If you inherit a house, changing the deed is one of the first things you'll want to do. It's an important step that ensures your name is on the deed and proves your legal entitlement to the property moving forward. Here's a step by step guide that breaks down this process.
Inherited properties can come with financial responsibilities such as existing mortgages, unpaid property taxes, maintenance costs, and insurance requirements. Be aware of hidden costs, including emergency repairs, property management fees, and legal expenses.
Unless your parents put their estate in trust, their assets will go into probate. Even if you have lived there all your life, it will go to probate. If you are the only child then it will all likely go to go. If there are siblings, you may have to sell the house to divide the estate.
While California may not impose an inheritance tax or an estate tax, there are still taxes associated with selling an inherited property: Capital Gains Tax: Capital gains tax is applied on a stepped-up basis, meaning it's only relevant to any increase in the property's value after inheritance.
Report the sale on Schedule D (Form 1040), Capital Gains and Losses and on Form 8949, Sales and Other Dispositions of Capital Assets: If you sell the property for more than your basis, you have a taxable gain.
Beck, Lenox & Stolzer Estate Planning and Elder Law, LLC, knows from experience how bad behavior can erupt among the siblings as well. Many people think children automatically inherit a house when their parents die, but this isn't true. It's possible for children to inherit without a will, but it doesn't always happen.
It depends on your personal circumstances. If you want to live in the home or use it as a rental property, keeping it obviously makes sense. If you don't want to do either — or if it needs significant work that you don't want to commit to — selling it will make more sense.
As we mentioned earlier, this can be done through a loan, with the help of family or friends, or through the sale of other assets. After the financing has been secured, you'll need a lawyer to draw up the necessary paperwork. This will include a sales contract and a deed transferring ownership of the property to you.
When you inherit property, you generally receive an initial basis in property equal to the property's FMV. The FMV is established on the date of death or on an alternate evaluation date six months after death. This is often referred to as a "stepped-up" basis since the basis is typically stepped up to FMV.
A broad categoty of non-inherited properies can be thought of as "layout properties": properties which change the size of the element in some way, or how it interacts with the elements around it. These properties include things like margin , padding , height , width , box-sizing , position , and display .
In this instance, if the home appreciates (rises in value) between when you inherited it and when you sell, you will be subject to capital gains tax on the difference. This is because the inherited home is now considered an investment property, even if you haven't sought to be a real estate investor.
Some also worry that the home will be sold quickly, against their wishes. And there is good reason to be concerned. If you bequeath a house to an heir or heirs, they will have to make an immediate plan for home maintenance, mortgage payments (if necessary), utilities, property taxes, repairs and homeowners' insurance.
Timelines for transferring property after the owner's death vary by state and can range from a few months to over a year.
However, it is likely that you will still need to go through probate even if you are inheriting a house with no mortgage. That's because the asset is still considered part of the estate until probate is completed.
When you inherit a home, its tax basis will be stepped up to reflect the home's current market value, which often entirely eliminates any capital gains taxes that may be due. Any major sums spent on the home, such as renovations or big repairs, can also add to the tax basis (decreasing any sale proceeds).
You can ensure your heirs don't incur any capital gains tax penalties by divesting the asset when your affairs are being settled through probate, but your estate will be liable for any long-term capital gains taxes realized from the sale.
“Cash is king when it comes to leaving an inheritance,” said Carbone. “It's the simplest asset to deal with in terms of a transfer.”
If you received a gift or inheritance, do not include it in your income. However, if the gift or inheritance later produces income, you will need to pay tax on that income.
The Hive Law indicates, "A house can stay in a deceased person's name until either the probate process is completed or legal actions require a change in ownership. Typically, the probate process takes 6 months to 2 years, depending on the jurisdiction and complexity of the estate.
To qualify for the principal residence exclusion, you must have owned and lived in the property as your primary residence for two out of the five years immediately preceding the sale. Some exceptions apply for those who become disabled, die, or must relocate for reasons of health or work, among other situations.
Many people worry about the estate tax affecting the inheritance they pass along to their children, but it's not a reality most people will face. In 2025, the first $13,990,000 of an estate is exempt from federal estate taxes, up from $13,610,000 in 2024. Estate taxes are based on the size of the estate.
Inheritance checks are generally not reported to the IRS unless they involve cash or cash equivalents exceeding $10,000. Banks and financial institutions are required to report such transactions using Form 8300. Most inheritances are paid by regular check, wire transfer, or other means that don't qualify for reporting.