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For someone looking to sell inherited property, Florida law, as well as federal law may dictate part of the process, but the real difficulty comes in navigating the probate process while also navigating the grief of losing a loved one.
If you’re looking at selling an inherited home, in this case a Florida property, there are some things to consider for a hassle free sale. To sell property efficiently and with as little emotional distress as possible, it may help to know a little bit about what to expect and where you can find assistance.
Will You Go Through the Probate Process?
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One thing that may be helpful to determine towards the beginning is whether or not you’re likely to need to go to Florida probate court. There are several factors that influence whether a property is held in probate or not, so one of the first things to check has to do with how the real estate was inherited.
inheriting by will
If you inherited property because someone left it to you in their will, you are likely to need to go through the probate process. Provided they are the only person on the deed, all the paperwork should go relatively smoothly.
Even if there are no difficulties with the inherited property in Florida, you may not be able to sell the house for over 4 months.You’d have to wait until the legal title is cleared before selling an inherited home, so despite a smooth probate process, be aware that it can be a significant period of time before it’s legal to sell the house.
inheriting by DEED
If it’s an inherited house in which you are already on the deed, and you are the only remaining person on that deed, you probably don’t need to go through the probate process.
For example, if the deceased person owned the home jointly with their parent or child as co owners, that person should need no more than to file the death certificate in public records to be able to sell the home.
Another case in which someone might be on the deed, even if they’re unrelated to the decedent, could be a “life estate” situation. A life estate is when a person is added to the deed while the homeowner is living under the condition that the homeowner can stay in the home until they pass away.
inheriting by TRUST
If you inherited property by being named in a trust, the need for a probate proceeding depends upon whether or not the deceased person has a spouse or children living.
If not, you can likely either sell the house, if you’re the only person named, or sell it and divide the sales proceeds among the other family members if more than one person is named in the trust.
What is Probate?
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If you are going to need to go to probate, it can be helpful to know what that process involves. Probate is the process of discovering and distributing the deceased’s assets, and it is overseen by a court.
If the deceased left behind a will, they likely assigned a “personal representative”. A personal representative is the person in charge of things like notifying heirs of the probate process and identifying, managing, and selling assets. If there is no will, or if a personal representative isn’t named, the probate court will assign an appointed personal representative.
Once the probate process nears its end, the personal representative will go before a probate judge, who will approve the probate proceeding. If everything is in order, the judge will sign off on the successful administration of the assets and will allow them to be distributed according to the paperwork.
inheritance and estate tax
When inheriting a house in Florida, it may be helpful to know that there is no inheritance tax in the state. However, it is still possible you’d wind up paying taxes for other reasons, if you inherit and then sell inherited property.
It’s possible you could pay a federal estate tax, but only if the home is worth more than $12 million. If the inherited property meets that criteria, federal estate tax is only due on the amount over $12 million that the property is worth.
Even if a property does result in federal taxes being charged, the taxes would be paid out of the estate sale and not directly by the seller.
capital gains tax
In Florida, most of the time, inheritors don’t pay income taxes on inherited homes. The value of the house sold is typically not considered eligible for income tax.
However, if the inherited property increases in value, it’s possible that the difference will count for taxable income and that you’d owe capital gains tax on that amount. If the inherited house is worth more when you sell it than it was upon the date of the decedent’s death, you may have to pay capital gains tax on the difference.
Note that the capital gains tax generally comes into play only when the value of the home changes after it was inherited. There is a process called “step up on basis” that sets the value of the home at what it was worth on the day of death.
This can be quite beneficial to the family member or interested parties in the inherited home. If the inheritor had to pay capital gains on the difference between the last value of the home – for example when the deceased person got their mortgage on it – and the value at the time of sale, the increase could be very expensive.
As with the value difference above, if the inherited property receives rental income in the period between the death and the sale of the inherited house, you may have to pay income tax. Although the property itself doesn’t count as income for federal income tax purposes, if it is generating rental income, you may still be required to pay taxes on that income.
If the value of the real estate is left unchanged between date of death and date of sale, no income tax should be charged on the inherited home.
When you inherit property, there is a system in place to address property taxes. It’s possible the property taxes will increase quite a lot, particularly if the decedent’s home had not been revalued since the original mortgage.
If the market value of the home has increased significantly, property taxes will likely be owed on a newer, larger market value. This is one reason it can be beneficial to sell real estate quickly.
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Florida has a set of regulations around homestead property that may come into play when selling an inherited home. For a property address in Florida, a homestead exemption may apply to the inherited home, depending on the legal ownership.
What is the homestead exemption?
Homestead law protects someone living in a home from having their house taken to pay off their debts. So, if you’re living in a home and can’t pay off creditors, they usually wouldn’t be allowed to confiscate and sell your house.
If the inherited property is real estate that was the primary residence of the deceased, it’s processed a little differently than other categories of the deceased’s assets.
a homestead is not part of probate
If an inherited house is a homestead, it is set aside and is not considered to pay off debts. Creditors may not liquidate a homestead for payment.
Instead, the home or the proceeds from the sale of the house will go to the heirs and trustees determined by the Florida probate court.
non homesteaded property
If the inherited house is not the primary residence of the deceased – if deceased persons are real estate investors, for example, and the house is an investment property – it will not qualify as a homestead.
For this type of real estate, creditors may be able to engage a selling process in order to recover debts. In cases like these, it’s likely a better choice to get advice from a real estate agent familiar with such transactions.
If, for some reason, there is a party who wants to dispute homestead status – either because the creditor believes the inherited house does not qualify as a homestead and can therefore be liquidated to pay debts, or if an heir thinks it should qualify – they can request an order determining homestead status.
If the status is unclear, a court can determine whether the inherited property qualifies as a homestead or not, for the purposes of executing the will or otherwise resolving assets.
Selling an Inherited Home
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Often, those grieving a recent loss have an emotional attachment to an inherited home. It can be stressful to figure out how to handle the repairs needed, clearing the home of memorabilia and other personal property, and finding a buyer.
Because of the high emotional energy of the process of selling inherited property, finding a real estate agent – and even a real estate attorney – can be of the most benefit.
the state of the home
One thing to determine when selling an inherited property is whether to do any repairs needed or to sell as is. Depending on the property address, it may be easy to sell the house as is, particularly if real estate investors want to buy houses in the area.
Selling a home in its current state may be more difficult with a traditional mortgage company, but there are many cash home buyers who offer cash to buy houses. If such an organization tries to offer cash for the property, check around to ensure it’s a reputable cash buyer.
cash home buyers
Heirs can sometimes get a fair cash offer from these cash home buyers, but it’s generally a good idea to be sure everyone’s on the same page. If you’re selling the house as is, check with the buyer to ensure they are not expecting changes or repairs.
Sometimes, the buyer will agree to cover closing costs or offer other incentives to close. Check with your real estate agent about the possibilities.
Using the Available Resources
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Selling an inherited home can seem overwhelming. Making sure everyone’s on the same page, dealing with the physical reality of a home that may contain a lot of memories, and managing one’s personal feelings about death is a lot for anyone to handle.
For this reason, it’s great to have some tools and resources available to help. Getting advice from knowledgeable sources, like real estate professionals, can help take some of the burdens off the shoulders of the family of the deceased.
A little knowledge can go a long way when trying to manage expectations. Heirs in Florida may find benefit from articles and advice from trusted sources while navigating this difficult time.