Selling an Inherited Property in Texas

Inheriting a property can pose challenges both emotionally and financially. And what if you’re out of state, or the house is several hours away? Who knows, you may be very familiar with the house. Or, this could be a relative that you weren’t close too. You may have questions about the house condition, costly upgrades, property tax implications, and the attorney probate process may arise.

This article will guide homeowners through the process of selling an inherited house, offering insights for a successful transaction in Texas, TX.

How To Sell An Inherited Property in Texas

So you’ve inherited a property and you’re not sure what happens next. In most states, the inherited property must go through a probate process so the courts can determine who is the legal owner. Probate is a legal process in which the Court legally transfers ownership of the estate’s assets to one or more beneficiaries and/or Heirs. Depending on the state of the will (if there was one), this process can be very fast or very slow. If you have already been notified that you are the Executor, then you will work with an attorney and the courts to settle the estate.

Determine the Executor

For inherited properties with a will, establishing the executor of the estate should be straightforward. One of the most important aspects of a will is establishing an executor that is able to carry out the deceased’s wishes through the process of probate.  Any assets listed in a will can’t be sold until the will is validated by the Court but, once approved, the executor of the will is allowed to act on the wishes of the deceased. But if the will is contested or there is no will, the process might take longer as the Court gets involved. 

The probate court will appoint someone not associated with the family as an administrator to the estate. These administrators play a similar role as an executor; they are responsible for carrying out the wishes of the deceased as stated in the will, as well as paying off any of the estate’s debts and distributing any assets. They may also determine if any real estate assets will need to be sold to pay off the estate’s debts, including back taxes, mortgages, etc.

Working with Lawyers and Real Estate Agents

Probate is not a simple process which is why you’ll want an experienced lawyer to help you navigate the potential pitfalls of selling an inherited home. But once you have the probate court’s okay to move forward with the sale of the property, working with a real estate agent that has dealt with inherited homes before will be your next smart step. An experienced agent with probate experience will understand the nuances and regulations for this type of sale. They can help you find the right buyer to help you get top dollar for the inherited property. They also will be a helpful guide to let you know what is worth spending time and money to fix up and upgrade, and what is a waste of your time. Listening to their advice may be the difference between selling a property quickly and for a profit, or being stuck with a house that sits on the market for too long and sells for below market value.

Resolve Any Debts

When you hear the word “inheritance” do you think of a mysterious great-aunt leaving you a million-dollar mansion in the woods, or do you understand the reality of having to deal with a property that might have liens against the title, years of back taxes, as well as a mortgage that leaves you with the ability to make much of a profit after a sale? Sadly, dealing with a loved one’s passing often means dealing with their debt, whether that’s in the form of taxes, a mortgage, or maxed out credit cards. Any assets you inherit must go to paying off that debt first before you can see one dime of the estate. While a house may seem like a huge asset, it also can be a huge money pit. An experienced estate advisor can help you research your options when it comes to dealing with an estate.

Clean & Restore the Home

Once ownership has been decided and the property is considered yours, your next step will be to decide whether you want to live in it, rent it out, or sell it. Many times, when a loved one passes they leave behind a house that is not in the best of shape. Whether the property hasn’t been kept up in the past decade and needs major cleaning and repair, or there were never any upgrades done and the house will need to be completely renovated to make it “market ready”, this is the part of an inheritance that is often forgotten about.

Do all heirs have to agree to sell the property?

No, the Heirs don’t have to agree to sell an inherited house or property if ownership has been established by a will or the probate court. But if ownership has not been established, such as with an estate with no will and/or a Court-appointed administrator, then all Heirs must agree to the sale. This also includes properties that have been put up at auction by the Court to pay off the estate’s debts. If a buyer purchases a house at auction but one or more of the Heirs disagree with the sale, the purchase must be put on hold while the disagreement is worked out and a settlement is reached.

How to Settle a Disagreement

There are a variety of options for settling disagreements among Heirs over an estate, but the first step is making sure that a loved one has an executor. Having a point person who is there to make sure the deceased’s wishes are followed as set forth in the will can ensure that there are no arguments over how the assets will be dealt with. If there is no executor and the will is being disputed, your next step may be hiring a mediator. Having a neutral third party to help work out differences will be much more affordable than a legal battle in probate court.

