How to Sell an Inheritance
- 1). Determine the overall estate value and decide if an asset actually needs to be sold to pay for estate transfer taxes. For highly valued estates with little cash capital, beneficiaries must liquidate and sell assets to pay the taxes.
- 2). Decide on the type of asset you wish to sell. Real estate and non-qualified securities accounts are treated differently from qualified accounts such as IRAs, 401(k) and 403(b) plans.
- 3). Consider the taxes before selling. Any assets inherited in qualified plans are added to your personal income taxes when sold and distributed. This is on top of estate transfer taxes. Real estate and non-qualified assets receive a step-up cost basis, meaning that if you inherited your mom's house that she bought at $400,000 and it is now worth $1.5 million, your inherited cost basis is $1.5 million. This reduces any capital gains you will pay upon sale finalization.
- 4). Compile a list of inherited real estate for sale to present to a realtor, including any time constraints you have to sell the home and pay the estate taxes. Estate taxes are due nine months after the date of death. If you must liquidate to pay taxes, you may have to sell below market value to expedite the process and pay the taxes. In the event that you do sell below the inherited cost basis, a loss may be realized.
- 5). Meet with financial representatives to sell securities and liquidate retirement accounts. Death certificates will be required to process the sale, along with forms provided by the investment firm.
