It can be very exciting when a family home gets passed down to you through inheritance. Maybe it was a family or vacation home that you now have the opportunity to remodel according to your own personal style and create new memories. But what do you do when you decide the residence no longer serves your needs? Selling a home passed down to you where you are the designated trustee or co-trustee can generate all sorts of questions and anxiety!
#1 Seek expert advice from a knowledgeable real estate agent.
It is critical to find an agent that has familiarity with properties being sold through an estate, so be sure to tell them the details! They will have the most up-to-date training and knowledge on how the real estate documents need to be signed and filed. The agent will ask for verification that you are the trustee or co-trustee from legally drawn documents. This is necessary information for both the agent and escrow officer in order to file properly. The trust document will also help determine how your signature should be written on real estate papers. Some real estate agents may require that every signature be followed by a description of your role within the estate along with your name. For example, Sally Smith, Co-trustee. Your agent will also ask for a separate TaxPayer ID Number to file the sale of the property. Be sure to find an agent in which you have good chemistry as it can be an emotional process!
#2 Call an estate planning attorney.
If your family has a relationship with an attorney who runs your estate, contact them to seek advice on how to legally prepare for the sale. If you do not have one, look for local estate law firms in your neighborhood and interview a few before deciding on one. Brush up on what an estate planning attorney can do for you before setting up a meeting. They charge by the hour and their fees can add up quickly so have a list prepared in advance! One question to ask may be if you need to set up a separate checking account with a new TaxPayer ID Number to transfer the funds from the sale of the property? Be prepared to share any legal documents in your possession that indicates who are the trustees and co-trustees of the property. The attorney will review who the proceeds are distributed to when the home sells. Maybe you and your sibling are both co-trustees and split the sale proceeds 50/50. The attorney can help set up a new TaxPayer ID Number that is specific to the estate. The purpose of this is to ensure the proceeds of the sale are filed as a separate entity.
#3 Call your CPA!
Ideally a CPA needs to be notified both when you inherit a property and when you have sold that property. They will submit tax forms and payments on behalf of the estate using the customized TaxPayer ID Number. They will request a number of documents when preparing your estate taxes after the sale of the property. If the property was inherited due to a death in the family, they may request a date of death appraisal document. They may also ask for receipts for expenses done on repairs to the property in preparation for it’s sale. Make sure to share the new TaxPayer ID document from your attorney. The CPA cannot file using your social security number or a deceased family member’s social security number. Your CPA may request a copy of the trust document to confirm legal rights to the property such as trustees. You may have to sign tax documents that include your name and role within the estate such as “trustee.” This will notify the IRS on how the property was transferred legally and who is responsible for paying taxes. Confirm with your CPA the most current tax laws and what is accepted. They may advise you to pay the taxes from a separate checking account that was set up with the TaxPayer ID Number or from your personal checking account. Your CPA will help with determining your expenses and capital gains taxes once the sale is finalized.
It may all sound daunting but you are not alone!
Extra steps need to be taken when selling an inherited home. Having access to an experienced real estate agent, estate attorney and accountant will guarantee nothing was left undone!
Contact Realty Summit today to find out who on our team we recommend!