“What To Do When You Inherit a House?” A Guide to Selling Your Inherited House

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Inheriting a home in the District of Columbia, Maryland or Virginia can be both a wonderful gift and a challenging burden.  If you inherited a home, you most likely just lost a loved one. Working your way through the intricacies of probate procedures, federal tax, state tax, and more while dealing with the loss of a loved one is an incredible challenge.

If you are in this situation now, take a deep breath. In this article, we’ve put together a road map that will tell you everything you need to know about inheriting a home in DC, Maryland, or Virginia. Make sure to read to the end of the article! It explains how to get through probate easily with a FREE probate attorney! Also, visit the “Important Terms” section for explanations of any confusing legal jargon.

Finally, remember this article is in no way meant to be legal advice but a general 2017 guide for inheriting a home.

Inheriting a House in Washington, D.C.

Probate process in Washington, D.C.

You just inherited a DC property. If you’re like most people, you’re going to have to go through probate. The probate process can be divided into five steps:

Step 1 : Decide Which Probate Administration to Use

Most inherited homes will undergo the unsupervised administration This process is designed for estate cases that have little or no contests. With this type of procedure, the D.C. probate court does not supervise every step of the probate process. For this reason, this process is usually quicker than the supervised administration process. Specifically, an unsupervised probate case will take around 6-9 months. This timeline may change depending on an estates complexity. The timeline starts when a personal representative is chosen.
The supervised or formal administration is designed to have more court involvement. This type of process would be helpful for complex estates, when disagreements over the estate are anticipated, or when interested persons question the ability of the personal representative. This probate process takes around 12-18 months to finish.
The small estate administration is used when an estate’s probate property value is under $40,000. This process is the quickest, least expensive, and easiest option. At the D.C. Superior Court Probate Division, there are Small Estate Specialists that will assist you

Step 2 : File the Will and Obtain Letters of Administration from the Court
Within 90 days of the decedent’s death, file the will with the D.C. Superior Court Probate Division

Step 3 : Assets

Within 3 months of being appointed as personal representative, the representative must compile a list of all assets and send it to all interested parties. Large assets including real estate will likely need to be formally appraised.

Step 4 : Pay Debt and Taxes

All of the decedent’s debts will need to be paid. These debts may include creditor claims, settlement fees, and funeral bills.

All of the decedent’s taxes will also need to be paid. These taxes may include: probate taxes, income taxes (D.C. and Federal), fiduciary taxes (D.C. and Federal), and estate taxes (D.C. and Federal).

Step 5 : Distribute Remaining Assets

The personal representative will be in charge of distributing any remaining assets to

NOTE: If an asset were jointly owned before a decedent’s death, the asset would automatically go to the other joint owner of the asset. This asset will not go through probate. Here’s an example:

  • Joe and Betty have a house together, and both of their names are on the deed of the house. Joe passes away, and the house is left to Betty because she owned the house before Joe’s death. The house does not go through probate.

Washington, D.C. Taxes When Dealing with an Inherited Home

There are 5 types of taxes that you may have to worry about after a loved one has passed. Income and probate taxes, estate taxes, inheritance tax, capital gains or loss tax.

Income and Probate Tax
If you’re the personal representative for someone’s estate, then you’ll have to file the decedent’s income taxes. This can include income taxes (D.C. and Federal), fiduciary income taxes (D.C. and Federal). You’ll also have to pay probate taxes at the beginning of the probate process. This is usually out of pocket and is reimbursed by the estate at a later time.
Estate taxes
The personal representative may also have to file estate tax returns. If the estate is worth $2 million or more, a D.C. estate tax return must be filed. If the decedent’s estate is worth $5.49 million or more, federal estate taxes must be filed.

Here’s an example:

Joe passed away and left his house to his daughter Sarah. Joe wrote in his will that he wants Sarah to take care of his estate once he passes away. She is now appointed as the personal representative.

