Estate Planning Essentials: A Beneficiary’s Guide to Selling Real Estate After a Loved One Dies

by Kelsey Simasko, 11/11/24

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No one wants to plan for the day when a loved one dies. Not only is it rather morbid, but it can also be overwhelming – especially for those who have a complex estate. In the midst of grieving your loved one’s loss and making funeral arrangements, you may also be responsible for finalizing their estate, which could include inheriting real estate.

As an estate planning and elder law attorney, I see this situation a lot: A group of siblings have inherited their parents' summer home and have decided they want to sell it. So, what does that process look like?

First, you’ll need to determine whether you have the legal authority to sell the home. The home can be inherited through probate, transfer on death deed, or via a living trust. Each state has specific rules about how the home is transferred, but there are a couple of general things to keep in mind.

If the home is in a trust, only the trustee is able to sell the house and must have possession of all the trust documents. If the home is left in the children's names, all children named must agree on the sale and be present at closing. If they don’t, an attorney might need to get involved. If the death was unexpected and the home is still in the name of the deceased, it will need to go through probate before a it can be listed for sale.

Once you’re able to sell the home legally, you’ll want to determine whether or not the home has a mortgage. If there’s a mortgage on a home you’ve inherited, you’ll be responsible for making those payments. It’s important to note the mortgage must be in your name before it can be sold, so be sure to contact the lender to work out that transfer. If the home doesn’t have a mortgage, there are obviously no payments to make. However, utilities and property taxes will still need to be paid.

In addition to checking for a mortgage, you’ll also want to see if there are any liens or encumbrances out on the home that need to be taken care of. If there are, those will need to be paid off. If you inherit a home with debt, you’re inheriting the debt as well. The lien could be paid through the estate, if applicable, using proceeds from the sale, or out of the beneficiaries’ pockets.

Selling a family home can be emotional, especially if there are lots of memories associated to the home. Don’t forget to keep the lines of communication clear between you and your siblings. To prevent any conflicts, discuss who will be responsible for preparing the home for sale. This might include making renovations, holding an estate sale to get rid of items, and dividing prized possessions amongst one another.

The home will also need to be appraised. Once you know the home’s worth, have a conversation about the listing price and determine the lowest offer you’ll accept. Remember, if you all are joint owners of the home, you must all agree on the decisions being made.

Selling an inherited home may also have tax implications. Selling any property for a large profit could trigger capital gains taxes. To determine whether you’ll have to pay a capital gains tax, subtract the original cost of the home from the price it was sold at.

Here’s an example: Let’s say your parents purchased their summer home for $150,000. At the time of their death, you find out the home is worth $700,000. The cost basis of the property is now $700,000. If you sell the home for $760,000, the $60,000 profit you made is taxable. Of course, taxes can be convoluted, so be sure to consult with a tax expert during this process.

Selling inherited property is no easy task. It involves a lot of red tape, ownership transfers, and communication. The loss of a loved one, especially a parent, is painful enough. To avoid complicating the process further, it's essential to create an estate plan ahead of time and it’s never too early to start.

If you’ve inherited property, or plan to leave property to someone else, enlist the help of a financial advisor. They can help you get your affairs in order, giving you peace of mind during your time of grief.

Kelsey Simasko is an associate attorney at Simasko Law firm. She specializes in elder law and wealth preservation, following in the footsteps of her late grandfather, Leonard J. Simasko, who started the firm in 1955. Her uncle, James M. Simasko, and father, Patrick M. Simasko, are now partners of the Simasko Law firm.

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Estate Planning Essentials: A Beneficiary’s Guide to Selling Real Estate After a Loved One Dies

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