Inherited my parents' home but don't want it

Non-investing personal finance issues including insurance, credit, real estate, taxes, employment and legal issues such as trusts and wills.
Post Reply
Topic Author
js2
Posts: 5
Joined: Sat May 27, 2023 12:51 pm

Inherited my parents' home but don't want it

Post by js2 »

I've inherited my late parents' home, however I do not want it. I have three siblings who have no interest in the ownership of it either. While I do appreciate the generosity of leaving this asset to me, what would make me happiest is to sell it and split the proceeds among myself and three sisters. Is there a way to do this without triggering a gift tax? Can I just sell it, split the money 4 ways and distribute without tax implications? Has anyone done something similar? Appreciate any feedback.
delamer
Posts: 17348
Joined: Tue Feb 08, 2011 5:13 pm

Re: Inerited my parents' home but don't want it

Post by delamer »

Federal gift taxes won’t need to be paid — by you or your siblings — if you distribute some of the proceeds of the sale to your siblings.

You will need to file a form with the IRS indicating the amount of the gifts, but no tax will be due.* The gifts will be considered part of your taxable estate when you die.

But right now, an individual can leave an estate of almost $13 million and not pay any federal estate tax.

You should look into whether there are any applicable taxes at the state level.


(*In the unlikely event that each gift is $17,000 or less, you wouldn’t need to even file the form.)
One thing that humbles me deeply is to see that human genius has its limits while human stupidity does not. - Alexandre Dumas, fils
Pops1860
Moderator
Posts: 1778
Joined: Thu Mar 14, 2013 4:05 pm

Re: Inerited my parents' home but don't want it

Post by Pops1860 »

Delamer's post is accurate, if you want to disburse the funds in one lump sum.

Another option Delamer mentioned in passing is the "annual" gift tax exclusion.

You only incur a gift tax liability if you exceed the annual limit "per person/per year."

Kiplinger describes it succintly:
The tax-free gift limit (gift tax exclusion) for 2023 is $17,000 (it was $16,000 in 2022). As a result, you can give up to $17,000 to as many people as you want in 2023 without having to worry about paying the federal gift tax. And, again, if you're married, your spouse can also give $17,000 to the same people. Between you and your spouse, that's a total of $34,000 per person in 2023. In addition, if you stay under the gift tax limit for each gift recipient, you don't have to file a gift tax return for the year.
https://www.kiplinger.com/taxes/gift-tax-exclusion

If you are married, and your siblings are also married, you and your spouse can give each sibling and her spouse $17,000, for a total of $68,000 each year (amount is adjusted periodically by IRS).

In any case, this is a straightforwad way to distribute the sale proceeds the way you want, with no tax or tax reporting obligations.

It may take a few years, but maybe not that long?
The power of accurate observation is often called cynicism by those who do not have it. ~George Bernard Shaw
User avatar
cchrissyy
Posts: 2339
Joined: Fri May 05, 2017 10:35 pm
Location: SF bay area

Re: Inerited my parents' home but don't want it

Post by cchrissyy »

do you live in a state or country that has a gift tax?
60-20-20 us-intl-bond
QBoy
Posts: 217
Joined: Sun May 05, 2013 7:09 am

Re: Inerited my parents' home but don't want it

Post by QBoy »

If the estate is not settled, you should talk to a lawyer about whether you can disclaim your right to the house. If so, perhaps it would enter the overall estate which (I am assuming) would be split equally among the siblings, depending on how will is written. That way, you don't need to use up some of your own estate tax exemption, which could be much smaller when you die than it is today.
delamer
Posts: 17348
Joined: Tue Feb 08, 2011 5:13 pm

Re: Inerited my parents' home but don't want it

Post by delamer »

QBoy wrote: Sat May 27, 2023 1:40 pm If the estate is not settled, you should talk to a lawyer about whether you can disclaim your right to the house. If so, perhaps it would enter the overall estate which (I am assuming) would be split equally among the siblings, depending on how will is written. That way, you don't need to use up some of your own estate tax exemption, which could be much smaller when you die than it is today.

True, although owning a physical asset with several other people can be fraught.