  • If Joe’s estate is worth $200,000, Sarah wouldn’t have to pay any estate taxes in D.C.
  • If Joe’s estate is worth $2.5 million, Sarah would have to pay D.C. estate taxes, but not federal.
  • If Joe’s estate is worth $10 million, Sarah would have to pay D.C. estate taxes and Federal estate taxes.
Inheritance Tax
Thankfully, D.C. does not have inheritance tax. Any inheritance that beneficiaries or heirs receive will not be taxed.
Capital Gains and Loss Tax
The last type of tax that you may have to worry about is capital gains tax. This is a tax that occurs if you sell an inherited property, without living in it for at least 2 of the last 5 years. If you have lived in the property for more than two years in the past 5 years, you can be exempt from the tax up to a certain amount. If you are single, the amount is $250,000. If you are married, the amount is $500,000.

The amount taxed is the difference between the houses value and the sold amount. The amount taxed is NOT the price the decedent paid for the house minus the sell price. This is called the stepped-up basis. Here are two examples:

  • Joe purchased his house back in 1987. He paid $100,000 for it and made $15,000 dollars of repairs. This means that his tax basis before he died was $115,000. Sarah inherits Joe’s house. She has the home appraised and it’s found to be worth $600,000. Sarah then sells the house 2 months later for $605 thousand. Due to the “stepped-up basis,” Sarah only pays capital gains tax on the $5 thousand ($605,000-$600,000). If the “stepped-up basis” didn’t exist Sarah would have to capital gains taxes on $490,000 ($605,000-$115,000).
  • Sarah inherits the same house from Joe and sells it for $585. She now has a capital loss of $15 thousand. If a capital loss occurs, up to $3 thousand of the loss can be deducted from her income taxes or $1.5 thousand if she is married and filing separately.

Here’s a Capital Gains Calculator to make things a little easier for you.

Inheriting a House in Maryland

Probate Process in Maryland

You just inherited a Maryland property. This most likely means you will go through the probate process.

Step 1 : Starting the process – Decide which probate procedure to use (administrative probate or judicial probate). File the will with the Register of Wills. Decide whether the estate is a small estate or a regular estate. Petition for probate at the Register of Wills or with the correct Orphan’s Court. Obtain letters of administration. Submit appropriate information to the Orphan’s Court or Register of Wills.

-If the decedent died intestate or there are disagreements with the will, the probate process will go through a Maryland Orphan’s Court. This is known as a judicial probate.

-An estate is considered small if it’s worth is under $50 thousand ($100 thousand if their spouse is the sole legatee or heir).

-An estate is considered regular if it’s worth more than $50 thousand (($100 thousand if their spouse is the sole legatee or heir).

Step 2 : Assets-Take an inventory of the decedent’s assets and supply a notice of appointment. The personal representative may also have to provide an Information Report, First Account, and Subsequent Accounts

Regular estates:

-Within 3 months the personal representative must supply the Orphan’s Court or Register of Wills with an inventory of the decedents assets, any required appraisals, and a Maryland Information Report. This timeline starts the day the personal representative is appointed.

-Within Nine Months from the date of appointment, a First Account must be filed. This includes the inventory of assets, all activity of the Orphan’s Court or Register of Wills, receipts, and documentation of transactions.

Small estates

The personal representative must submit a Maryland Information Report. Small and regular estates must supply a Notice of appointment. This is a posting in a newspaper that is intended to inform creditors of the probate and the decedent’s

Step 3 : Pay Debts and Taxes– Determine the decedent’s debts and pay them down. File all applicable tax returns.

These debts can include creditor claims, settlement fees, legal fees, and funeral bills. The taxes can include probate taxes, income taxes, federal estate taxes, and estate taxes.

Step 4 : Distribute Remaining Assets-Distribute any remaining money or assets to beneficiaries. The personal representative will be responsible for distribution.

NOTE: If an asset were jointly owned before a decedent’s death, the asset would automatically go to the other joint owner of the asset. This asset will not go through probate. Here’s an example:

-Joe and Betty have a house together and both of their names are on the deed of the house. Joe passes away, and the house is left to Betty because she owned the house prior to Joe’s death. The house does not go through probate.

Taxes in Maryland

There are 5 types of taxes that you may have to worry about after a loved one has passed. Income and probate taxes, estate taxes, inheritance tax, capital gains or loss tax.