Best Practices

But what if the issue is around the executor themselves? Disputes can occur when a family member is named as the executor or trustee of a will, causing strife with the other family members. If this has happened to you, an option is for the person to decline the appointment and choose an independent fiduciary, such as an estate-planning attorney, to administer the will. Stepping back while a neutral party steps in might not just keep arguments from cropping up, but might also give everyone the time and space to deal with difficult emotions before it permanently damages your family. 

How is inherited property taxed when sold?

State and local governments in the United States collected over $5.3 billion in revenue from estate and inheritance taxes in 2020. That’s a lot of taxes! But with laws and regulations different from state-to-state, you’ll want to do your research and contact a lawyer with knowledge and experience of taxes and estate planning as you deal with a surprise inheritance or you’re writing your own will. 

State Tax Laws

Each state has different laws regarding inheritances. In the case of the sale of an inherited property, states may take an estate tax, an inheritance tax, as well as a capital gains tax on your inheritance. Currently, twelve states have an estate tax, 5 have an inheritance tax, and one has both an estate and inheritance tax.

Capital Gains Tax on Inherited Property

Understanding Capital Gains Tax and State Requirements

Curious about capital gains tax and which states mandate it? Capital gains tax is due on the appreciation of assets inherited through an estate, payable only upon the profitable sale of the asset—not upon inheritance. This tax is calculated based on the disparity between the selling price and the property’s purchase price. While most states enforce this tax on inherited properties, some exemptions may apply for properties sold below a specific value.

For instance, in Washington State, no capital gains tax is imposed on residential properties or land sold for less than $250,000. Moreover, there are legal strategies to potentially mitigate or avoid capital gains tax obligations, such as reinvesting the proceeds in another property. It is advisable to seek guidance from a tax attorney well-versed in local regulations before proceeding with the sale of your property in Texas, TX. Contact Starfish Group Properties at 817-859-6677 for expert advice.

Estate Taxes

An estate tax is a tax paid directly out of the estate to the state before anyone is able to inherit it. Worried that you might get a huge hit taken from the estate? Don’t worry! The estate tax has a minimum threshold which in 2023 was $12.92 million for individuals. This means that the government is not able to charge you an estate tax unless your total taxable estate is worth $12,920,001. The remainder is passed on estate tax-free. Despite having such a high threshold, each year more states repeal their estate tax laws, losing out on millions of dollars of revenue.

Inheritance Taxes

While only six states have an inheritance tax, such as Maryland, Nebraska, Kentucky, New Jersey, Pennsylvania, and Iowa, the majority of individuals are fortunate enough to not have to navigate this process. If you find yourself in one of these states, as a beneficiary/heir to an estate, you may be required to pay taxes on your inherited assets and properties. However, there is a silver lining – if the deceased lived in one of the 44 states without an inheritance tax, you may not have any tax obligations, providing some relief in this regard.

Documents required to sell an inherited property

To show legal ownership and place a property for sale, you will need to have a copy of the documents issued by the court that grant you the legal authority to act as the executor or administrator of the estate. These documents will establish your ability to manage the inherited property. Once a buyer is found and you are ready to close, you’ll need the deed, title insurance, or other relevant legal records to establish the legal ownership of the inherited property. 

Do your research regarding what additional documents may be needed to sell an inherited property! Some jurisdictions may require additional property-related documents, including previous surveys, inspections, or any other relevant paperwork that pertains to the property’s condition or history.

Is there an easier way to sell?

Yes, there is! Starfish Group Properties is a direct house buying company that has built our reputation on buying inherited houses for cash with less stress and less fees. Contact us today and get a competitive cash offer for an inherited house, condo, or property. We buy homes in any condition, and we can also help with the convoluted process of selling a house in probate! Let us make your home selling experience as straightforward and stress-free as possible so you can move on with your life.

Even if the house suffered major damage in the last storm or was neglected for years and needs a large amount of upgrades to make it “market ready”, once you accept our fair cash offer our team of experts will handle all of those expensive repairs so you don’t have to! We make selling an inherited house easy.