​It’s easy to make bad decisions when your mind is being pulled in so many different directions. Your parents or a close relative has just died, leaving you the family home - sometimes in a different state - and you suddenly have to deal with questions that you may not be prepared for.

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Inheriting a home can be a very emotional and stressful experience but here is a straightforward list that will help you navigate this process and get your home ready for sale.

Locate all the important financial documents, specifically the Deed and/or Title to the house, Property Tax bills and statements, and any Loan and Bank documents for the deceased.  

It’s important to be meticulous and also locate:

  • Will
  • Trust Documents and addendums
  • Power of Attorney
  • Death Certificates
  • Insurance Policies
  • Personal Loan Documents
  • Tax Returns
  • Receipts
  • Stock Certificates
  • 401(k) Records
  • Utility and Credit Card Bills


INHERITANCE TAX: An inherited property that you do not live in is considered an investment. 
The sale falls under the rules of an investment property sale. You will be taxed on your Profit from the sale and your Profit is calculated by subtracting your Cost Basis from the Sale Price.  

What is Cost Basis (or simply Basis)?  Basis is just the original cost of property plus any improvements made.  But don’t worry if your parents only paid $20,000 for the house and now it’s worth $500,000.  You will NOT have to pay taxes on $480,000 of Profit. 

The good news is that when you inherit a property, you get a
stepped up BASIS in the property equal to the Fair Market value at time of death. Your holding period is automatically long term and this means any gain (profit) from the sale is taxed at the lower long term capital gains rate.

ESTATE TAXES: Most people won't have to deal with federal estate taxes, which in 2016 is triggered when an estate has more than $5.43 million of assets. Also, California does not collect a state inheritance tax.  But, if you live in California, and inherit property from someone who lived in a state that does levy an inheritance tax, you may get a tax bill for the property that you inherited from the person who lived in that state. Some states exempt small inheritances, but it's still a tax bill that you'll have to pay and that you might not have been expecting.

If you are inheriting a house that’s not paid off in full, you should contact the lender and check on the status of the mortgage to make sure that it’s current. 
You are only allowed to assume the mortgage if you plan on living in the the house.  If the home has a mortgage and you have the cash, you should pay it off yourself, otherwise the house will have to be sold to pay back the bank. 
Even if the house is paid off, many elderly people will have a reverse mortgage on the property so you should check and see if this is the case with your inherited home.

This article is written for those with a sole inheritance or a written agreement in place, but I know that it’s not always as simple as that. Heirs who jointly inherit a home are called “tenants in common”  Under this definition, one sibling can force the sale of a property without agreement from the others, but to avoid an expensive, emotionally damaging situation, you should have a candid discussion with any additional heirs to the property to make sure that you’re all on the same page before you even think about listing the property.

If you’re inheriting an older house that hasn’t been remodeled or upgraded for many years, you should get an inspection BEFORE making any decisions. 

Some of the home systems and structures may be out of date or damaged and you will either need to replace these systems prior to selling or be prepared to adjust the list price significantly.  Either way, you will want to know exactly what you’re dealing with before you put the property on the market.

I call it “stuff” because when YOU are the one responsible for cleaning out your parent’s home, going through their belongings can be overwhelming and at a certain point can start to feel like stuff.  The key things to keep in mind are: 

  • Take your time when going though your parent’s things. There may be hidden treasures tucked away in a drawer or a pocket or even under a mattress. 
  • Everything must go:  A house will sell much faster if it is a blank slate. Clutter and unnecessary items should removed so that a buyer can easily project their own vision on to the space.
  • Sell it  Use an estate sale, yard sale, craigslist, eBay or consignment to sell any valuable items that you and your family don’t want.
  • Donate: Use sites like Donation Town to contact organizations that will pick up of any items that you'd like to donate.

The easiest way to deal with sale of an inherited home is to hire a Realtor right away.  I'm not saying this because I want your business, I'm saying this because THIS WILL SIMPLIFY YOUR LIFE.  This is not the time to try to sell on your own or gamble with inexperienced agents.  There are too many moving parts with inherited property and you need someone with experience with probate and with this type of transaction who can take a lot of the worries off of your plate. 

I can tell you that I have been exactly where you are now, and my team and I, which include an inheritance tax professional,  can help you navigate this delicate time with kindness, efficiency and attention to detail - while getting you the absolute highest price possible. 

Contact me today  and I will help you in any way possible, and answer any questions that you have, big or small.