You’ll all need to agree on how to maintain the home and who pays taxes and utilities, until it’s sold. And then get several sign-offs on listing the home and a selling price.

So unless you have serious concerns about bumping up against the estate tax limits, stick with your original plan.
One thing that humbles me deeply is to see that human genius has its limits while human stupidity does not. - Alexandre Dumas, fils
User avatar
FreddieFIRE
Posts: 825
Joined: Tue Aug 03, 2021 11:49 am

Re: Inerited my parents' home but don't want it

Post by FreddieFIRE »

js2 wrote: Sat May 27, 2023 1:00 pm I've inherited my late parents' home, however I do not want it. I have three siblings who have no interest in the ownership of it either.
Who is the executor of the estate?
A house and a job. Once the American dream. Two things I'll never again have. Life is simple (and good).
User avatar
Stinky
Posts: 14088
Joined: Mon Jun 12, 2017 11:38 am
Location: Sweet Home Alabama

Re: Inerited my parents' home but don't want it

Post by Stinky »

delamer wrote: Sat May 27, 2023 1:47 pm
QBoy wrote: Sat May 27, 2023 1:40 pm If the estate is not settled, you should talk to a lawyer about whether you can disclaim your right to the house. If so, perhaps it would enter the overall estate which (I am assuming) would be split equally among the siblings, depending on how will is written. That way, you don't need to use up some of your own estate tax exemption, which could be much smaller when you die than it is today.
True, although owning a physical asset with several other people can be fraught.

You’ll all need to agree on how to maintain the home and who pays taxes and utilities, until it’s sold. And then get several sign-offs on listing the home and a selling price.

So unless you have serious concerns about bumping up against the estate tax limits, stick with your original plan.
I am not a lawyer.

If OP were to disclaim the bequest, wouldn’t the “estate” retain ownership, rather than immediately passing to the siblings? And then couldn’t the “estate”, acting through the executor, maintain and sell the house, and then distribute the proceeds per the will, likely equally to the siblings?

This would require keeping the estate “open” until the house was disposed of.

I am not a lawyer, so I may be totally off base. I’d appreciate comments / corrections.
Retired life insurance company financial executive who sincerely believes that ”It’s a GREAT day to be alive!”
User avatar
FreddieFIRE
Posts: 825
Joined: Tue Aug 03, 2021 11:49 am

Re: Inerited my parents' home but don't want it

Post by FreddieFIRE »

Stinky wrote: Sat May 27, 2023 2:27 pm
delamer wrote: Sat May 27, 2023 1:47 pm
QBoy wrote: Sat May 27, 2023 1:40 pm If the estate is not settled, you should talk to a lawyer about whether you can disclaim your right to the house. If so, perhaps it would enter the overall estate which (I am assuming) would be split equally among the siblings, depending on how will is written. That way, you don't need to use up some of your own estate tax exemption, which could be much smaller when you die than it is today.
True, although owning a physical asset with several other people can be fraught.

You’ll all need to agree on how to maintain the home and who pays taxes and utilities, until it’s sold. And then get several sign-offs on listing the home and a selling price.

So unless you have serious concerns about bumping up against the estate tax limits, stick with your original plan.
I am not a lawyer.

If OP were to disclaim the bequest, wouldn’t the “estate” retain ownership, rather than immediately passing to the siblings? And then couldn’t the “estate”, acting through the executor, maintain and sell the house, and then distribute the proceeds per the will, likely equally to the siblings?

This would require keeping the estate “open” until the house was disposed of.

I am not a lawyer, so I may be totally off base. I’d appreciate comments / corrections.
That's exactly why I asked who the executor was. If js2 were the executor, he might be able to pull that off with proper legal guidance. If somebody else is the executor, and js2 disclaims, it may be hard to predict the final outcome. What if the executor then sold the house and divided the proceeds among the remaining siblings, because js2 abandoned his interest? I'm curious what our experts have to say.
A house and a job. Once the American dream. Two things I'll never again have. Life is simple (and good).
delamer
Posts: 17348
Joined: Tue Feb 08, 2011 5:13 pm

Re: Inerited my parents' home but don't want it

Post by delamer »

Stinky wrote: Sat May 27, 2023 2:27 pm
delamer wrote: Sat May 27, 2023 1:47 pm
QBoy wrote: Sat May 27, 2023 1:40 pm If the estate is not settled, you should talk to a lawyer about whether you can disclaim your right to the house. If so, perhaps it would enter the overall estate which (I am assuming) would be split equally among the siblings, depending on how will is written. That way, you don't need to use up some of your own estate tax exemption, which could be much smaller when you die than it is today.
True, although owning a physical asset with several other people can be fraught.

