Inherited property is a valuable asset. If you're the sole beneficiary of an inheritance, say a home or land, you can decide to reside in it, rent or sell it and make a fortune. However, it won't be similar to selling other property. It is important to understand that there are implications and regulations for selling an inherited property.
This article will give you insights on what to consider before selling a property you inherited, so please read on.
You have several options when selling inherited property, as outlined below:
The faster you make the sale, the better, especially if you need cash for urgent expenses. Some selling options are faster than others. Therefore, you'd want to choose appropriately. You can quickly sell your property and cut costs you'd incur, or you can repair and revamp your house first and enhance property value. Find a suitable buyer who is comfortable with buying your property on agreed terms to avoid future issues.
Another essential factor to consider when selling inherited property is title ownership. A will can help you determine the property's rightful owner. For instance, if you've inherited a house, it's best to identify who has the title ownership of the land your property sits on.
Securing title ownership is crucial when selling a property to avoid any legal dilemmas in the future. So, if you are planning to sell your inherited property, it is best to guarantee title ownership first.
Selling inherited properties attracts taxes. Understanding the tax policies and laws governing their sale is equally important. Note that the Internal Revenue Service (IRS) allows the inherited property value to be stepped up to its fair market price. For instance, property bought 20 years ago at USD$100,000 can be valued at USD$200,000 today. If an heir sells it at USD$250,000, the value viable for taxation is USD$50,000. This shows that the profits gained from selling inherited property are subjected to taxes.
Your inheritance can also attract capital gains tax based on how long you've owned the property. The capital gains are divided into short and long terms. The terms depend on the years you've held the property. Holding the property for more than one year attracts long-term gains, while holding it for less than a year result in short-term capital gains.
A legal process governs inherited property. If your parents drafted a will, the law provides that an executor by the court reads the will. The laws on when the will should be read vary with every state.
If there's no will, the property goes to the next of kin. However, with or without the will, a legal process called probate controls the administration of assets left behind by a deceased person. Thus, it's essential to understand the legal procedures before selling an inherited property.
Since most inherited properties have more than one beneficiary, it's vital to get the consent of all other parties. In most cases, inheritance disagreements end up in court. In court, all parties will be provided with viable options.
The usual solution is to sell the inherited property and share the proceeds. Such agreements provide the basis and the go-ahead to sell the property. You should include a lawyer and ensure that everyone consents to sell the inheritance. This should also be within the timelines stipulated by the will on how long you should wait before selling the inherited property.
Selling inherited property is possible if you follow the rule of law. Although most people view it as daunting, it becomes easy if you consider the factors mentioned above. It's essential to mutually agree to sell the property before putting it on sale. Choose a selling option you think is best for you to get the best value for your inherited property.