements among heirs over an estate, with the first step being to ensure that a loved one has an appointed executor. An executor is responsible for ensuring that the deceased’s wishes, as outlined in the will, are followed, which can help prevent disputes over asset management. If there is no executor or the will is contested, the next step might be to hire a mediator. A neutral third party can assist in resolving differences more affordably than engaging in a legal battle in probate court.

Best Practices

Disputes can arise when a family member is named as the executor or trustee of a will, leading to tension with other family members. If you’re facing this situation, one option is for the named executor to decline the appointment and choose an independent fiduciary, such as an estate-planning attorney, to manage the estate. Allowing a neutral third party to handle the administration can not only help prevent conflicts but also provide everyone with time and space to address their emotions, potentially preserving family relationships and avoiding long-term damage.

How is inherited property taxed when sold?

State and local governments in the United States collected over $5.3 billion in revenue from estate and inheritance taxes in 2020. That’s a lot of taxes! But with laws and regulations different from state-to-state, you’ll want to do your research and contact a lawyer with knowledge and experience of taxes and estate planning as you deal with a surprise inheritance or you’re writing your own will. 

State Tax Laws

Each state has different laws regarding inheritances. In the case of the sale of an inherited property, states may take an estate tax, an inheritance tax, as well as a capital gains tax on your inheritance. Currently, twelve states have an estate tax, 5 have an inheritance tax, and one has both an estate and inheritance tax.

Capital Gains Tax on Inherited Property

The capital gains tax applies to the appreciation of assets that an heir inherits through an estate, but it is only incurred when the asset is sold for a profit, not at the time of inheritance. This tax is calculated based on the difference between the sale price and the purchase price of the property.

Most states require payment of this tax on inherited properties, though there can be exemptions for sales below a certain threshold. For instance, in Washington State, the capital gains tax does not apply to homes or properties sold for less than $250,000. Additionally, there may be legal strategies to minimize or avoid the capital gains tax, such as reinvesting the proceeds in another property.

It’s important to consult with a tax lawyer who is familiar with the laws in your state before proceeding with the sale of your property to ensure you understand your tax obligations and explore potential ways to reduce your tax liability.

Estate Taxes

An estate tax is a tax levied directly on the estate before the assets are distributed to the heirs. If you’re concerned about a significant tax burden, there’s some good news: the estate tax has a high minimum threshold. As of 2023, this threshold was $12.92 million for individuals. This means that the government only charges estate tax if the total taxable estate exceeds $12,920,001. Any amount above this threshold is subject to the estate tax.

Despite this high threshold, some states have been repealing their estate tax laws, which results in a loss of revenue. If you’re inheriting a large estate, it’s important to consult with a tax professional to understand any potential estate tax implications.

Inheritance Taxes

Only six states impose an inheritance tax: Maryland, Nebraska, Kentucky, New Jersey, Pennsylvania, and Iowa. If you reside in one of these states, you as a beneficiary or heir will be required to pay taxes on your inherited assets and properties. However, if the deceased lived in one of the 44 states that do not have an inheritance tax, you won’t have to pay this tax, even if you live in one of the states that does impose it.

Documents required to sell an inherited property

To show legal ownership and place a property for sale, you will need to have a copy of the documents issued by the court that grant you the legal authority to act as the executor or administrator of the estate. These documents will establish your ability to manage the inherited property. Once a buyer is found and you are ready to close, you’ll need the deed, title insurance, or other relevant legal records to establish the legal ownership of the inherited property. 

Do your research regarding what additional documents may be needed to sell an inherited property! Some jurisdictions may require additional property-related documents, including previous surveys, inspections, or any other relevant paperwork that pertains to the property’s condition or history.

Is there an easier way to sell?

Yes, there is! White Barn Home Buyers is a direct house buying company that has built our reputation on buying inherited houses for cash with less stress and less fees. Contact us today and get a competitive cash offer for an inherited house, condo, or property. We buy homes in any condition, and we can also help with the convoluted process of selling a house in probate! Let us make your home selling experience as straightforward and stress-free as possible so you can move on with your life.

Even if the house suffered major damage in the last storm or was neglected for years and needs a large amount of upgrades to make it “market ready”, once you accept our fair cash offer our team of experts will handle all of those expensive repairs so you don’t have to! We make selling an inherited house easy.