Maryland Income and Probate Tax
If you’re the personal representative for someone’s estate, then you’ll have to file the decedent’s income taxes. This can include income taxes (Maryland and Federal), fiduciary income taxes (Maryland and Federal). You’ll also have to pay probate taxes and possibly inheritance tax. The probate taxes are paid at the beginning of the probate process. This is usually out of pocket and is reimbursed by the estate at a later time.
Maryland Estate Tax
The personal representative may also have to file estate tax returns. If the estate is worth $3 million or more, a Maryland estate tax return must be filed. If their estate is worth $5.49 million or more, federal estate taxes must be filed.

Here’s an example: Joe passed away and left his house to his daughter Sarah. Joe wrote in his will that he wants Sarah to take care of his estate once he passes away. She is now appointed as the personal representative.

-If Joe’s estate is worth $200,000, Sarah wouldn’t have to pay any estate taxes in Maryland.

-If Joe’s estate is worth $3.5 million, Sarah would have to pay Maryland estate taxes, but not federal.

-If Joe’s estate is worth $10 million, Sarah would have to pay Maryland estate taxes and Federal estate taxes.

Maryland Inheritance Tax
Maryland has an inheritance tax, but immediate family members are exempt. There are also other people/organizations that are exempt from the inheritance tax as well. To see a more in-depth list, click here. If the Maryland inheritance tax did apply to you, this would be an example of that situation stated earlier:

-Joe’s estate is found to be worth $3.5 million. Greg being the personal representative files the Maryland estate tax. $3 million of the estate isn’t taxed, but the $500,000 is taxed. Greg receives the $3 million, and the after taxes amount of the $500,000.

Maryland Capital Gains and Loss Tax
The last type of tax that you may have to worry about is capital gains or loss tax. This is a tax that occurs if you sell an inherited property, without living in it for at least 2 of the last 5 years. If you have lived in the property for more than two years in the past 5 years, you can be exempt from the tax up to a certain amount. If you are single, the amount is $250,000. If you are married, the amount is $500,000.

The amount taxed is the difference between the houses value and the sold amount. The amount taxed is NOT the price the decedent paid for the house minus the sell price. This is called the stepped-up basis. Here are two examples:

-Joe purchased his house back in 1987. He paid $100,000 for it and made $15,000 of repairs. This means that his tax basis before he died was $115,000. Sarah inherits Joe’s house. She has the home appraised and it’s found to be worth $600,000. Sarah then sells the house 2 months later for $605,000. Due to the “stepped-up basis,” Sarah only pays capital gains tax on the $5,000 ($605,000 -$600,000). If the “stepped-up basis” didn’t exist Sarah would have to capital gains taxes on $490,000 ($605,000-$115,000).
-Sarah inherits the same house from Joe and sells it for $585,000. She now has a capital loss of $15,000. If a capital loss occurs, up to $3,000 of the loss can be deducted from her income taxes or $1,500 if she is married and filing separately.

Here’s a Capital Gains Calculator to make things a little easier for you.

Inheriting a House in Virginia

Probate Process in Virginia

You inherited a Virginia property and will most likely go through probate. It’s important to note that Virginia doesn’t have a separate court for probate. Instead, the probate process goes through In Virginia  county circuit courts. Here are the four major probate steps for Virginia.

  1. Step 1 : Starting the process– Decide if the decedent’s estate is considered a small estate in Virginia. Decide whether the probate case needs to be brought in front of a judge. Make an appointment with the County Clerk or deputy clerk and bring necessary forms. File the will with the county. Obtain a certificate of qualification. Post a probate bond. Send out a notice of probate.
    1. In Virginia, an estate is considered small if all of the decedent’s assets are worth under $50 thousand. This can’t include real property and each asset must be valued below $15 thousand. If this is the case, a circuit court judge is not involved. However, if there is a dispute, the interested person may appeal the case to a judge. For all other estates, a personal representative is appointed and receives a certificate of qualification.
    2. When an appointment is made with the county they will tell you what forms to bring. Here is an example list of forms you may have to show to the county.
    3. A notice of probate must be sent out within 30 days from the date the personal representative was appointed. If applicable, the probate notice has to be sent to the surviving spouse, all heirs, and all beneficiaries.
  2. <Step 2 : Assets– An inventory of the decedent’s assets must be taken and filed with the

Commissioner of Accounts. The value of all assets should be the fair market value at the time of the decedent’s death, not when the inventory was taken. This is due four months after the personal representative is appointed.

