Your parents have both passed away. Now, you find out you have inherited their house. There’s so much to take care of and figure out with their estate. This guide will help inform you about selling a house you inherited in Utah.
Selling An Inherited House In Utah? Here’s What To Consider
There’s a lot to take into consideration when you inherit a house. The laws are different in every state. Your situation and stage in life will affect your decision, as well.
During this time of grief, it’s crucial to get the best advice. Take time to ask yourself a few questions about your options.
- What do you want to do with the house?
- Does the house have to go through probate?
- What are the debt obligations on the house?
- What are the tax liabilities of the house?
Should You Keep or Sell an Inherited House?
Your first step is to consider all your options. What are the consequences of either keeping or selling your inherited house?
Keep it and fix it up
Living in the house you grew up in sounds nostalgic, but this decision is emotional. Fixing-up a home is expensive and always takes more money and time than gets budgeted. It might not be right for your family.
Share it with co-heirs
People have very different opinions and priorities when it comes to homeownership. If you inherited the house with your siblings, its likely misunderstandings would arise.
A rental property might provide a nice side income. But, landlords have to deal with constant repairs and problems. It’s especially hard to manage if you live out of town.
Selling makes the most sense if you are the only beneficiary, or there are multiple heirs. The heirs spend or save their proceeds as they choose.
Can You Sell an Inherited House In Utah Before it Goes Through Probate?
Your inherited house might be a part of a probated estate. These probate laws affect how soon you can sell the house you inherited.
Probate is the legal process of managing and transferring assets after a person dies.
The Utah Uniform Probate Code (UPC) stipulates that probate is necessary when:
- The estate has real property (such as a house or land)
- The assets of the estates exceed $100,000 in value
Probate can be as short as five months or take a couple of years. It depends on the kind of probate that is open and how complicated the estate is. There are two types of probate in Utah:
- The personal representative of the estate is appointed without a court hearing
- All interested parties agree on the appointment of the personal representative
- All beneficiaries agree in the distribution of the assets
- The interested parties or beneficiaries are not in agreement
- Requires a court hearing to appoint a personal representative for the estate
- The court decides how the estate will be administered
However, not every inherited house has to pass through probate.
You Can Sell an Inherited House Before Probate If:
- Property is held in joint tenancy with the right of survivorship. The surviving owner of the property retains full ownership of the property without going through probate.
- Property is held in a Living Trust. The trust gives the property owner the right to manage assets while they are still living, but names someone else as the beneficiary.
- Property is held in a Transfer on Death Deed, which was enacted by Utah in 2018. A transfer on death deed is quicker to set up than a living trust and applies only to real property.
What Are the Debt Obligations of Your Inherited House?
After you inherit a house, you will inherit all the debt and financial obligations encumbered by the property, including:
- The mortgage
- Any liens
- Property taxes
- Other assessments
An inherited house with a mortgage will either have to be paid off or assumed.
Usually, you can assume the mortgage without having to qualify for it as the property title will be in your name.
However, a reverse mortgage cannot be assumed, and the balance will have to be paid when the property is sold.
What Are The Tax Implications When Selling an Inherited House In Utah?
Federal Estate Taxes
A federal estate tax is applicable only for very large estates ($11,580,000 in 2020). The estate tax is paid out of the assets of the estate. There is no state inheritance tax in Utah.
Capital Gains Taxes
Capital gains are the profit someone makes from the sale of an asset, like real estate. Capital gains taxes could be due when you sell an inherited house.
Calculating Capital Gains and Losses
An inherited property will have a basis set for income tax purposes as of the date of death of the decedent. It is referred to as the “stepped-up” basis as it has been stepped up from the original purchase price. The new basis must be established with a professional appraisal.
If you sell the property for a profit, there will be a capital gain. If you sell it for less than a stepped-up basis, there will be a capital gain loss.
Short–term capital gains tax is assessed on property held for less than one year. It is taxed as regular income based on your tax bracket ranging from 10% to 37% for 2019 and 2020.
Long–term capital gains tax is assessed on property held for more than one year. It is also based on income but at more-favorable rates from 0% to 20% for 2019 and 2020.
Capital Gains Exclusions
There are some exclusions to the capital gains tax on the sale of your primary home. The tax is not assessed on capital gains realized:
- Up to $250,000 if you are single
- Up to $500,000 if you are married, filing jointly
These exclusions only apply to an inherited property if:
- The house is your principal place of residence
- You owned the house at least two years in the five years since you sold it
- You lived in the house at least two of the past five years before you sold it
- You did not use the exclusion in the past two years
Discuss these ramifications with a tax professional to determine how they apply to your situation.
What Are the Steps to Sell an Inherited House?
At this point, you may think you are ready to sell your inherited house. However, there is still a lot of work before you slap a “For Sale” sign out front. Selling a home with a real estate agent can take months before you close and cost you a lot of money. Before the sale closes and you receive your proceeds, you’ll need to:
- Have the house appraised
- Clear out the personal property
- Hire a real estate agent
- Obtain a property inspection
- Maintain the home for showings
- Negotiate offers and concessions
- Make repairs as required by a lender
- Secure court approval if in probate
- Attend the closing at the title company
- Place notice in the local paper of the sale
- Pay ongoing expenses including utilities, taxes, and mortgage
- Spend thousands of dollars for real estate commissions, seller’s concessions, repairs, and closing costs
Do You Need to Sell Your Inherited House?
Hanging onto an inherited home can be aggravating. Managing a house is costly and takes a lot of your time. A vacant house is a target for thieves and vandals. But there is a way to sell your inherited house that can alleviate stress, save you money, and get done faster.
If you have an inherited house, you can sell directly to Axess Home Buyers. We buy houses in the Salt Lake City area in any condition for cash. We make the process FAST so you can get rid of your property and get on with your life.
When you sell your house to Axess Home Buyers, we make the process easy for you. We make you a fair cash offer and close fast. You avoid paying for repairs, real estate commission, and closing costs. Find out more about our fast and easy 3 step home buying process.