You’ll all need to agree on how to maintain the home and who pays taxes and utilities, until it’s sold. And then get several sign-offs on listing the home and a selling price.

So unless you have serious concerns about bumping up against the estate tax limits, stick with your original plan.
I am not a lawyer.

If OP were to disclaim the bequest, wouldn’t the “estate” retain ownership, rather than immediately passing to the siblings? And then couldn’t the “estate”, acting through the executor, maintain and sell the house, and then distribute the proceeds per the will, likely equally to the siblings?

This would require keeping the estate “open” until the house was disposed of.

I am not a lawyer, so I may be totally off base. I’d appreciate comments / corrections.
I see your point.

I still wonder, assuming you are correct, if having multiple owners complicates the sale of the house for the executor.

As someone else noted above, hopefully one of our estate experts will weigh in.
One thing that humbles me deeply is to see that human genius has its limits while human stupidity does not. - Alexandre Dumas, fils
Topic Author
js2
Posts: 5
Joined: Sat May 27, 2023 12:51 pm

Re: Inerited my parents' home but don't want it

Post by js2 »

FreddieFIRE wrote: Sat May 27, 2023 2:01 pm
js2 wrote: Sat May 27, 2023 1:00 pm I've inherited my late parents' home, however I do not want it. I have three siblings who have no interest in the ownership of it either.
Who is the executor of the estate?
I am the executor.
Jack FFR1846
Posts: 18461
Joined: Tue Dec 31, 2013 6:05 am
Location: 26 miles, 385 yards west of Copley Square

Re: Inerited my parents' home but don't want it

Post by Jack FFR1846 »

I would think the cleanest and cheapest way to go about this is as follows.

OP does inherit the home.
OP sells the home.
Basis becomes fair market value at death so gain will be near zero.
OP keeps the money from the sale of the house.

As OP was the inheritor, there's no reason to involve other siblings.

This all assumes as the original post stated, that the OP only has inherited this house.

If the OP later wants to gift other siblings money, that can be worked and kept under the $17k per person amount.
Bogle: Smart Beta is stupid
Topic Author
js2
Posts: 5
Joined: Sat May 27, 2023 12:51 pm

Re: Inerited my parents' home but don't want it

Post by js2 »

delamer wrote: Sat May 27, 2023 1:32 pm Federal gift taxes won’t need to be paid — by you or your siblings — if you distribute some of the proceeds of the sale to your siblings.

You will need to file a form with the IRS indicating the amount of the gifts, but no tax will be due.* The gifts will be considered part of your taxable estate when you die.

But right now, an individual can leave an estate of almost $13 million and not pay any federal estate tax.

You should look into whether there are any applicable taxes at the state level.


(*In the unlikely event that each gift is $17,000 or less, you wouldn’t need to even file the form.)
Thank you.
bsteiner
Posts: 9153
Joined: Sat Oct 20, 2012 9:39 pm
Location: NYC/NJ/FL

Re: Inerited my parents' home but don't want it

Post by bsteiner »

The original poster could give away 3/4 of the proceeds, either all at once or over time to reduce or avoid making taxable gifts.

Or, to avoid making a taxable gift, the original poster could disclaim 3/4 of it (and any resulting increase in his/her interest in the estate).

The original poster should discuss the choices with his/her lawyer or with the lawyer handling the estate administration.
Big Dog
Posts: 4588
Joined: Mon Sep 07, 2015 4:12 pm

Re: Inerited my parents' home but don't want it

Post by Big Dog »

bsteiner wrote: Sun May 28, 2023 11:04 am The original poster could give away 3/4 of the proceeds, either all at once or over time to reduce or avoid making taxable gifts.