  1. Step 3 : Pay Debts and Taxes– Determine the decedent’s debts and pay them down, file all applicable tax returns.
    1. A decedent’s debts may include creditor claims, settlement fees, legal fees, funeral bills, and medical expenses. The taxes can include probate taxes, income taxes, and federal estate taxes.
  2. Step 4 : Distribute Remaining Assets-Distribute any remaining money or assets to beneficiaries. Acquire a Final Order of Distribution (optional).
    1. The personal representative is responsible for distributing assets.
    2. An Order of Distribution is a safeguard for the personal representative.

NOTE: If an asset were jointly owned before a decedent’s death, the asset would automatically go to the other joint owner of the asset. This asset will not go through probate. Here’s an example:

  • Joe and Betty have a house together and both of their names are on the deed of the house. Joe passes away, and the house is left to Betty because she owned the house before Joe’s death. The house does not go through probate.

Types of taxes in Virginia

There are 5 types of taxes that you may have to worry about after a loved one has passed. Income and probate taxes, estate taxes, inheritance tax, capital gains or loss tax.

Virginia Income and Probate Tax
If you’re the personal representative for someone’s estate, then you’ll have to file the decedent’s income taxes. This can include income taxes (Virginia and Federal), fiduciary income taxes (Virginia and Federal). You’ll also have to pay probate taxes and possibly inheritance tax. The probate taxes are paid at the beginning of the probate process. This is usually out of pocket and is reimbursed by the estate at a later time.
Virginia Estate Tax

The personal representative may also have to file estate tax returns. Virginia does not have an estate tax, but there can still be a federal estate tax. If their estate is worth $5.49 million or more, federal estate taxes must be filed. This number changes every year. So make sure to be up to date on the law. Here’s an example of how this might affect someone:

Joe passed away and left his house to his daughter Sarah. Joe wrote in his will that he wants Sarah to take care of his estate once he passes away. She is now appointed as the personal representative.

-Sarah estimates Joe’s estate to be worth $10 million, Sarah would then have to pay Federal estate taxes on $4.51 million ($10 million-$5.49 million).

-Sarah estimates Joe’s estate to be worth $200,000. Therefore she pays zero estate taxes.

Virginia Inheritance Tax
Thankfully, Virginia does not have an inheritance tax of any kind.
Virginia Capital Gains and Loss Tax

The last type of tax that you may have to worry about is capital gains or loss tax. This is a tax that occurs if you sell an inherited property, without living in it for at least 2 of the last 5 years. If you have lived in the property for more than two years in the past 5 years, you can be exempt from the tax up to a certain amount. If you are single, the amount is $250,000. If you are married, the amount is $500,000

The amount taxed is the difference between the houses value and the sold amount. The amount taxed is NOT the price the decedent paid for the house minus the sell price. This is called the stepped-up basis. Here are two examples:

-Joe purchased his house back in 1987. He paid $100,000 for it and made $15,000 of repairs. This means that his tax basis before he died was $115,000. Sarah inherits Joe’s house. She has the home appraised and it’s found to be worth $600,000. Sarah then sells the house 2 months later for $605,000. Due to the “stepped-up basis,” Sarah only pays capital gains tax on the $5,000 ($605,000-$600,000). If the “stepped-up basis” didn’t exist Sarah would have to capital gains taxes on $490,000 ($605,000-$115,000).

-Sarah inherits the same house from Joe and sells it for $585,000. She now has a capital loss of $15,000. If a capital loss occurs, up to $3,000 of the loss can be deducted from her income taxes or $1,500 if she is married and filing separately.

Here’s a Capital Gains Calculator to make things a little easier for you.

The No Hassle Way to Deal with an Inherited House

If you just read this article, I know what you’re thinking. “I just lost someone and now I have to deal with all of this…” During this time, you shouldn’t have to worry about probate, filing fiduciary income taxes, letters of administration, and everything else that comes with inheriting a house. If you’re like most people that inherit a house from a deceased loved one, dealing with their belongings is the last thing you want to do.

