The death of a parent is traumatic. Grieving takes time. It is especially stressful when, during this time, you must settle your parent’s estate. This can be a long and difficult task. One of the things you may have to do during the process of settling your parent’s estate is selling your parent’s house.
Jump ahead to these sections:
- Who’s Typically Responsible for Selling a Parent’s House After They Died?
- What Do You Need to Do Before You Sell a Parent’s House?
- Are There Any Tax Implications of Selling a Parent’s House After Death?
- Steps for Selling a Parent’s House After They Died
Selling your parents’ house after death is not the same as selling your own house. It includes emotional and practical aspects that you may not have considered until the time comes. You’ll have to confront the heartache of “letting go,” the complication of locating assets and “cleaning out” the house, the drama of family relationships, and the sheer stress of putting a house on the market.
But there are steps you can take to make the process of selling your parents’ house a little easier. This guide will help you know what to expect when you sell your parents’ house after death and what steps to take to minimize the stress that comes with selling a house.
Who’s Typically Responsible for Selling a Parent’s House After They Died?
When a parent dies, it’s natural for the children to participate in the process of settling the parent’s affairs. It can be a stressful process that can sometimes be made easier when there are more people contributing to its completion. But siblings don’t always get along. And even if they do, sometimes the death of a parent and settling their affairs can reveal tensions that you didn’t know existed.
Or perhaps you’re the only living child of your parents, and you’re confronting this process alone. In either case, while you may assist in much of the work required to sell your parents’ house, the actual responsibility of “selling” your parents’ house rests with the person who’s appointed to settle the estate.
The most common way someone is appointed to settle the estate is through a will. A person appointed in a will is called an “executor.” The executor is charged with certain responsibilities to settle the estate legally, and selling the house can be one of those responsibilities.
If your parent did not have a will, or they had a will but didn’t appoint someone as their executor, then the probate court will appoint someone to serve in this capacity. This person is called a “personal representative.” Once appointed by the court, the personal representative assumes the same role as the executor.
When a parent dies, it is often the case that they appointed a child as the executor of their estate. Likewise, if the court appoints a personal representative to handle the estate of a parent, it is not uncommon that it appoints one of the children. However, only the person who is named as the executor or personal representative is legally responsible for selling your parents’ house when they die.
If this person is you, then this guide will show you what you need to do before you sell your parents’ house and some steps you can take to make the process go as smoothly as possible.
What Do You Need to Do Before You Sell a Parent’s House?
Because only the executor or personal representative has the legal authority to sell the house during the probate process, the first thing you must do is identify who will serve in this role. If it is you, then once the court appoints you, you may begin the process of preparing the house for sale.
As the executor or personal representative of your parent’s estate, you will be responsible for settling the entire estate. The house will be just one of many assets that you are responsible for distributing. Most likely, many of the assets in your parent’s estate will be distributed according to your parent’s will.
Some assets not specifically included in the will that hold sentimental value may be shared among the children. But if you have chosen to sell your parents’ house, there are a few things you may have to do before you prepare the house to be sold on the market. One thing to be aware of is that selling the house may have tax implications for both the estate and the beneficiary of the house.
Are There Any Tax Implications of Selling a Parent’s House After Death?
Like so many other transactions during life, selling your parent’s house after death has tax implications. The taxes incurred may be “estate taxes” and “inheritance taxes.” Although these taxes are sometimes thought to be the same, they are very different and are enforced against different parties.
Estate taxes
Estate taxes are fees charged by the federal government (and some state governments) against the estate of a deceased party who passes property to their heirs. The tax is based on the total value of all the property in the estate that is passed on after death. This may include the house.
However, only estates that are valued over a certain amount ($11.7 million in 2021) are subject to the federal estate tax. The threshold level for exemption changes every year based on the changing tax laws.
Some states also charge an estate tax. These states include:
- Connecticut
- District of Columbia
- Hawaii
- Illinois
- Maine
- Maryland
- Massachusetts
- Minnesota
- New York
- Oregon
- Rhode Island
- Vermont
- Washington
The state exemption thresholds vary from state to state, ranging from $1 million to $8.7 million. Estate taxes are calculated and paid before any property in the estate is distributed to beneficiaries. It is your responsibility as executor to see that these taxes are paid.
Inheritance taxes
Inheritance taxes are state taxes charged against the beneficiary who receives property from a deceased person after the estate pays estate taxes and distributes property. States that impose an inheritance tax include:
- Iowa
- Kentucky
- Maryland
- Nebraska
- New Jersey
- Pennsylvania
There are no federal inheritance taxes.
