sale of property

sale of property

What is the process to sale a parecel of land left to an heir or group of heirs?


The easy answer is you all sign a contract and sell the property.

Now for more. It depends on how you get the property, the size and status of the estate, what type of property, what type of planning you engage in and more.

If the property was owned by the decedent as joint with rights of survivorship with the heirs, then on death the property belongs to you and you can sell it. No probate. You might need to present a death certificate (see below concerning taxes).

If the property was owned by the decedent it will pass to his or her estate. Then under the will it could pass to the heirs. How the will is structured and the type of bequest could have income tax consequences to the heirs. For example, if the heirs were left $500,000 and the property was transferred to the heirs by the executor to satisfy that bequest, there could be an income tax cost to the heirs.

If the estate is subject to federal or state estate or inheritance tax, there could be a tax cost the heirs have to bear. This tax cost may have to be addressed before you can have clear title to sell the property. In some states you may have to go through a process to get a state tax clearance in order to sell the property even if there is no state estate tax ultimately due. It varies by state.

If the real estate is held by the estate the executor might opt to establish a limited liability company (LLC) or other entity to own the property to protect the estate from claims relating to the property. In such a case you would then receive the LLC interests and perhaps sell those interests rather than the property directly.

You also should address, or may have to deal with, the issues of a group of heirs, some of whom may have unique or different ideas for what should be done with the property. It might be beneficial to have an agreement between the heirs to avoid problems.

If the property is inherited the tax basis (what was paid for the property, plus improvements, less depreciation) is increased (stepped up) to equal the fair market value of the property when the benefactor died (or in some instances six months after death).

The complications continue. If the property were owned by a partnership or LLC by the decedent and others you had best see your accountant about making a special election under code Section 754 to increase the tax basis in the property.

There are lots more issues, but if you set up an appointment with a local estate planner (probate attorney) and real estate attorney, you'll likely get some quick and straight forward answers. But don' try it on your own (this is like the car commercials on TV where they put up a disclaimer saying "Professional driver; closed course"). Get some pros to help you, it probably won't be very complex once they narrow down the facts.

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