Q: Questions about selling an inherited house
I inherited a house in Maryland. The estate is in probate and I'm the executor and sole heir (I will be filling for modified administration). As I understand it, the house can be sold either by the estate or deeded to me first before the sale. For both options, when exactly in the probate process am I allowed to sell the house? Is there some advantage to doing one or the other? Is there some kind of required probate process for either option? Also, with regard to the capital basis of the house at the time of death, how do I determine the exact value? When I opened the probate, I used an estimate that was much too low (due to ignorance) and I don't know whether that will be used or whether and how to use some method to avoid having to pay unnecessary taxes.
A: You can amend the inventory value based either on the tax assessed value or an appraisal by a certified real estate appraiser (not just a real estate agent doing a valuation—must be a certified appraisal). The tax basis in the Property is fixed as of the date of death regardless of whether the estate or the heir sells it. However, no estate assets may be distributed until after the time for creditors to file claims, which is 6 months after the estate is opened and the PR appointed, and after all administration fees and expenses and filings are completed. In the meantime, the estate can list and sell the property and deposit all the proceeds in the estate account so they are ready to distribute to you at the soonest possible date when the estate is ready to close. Otherwise, if the property is deeded to you as the heir, you must wait until then before having a new deed issued and recorded, which will cost Attorney fees and recording costs before that can happen, and only then can you list and sell the property. Therefore, if it is your intention to sell it, sell it through the estate now and don’t delay until you distribute the estate assets. You will also save the unnecessary costs and steps in retitling the property into your name before it can be sold.
Steven J. Fromm agrees with this answer
A: Attorney Oakley offers sound advice regarding the estate administration process. From a tax perspective, you want to value the real estate at its true value at the date of death. You will have this as your basis for purposes of selling the property. This is the so-called " step up" in basis to the date of death value. So if the property is valued at $100,000 and you sell it later for $105,000, you would report a $5,000 long term capital gain.
A: "For both options, when exactly in the probate process am I allowed to sell the house?"
A Personal Representative may SELL property at any time after being appointed so long as it is sold for fair market value.
As far as DISBURSING the proceeds or transferring to an heir, this can happen 6 months after the estate opens / notice is published AND after the court is notified by means of either an Account (regular administration) or Final Report (modified administration).
"with regard to the capital basis of the house at the time of death, how do I determine the exact value?"
As another attorney noted, the options are either using the tax assessed value or an appraisal. One additional piece of information, though, is that the IRS will usually accept the sales price (assuming the property was fairly marketed and sold to an unrelated party) as the presumptive value if the house is sold within 6 months after the date of death.
While not legal advice, I hope this general information helps.
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