Beneficiaries pay inheritance taxes only on the value of the property they receive. Inheritance taxes vary by state and range from 1 to 18 percent. However, just as there is an exemption threshold for estate taxes, each state has its own exemption threshold for inheritance taxes. If the value of the property you receive is less than your state’s exemption amount, you do not have to pay inheritance taxes.
Capital gains tax
Another tax that you may have to pay is a capital gains tax. This is based on whether you make a profit on the sale of the house. Capital gains taxes are separate from any estate or inheritance taxes that are imposed.
You should consult with an attorney or a tax professional to be sure what estate, inheritance, or capital gains taxes you must pay if you sell or inherit your parent’s house after they die.
Steps for Selling a Parent’s House After They Died
Selling a deceased parent’s house is never easy. But if you have to sell your parent’s house after they die, there are steps you can take to minimize the stress and the time it takes to sell the house.
Establish the value of your parent’s house
Because federal and state law requires that you pay estate taxes before you distribute any property from your parent’s estate, and because estate taxes are based on the value of the property that is passed on, the first step in selling your parent’s house is to value the house, along with the other property in the estate. The value of the house will be affected by any mortgage that remains to be paid on the house, improvements to be made, and the market value of comparable houses in the area.
In valuing the house, you may consider using a real estate professional with experience selling inherited property and someone familiar with the local real estate market. Using an agent that other heirs get along with and trust can alleviate some of the tension that often arises among heirs when one child has more control over the process than others.
Sort through your parent’s property in the house
It is likely that most of your parent’s property that they owned when they died is located in the house. To sell the house, this property must be removed so the house may be prepared for sale.
Family members may wish to take possession of certain property left behind that holds particular sentimental value. However, if your parent left a will and bequeathed specific property to named beneficiaries, you must preserve this property for the beneficiaries. Even if a close family member wants a particular piece of property, you cannot dispose of it if your parent included it in their will.
Once you account for all the property expressly listed in the will, you will need to start “decluttering” the house of all the other property. Family members may wish to claim certain items. Sometimes an estate sale may help to clear out some property and bring in some cash at the same time. Inevitably, there will be some property that no one wants that you can donate to charity or simply dispose of. The goal is to empty the house of all property so that it may be placed on the market for sale.
Prepare the house for sale
Once the property is decluttered, you should determine how you want to present the house for sale. You could do a thorough cleaning of the house and make any necessary repairs to help increase the fair market value of the house, or you could do a simple, superficial cleaning and present the house “as is.” There are advantages and disadvantages to each.
Whether to invest money in “fixing up” the house for sale depends largely on the fair market value of the house and whether you are intent on making a profit from the sale or just want to sell the house as quickly as you can. Your decision will depend on the age and condition of the house.
Keep in mind that if you are aware of major issues with the house, like structural damage or conditions of safety or habitability, you must disclose these issues and likely will need to make these repairs before selling the house. A professional inspection of the house will reveal these kinds of issues.
Other than repairing significant damage issues, you have the option of investing just a little money into the house to make it more marketable. This normally includes things like:
- Modernizing the kitchen
- Renewing bathrooms
- Upgrading fixtures
- Improving landscapes
These improvements may cost some money but are usually fairly easy to do without breaking the bank and often make the home more inviting to potential buyers.
Alternatively, you may choose to list the house for sale as is, without upgrades or improvements. You may have to lower the price from what you might otherwise get for the house, but you may sell the house more quickly without investing a lot of time and money into making improvements that are not absolutely necessary to sell the house.
List the house for sale
Once the house is emptied, cleaned, and perhaps upgraded, determine the price of the house that you are willing to accept and list the house for sale. Doing all of these tasks can be more difficult if you do not live close to your parent’s house, so you may want to use a listing agent who knows the market in that area. The market will dictate the list price of the house.
Although you may feel attached to the house and may have strong emotions about how much the house is worth to you, try to be realistic about what value you can get for the house.
Separate Your Emotions When Selling Your Parent’s House after Death
Selling a parent’s house after they die is emotional, and your emotions can easily affect your success in selling the house. If you can separate your emotions from the task at hand, take a few simple steps to prepare the house for sale, and list the house at a reasonable price within the market, you’ll find that selling your parent’s house after death can be easier and quicker than you expected.