Published on Sunday, November 06, 2016 by Land Century
If youve inherited property documents, you may be wondering what to do next. In many cases, a representative from the probate court or the wills executor will issue a deed with your name on it.
Check to Ensure that You Can Inherit
The first thing you need to do is check to make sure that you can actually inherit the property. The best way to do this is to find out if the property was jointly owned when the deceased died. If the property was jointly owned, the other owner would have full rights to the property.
Prove Order of Succession
If the property was jointly owned at the time of the decedent's death, youll need to prove order of succession in order to inherit. Obtain death certificates for both owners and compare dates. If the person you stand to inherit from died first, the property will revert to the other owner. If he or she passed away second, the process of transferring ownership becomes much easier. Of course, if the joint owner is still living, you will likely not have any rights to inherit the property.
Have a New Deed Drafted
A new deed will need to be drafted to replace the current one thats on file. If the property was left to you in a will, youll need to have the executors deed. If there was no will and the property was granted to you by the court, youll need to have the administrators deed.
In either case, the deed must include a legal description of the property and it must cite you as the new owner. If you are drafting a deed based on an executors deed, you will also need to provide: information that shows the executor was authorized to deed you the property, the name of the previous owner, and confirmation that the will has already gone through probate.
If you are drafting a deed based on an administrative deed, you must ensure that the deed is drawn up in accordance to state law. Once the deed is drafted, all you have to do is sign on the dotted line in the presence of a notary. Either the court administrator or the executor of the will must also sign in the presence of a notary.
Once youve legally gained ownership of the property, you may need to pay state, federal and/or local estate taxes if the value of the property is higher than the threshold. Not all states have an estate tax, but federal estate taxes are imposed on properties worth $3.5 million or more, and tax rates begin at 45%.
Unfortunately, people who inherit high net worth estates often wind up having to sell the property just to pay the estate taxes.
Selling the Property
If you decide that selling the property is the best option, you will likely need to pay a capital gains tax on the difference between your basis and the proceeds from the sale. If the property is used as a personal residence and you can meet certain requirements, you may not have to pay capital gains tax on the first $500,000 if youre married and $250,000 if youre single.
When deciding whether to sell, youll need to keep in mind the condition of the home, the current going rate for similar properties and the costs involved with upgrading the home if necessary. The costs associated with selling the home (i.e. realtor fees) will need to be considered as well. Most realtors charge a commission of 6%.
If selling isnt as attractive as youd hoped it would be, you may consider renting the property through a long-term lease or as a vacation getaway.
Understand the Terms of the Homes Mortgage
Another matter that can complicate the inheritance of property is the mortgage on the home. Yes, the previous owner is now deceased, but the mortgage must be paid.
Many mortgage companies view death as a trigger for immediate loan repayment. In this case, you will either need to obtain a separate mortgage to cover the cost of the remaining loan, or sell the property. If the mortgage included provisions for survivorship through a deed or a trust, then the mortgage would remain outstanding and payments could continue as normal. In this case, you will need to consider whether you can afford the monthly payments attached to the home.
Apply for Mutation of Property Title
If you decide to hang onto the property, you will need to apply for mutation of property title. This process is done to record the transfer of the title from the previous owner (the deceased) to you (the heir), and is primarily for the purpose of property tax payments. It may also be needed for the transference of utility connections. The mutation process varies from state to state as does the document requirements and fees that need to be paid.
Dealing with Rental Properties
If the property you inherit is currently being rented out to tenants, you will be obliged to adhere to the lease agreement between the lessor and the lessee (the deceased). And if there are any disputes or litigations pertaining to the property, you will become a part of that as well.
There are benefits to signing a new lease agreement once the current lease expires. If you were not planning on moving into the home, you can earn income while the home continues to appreciate in value. With that said, youll need to consider the responsibilities that come along with renting and managing a property. If youre willing to take on those responsibilities, hanging onto the home and continuing to rent it out may be a smart option.