But guess what? There’s a way to get immediate help with your situation and it comes with free experienced probate attorneys. Are you looking to sell your inherited house? If you are, do it the hassle free-way. Express Homebuyers can give you a fair cash offer in about 7 minutes for your inherited house. If a deal is made, we’ll also supply you with a free probate attorney. At Express Homebuyers, we believe you already have enough to worry about after losing a loved one. That’s why our probate attorneys won’t only help you with the real estate portion of your probate process, but the entire probate process!

So why not take 7 minutes to save you time, money, and worry on a process that can take more than 7 months?

Important Terms to Know

Administrative probate (M.D.)
an administration in M.D. for uncontested wills, which is handled by the county register of wills.
Assets
All property other than income that is part of an estate.
Beneficiary/Legatee
a person or entity entitled to receive a portion of the estate that has been written into a will.
Capital Gains Tax
a tax levied on profit from the sale of property or of an investment.
Capital Loss Tax
the negative difference between the amount an asset is worth (or the amount you paid for it) and the selling price.
Certificate of qualification
the written document created by the Clerk, under seal, at the time the personal representative qualifies to administer the estate. This is also referred to as “letters testamentary” or “letters of administration.”
Commissioner of Accounts
the person appointed by the Court to oversee the reports and activities of personal representatives.
Contested
to challenge or disagree with a position in a judicial proceeding.
Decedent
the deceased person.
Estate
the decedent’s property, including real estate, personal property, and any other assets.
Estate taxes
a tax levied on the entire value of a decedent’s estate. This tax is levied before beneficiaries or heirs receive inheritance.
Federal income taxes
Income taxes levied by the federal government, not state
Fiduciary
a person in a position of entrusted with another one’s property; a general term used to refer to the personal representative.
Fiduciary income taxes
an income tax return for trusts or estates that is completed by personal representatives.
Heir
the persons who would inherit the decedent’s estate if the decedent died intestate (without a will)
Income taxes
taxes that are levied on income. This can include federal and state level income taxes.
Information Report (M.D.)
trusts, jointly held property, retirement and P.O.D. accounts, gifts made within two years of death, and other non-probate property
Inheritance
the assets given to heirs or beneficiaries after all of a decedent’s taxes and fees have been paid; examples include payment to creditors, income taxes, probate taxes, legal fees, funeral expenses, and estate taxes.
Inheritance tax
a tax on all assets inherited by heirs or beneficiaries
Intestate
when a decedent has passed away and not written a will
Judicial probate (M.D.)
usually for contested wills and is handled by the county Orphan’s Courts
Non-probate Property
Property that passes automatically at death
Notice of Appointment
written notice informing all creditors, heirs, and beneficiaries of a decedent’s personal representative
Notice of Probate
the required notice that an estate is undergoing probate, which is given to beneficiaries and heirs
Personal representative/Executor
the person appointed to oversee and deal with the decedent’s estate
Petition for Probate
a written, formal request, properly filed with the court to apply for probate
Probate
the procedure of admitting a will to a court; the process of appointing a personal representative of an estate
Probate bond
a written promise, recorded in the Clerk’s Office, by the administrator to perform his or her obligations and duties
Probate Property
All assets owned at death that require some form of legal proceeding before title may be transferred to the proper heirs
Probate taxes
These are taxes levied at the beginning of the probate process. They differ from estate taxes
Regular estate (M.D.)
an estate worth more than $50,000 ($100,000 if their spouse is the sole legatee or heir).
Resident agent
a person or business that can be served with any legal papers inside a certain state. This person is appointed if a personal representative lives out of state and therefore is a substitute if the personal representative cannot be reached
Small estate Administration (D.C.)
the administration used in D.C. for small sized estates. These estates will be valued under $40,000
Small estate (M.D.)
an estate is considered small in Maryland if it’s worth is under $50,000 ($100,000 if their spouse is the sole legatee or heir)
Small estate (V.A.)
decedent’s assets are worth under $50,000, cannot include real property, and each asset must be valued below $15,000
Supervised Administration/Formal Administration (D.C.)
an estate administration in D.C. This administration is designed to provide more court involvement. It is used for complicated estate cases or when disagreements are made over a decedent’s assets
Testate
when a decedent has passed away and has written a will
Unsupervised administration (D.C.)
the main way estates are dealt with in D.C. Estates will fall under this administration if there is no disagreement about assets

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