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What Documents are Required to Sell an Inherited House in New York?
Selling an inherited house can be much more involved and take significantly longer than normal. That is because there are various aspects of possession that you must confirm.
The good news is that, once you understand what hoops you need to jump through, you can speed up the process. You can also do so without any hiccups associated with the sale or transfer.
This article explains what documents you need in order to sell an inherited house in New York, as well as the basic processes involved. It will help you be prepared so that it can go as smoothly as possible. Keep reading to learn more.
Understanding Probate and Estate Settlement in New York
Probate refers to the legal proceedings to validate a deceased person’s will and to disperse property to heirs. In New York, these take place in the county where the deceased person died.
Not all estates go to probate in New York, but most do. The first criterion is that the estate must exceed $30,000. If it does not, probate may not be warranted.
Next, if you are the spouse of the deceased, then the property passes directly to you and probate is not required. A final circumstance is when the property was part of a living trust that specifies beneficiaries upon death.
In the New York probate process, the executor of the will files a petition with the appropriate court. Along with the original will, this includes information about the death, beneficiaries named in the will, and an estimate of the estate’s value. It also may contain heirs recognized by law, in case the will is invalid.
Once the court validates the legitimacy of the will, the executor can begin carrying out the stipulations of it. This often includes categorizing all the estate’s assets, such as financial accounts and investments. It also entails appraising property value, such as vehicles, artwork, and real estate.
Documents You Need to Sell an Inherited House in New York
There are several different documents you need to sell an inherited house in New York. Here are the main ones to put together.
The first one is a death certificate, which proves to the court that the property owner has passed away. Next, you will need a letter from the executor proving that you are the rightful owner of the property, or that you have been authorized the sell the property on behalf of the estate.
If the property was inherited through probate, you may need the court order to show that. This is especially important if the conclusions of the court are disputed by another party.
Next, you will need the beneficiary deed to the home. This is essential for proving ownership of the property.
If there is an outstanding mortgage on the home, you will need documentation showing the remaining balance. You also must have all relevant property tax information, including the most recent tax statements.
Like with selling all homes, a recent utility bill can demonstrate that you are responsible for ongoing expenses related to the property. You also may wish to conduct a property survey and have the information showing property boundaries
Tax Considerations for Selling an Inherited House
There are several tax implications for selling an inherited home in New York. These can be broken down into state and federal taxes.
New York does not have an inheritance tax per se, but it is one of a dozen states that tax property passed down from a deceased person. Regardless of the primary residence of the decedent, property they owned inside the state’s borders is subject to taxation.
In terms of federal taxes, things get more complex. The main one to consider is capital gains taxes. These can be upwards of 15 to 20 percent, depending on your income and filing status.
This relates to the amount a property has appreciated over the years. For instance, if the deceased purchased the home 25 years ago, it has likely increased in value a great deal. As part of an inheritance, the accumulated value of the home could be subject to taxation.
Can Capital Gains Taxes Be Avoided?
There are two main ways to get around paying serious capital gains taxes on inherited property. The first is if you plan to live in the home as your primary residence. Residing there for at least two years will make you eligible for a $250,000 (individuals) or $500,000 (married) tax exclusion.
This is not an option or preference for many beneficiaries. Fortunately, there is an alternative, based on the “step-up in basis” rule, a tax provision that allows you to reduce taxable liability.
This allows heirs to use the property’s “fair market value” at the date of the original owner’s death, rather than the purchase price plus appreciation. It makes the taxable profit smaller, which results in smaller capital gains taxes.
There is a caveat here. In order to avoid paying long-term capital gains taxes, you must sell the home within a year of inheriting it. Note that the clock starts ticking from the time you take possession of the property, not the date original owner’s death.
Regardless, inherited homes can take much longer to sell than normal ones. That is due to all of the complexities of executing the will and transferring possession, described above. For this reason, many people in this situation seek the help of experienced real estate experts to assist in expediting the process, in order to avoid serious tax implications.
Find Assistance Selling an Inherited Home
Now that you understand what it takes to sell an inherited house in New York, you can start the process. A qualified real estate company can further advise you on the property steps to take.
At We Buy Long Island Homes Fast, our team of experts understands the unique challenges of navigating the complex world of real estate. We bring years of experience and success, which has gained us a reputation for excellence in service. Fill out our form or give us a call today to see how we can assist.
