Can Real Estate Be Included in an Inheritance?

When it comes to inheritance, one of the most commonly inherited assets is real estate. However, there are various legal considerations and tax implications that come with inheriting real estate. In this article, we will explore the different ways real estate can be included in an inheritance, tax implications, and what you need to know to ensure you receive the full value of your inheritance.

Inheriting Real Estate: Understanding the Process

The process of inheriting real estate can differ from state to state. Generally, when a person passes away, their assets are passed on to their heirs or beneficiaries through a legal process known as probate. Probate is the legal process through which the deceased person’s assets are transferred to their heirs or beneficiaries. If the deceased person had a will, the probate court will ensure that their assets are distributed according to their wishes. If the deceased person did not have a will, the probate court will distribute their assets according to the applicable laws of the state.

When it comes to real estate, if the deceased person owned the property solely in their name, then the property will be included in their probate estate. The probate court will determine how the property will be distributed to the heirs or beneficiaries. If the deceased person had a will, the property will be distributed according to their wishes. If they did not have a will, the property will be distributed according to state law.

If the deceased person owned the property jointly with another person, then the property will typically pass to the surviving owner. For married couples, real estate is often owned jointly, so when one spouse passes away, the property automatically passes to the surviving spouse.

However, there are exceptions to this rule. For example, if the property was owned by the deceased person and their spouse as tenants in common, then the deceased person’s share of the property will be included in their probate estate and distributed according to their wishes or state law. Additionally, if the property was owned by the deceased person and another person as joint tenants with rights of survivorship, then the other joint tenant will automatically inherit the property.

Inheriting Real Estate: Tax Implications

Inheriting real estate can also have tax implications. The federal estate tax is a tax on the estate of a deceased person. It is only applicable to estates valued at over $11.7 million for individuals and $23.4 million for married couples in 2021. Therefore, most people will not have to pay federal estate taxes on their inheritance.

However, some states have their own estate tax or inheritance tax. These taxes typically apply to estates that are valued at lower amounts than the federal estate tax threshold. If you inherit real estate, you should consult an estate planning attorney to determine the tax implications in your state.

In addition to estate taxes, inheriting real estate can also have property tax implications. When a property is transferred through inheritance, the property tax basis is often reset to the fair market value at the time of inheritance. This means that if you sell the property, you will only have to pay capital gains taxes on any appreciation in value since the date of inheritance. However, property tax laws differ from state to state, so you should consult an estate planning attorney or tax professional for guidance.

Inheriting Real Estate: What You Need to Know

If you inherit real estate, there are several things you need to know to ensure that you receive the full value of your inheritance:

1. Get the Property Appraised: Before making any decisions about the property, it is important to have it appraised by a licensed appraiser. This will give you a clear understanding of the property’s value and help you make informed decisions about how to handle the property.

2. Consider Your Options: Once you have the property appraised, you should consider your options. You can choose to keep the property and become a landlord, sell the property, or rent it out for extra income.

3. Consider Your Financial Situation: Inheriting real estate can also come with financial responsibilities. If you inherit a property with a mortgage, you will be responsible for making the mortgage payments. You should consider your financial situation before making any decisions about the property.

4. Consult an Estate Planning Attorney: If you are unsure about how to handle the property or have any questions about the legal process, you should consult an estate planning attorney. They can help you navigate the legal process and ensure that you receive the full value of your inheritance.

Conclusion

Inheriting real estate can be a complex process, but understanding the legal and tax implications can help you make informed decisions about how to handle your inheritance. Whether you choose to keep the property, sell it, or rent it out, consulting with an estate planning attorney can help ensure that you receive the full value of your inheritance and avoid any legal or financial pitfalls.

When an individual passes away, it is common for them to have assets such as money, an estate, an automobile, etc., if they were established. What happens to these assets? With or without a will, the assets are conveyed to the bloodline of the deceased. With a will, the testator would decide who receives what. Without a will, the assets get conveyed to the the direct family by way of inheritance. If the direct family has predeceased the individual, then out of the rest of the family, the state deems who inherits what.