Or, to avoid making a taxable gift, the original poster could disclaim 3/4 of it (and any resulting increase in his/her interest in the estate).

The original poster should discuss the choices with his/her lawyer or with the lawyer handling the estate administration.
We did something similar when my folks died. The folks had purchased a piece of land in the desert, which only one sibling wanted. The other four of us just disclaimed our fractional share so the one sib received the whole thing. Since all heirs agreed, it was no fuss-no muss for the Trustee.
User avatar
bengal22
Posts: 2146
Joined: Sat Dec 03, 2011 5:20 pm
Location: Ohio

Re: Inerited my parents' home but don't want it

Post by bengal22 »

Jack FFR1846 wrote: Sun May 28, 2023 10:37 am I would think the cleanest and cheapest way to go about this is as follows.

OP does inherit the home.
OP sells the home.
Basis becomes fair market value at death so gain will be near zero.
OP keeps the money from the sale of the house.

As OP was the inheritor, there's no reason to involve other siblings.

This all assumes as the original post stated, that the OP only has inherited this house.

If the OP later wants to gift other siblings money, that can be worked and kept under the $17k per person amount.
This post is right on.
"Earn All You Can; Give All You Can; Save All You Can." .... John Wesley
User avatar
Watty
Posts: 28813
Joined: Wed Oct 10, 2007 3:55 pm

Re: Inerited my parents' home but don't want it

Post by Watty »

Disclaiming it should only be done if you are working closely with a lawyer. A concern is that the details will vary with your state law and there could be some quirk in your state law that would be important.
User avatar
Stinky
Posts: 14088
Joined: Mon Jun 12, 2017 11:38 am
Location: Sweet Home Alabama

Re: Inerited my parents' home but don't want it

Post by Stinky »

bsteiner wrote: Sun May 28, 2023 11:04 am The original poster could give away 3/4 of the proceeds, either all at once or over time to reduce or avoid making taxable gifts.

Or, to avoid making a taxable gift, the original poster could disclaim 3/4 of it (and any resulting increase in his/her interest in the estate).

The original poster should discuss the choices with his/her lawyer or with the lawyer handling the estate administration.
This is good advice.

Poster bsteiner knows his stuff on questions of this type.
Retired life insurance company financial executive who sincerely believes that ”It’s a GREAT day to be alive!”
Mr. Rumples
Posts: 2965
Joined: Sun Aug 25, 2019 7:16 am

Re: Inerited my parents' home but don't want it

Post by Mr. Rumples »

As noted above, consider disclaiming it if the estate is not settled. I did this on some real estate which was full of asbestos and lead. In VA, the Code permits disclaiming a part or the whole of the inheritance. The Clerk of the Court was so amused - it happens so rarely she said - she told me what to put in the letter and to send it to her. I did not need an attorney. As an example, below is the VA Code. Note, she said to be sure to send a copy of the letter to all concerned, executor, the court where the property was located. Also, in VA, once the letter is received, even if the estate hasn't been settled, it cannot be retracted § 64.2-2603.F https://law.lis.virginia.gov/vacode/tit ... 20disclaim.
"History is the memory of time, the life of the dead and the happiness of the living." Captain John Smith 1580-1631
User avatar
HipCoyote
Posts: 230
Joined: Mon Jan 27, 2020 5:30 pm

Re: Inerited my parents' home but don't want it

Post by HipCoyote »

You can sell the house without any cap gains due to stepped up basis. Minimally get an appraiser now if you are going to delay sale at all.

You could simply gift the money to sisters and file IRS form so indicating the gift which will come off your lifetime exemption for passing on your estate. If you think your estate will be large or you are concerned about changes in law you could gift the 17 k a year to siblings. If you are married you could co-mingle the funds with spouse and spouse could also gift 17k to each sibling. (Assuming spouse goes along with the strategy.). Do this around December and you could turn around and donor again in January.

FWIIW we gifted 100k worth of a condo to a child and just filed the IRS form and that was that. Simple and legal.
Silverado
Posts: 1636
Joined: Fri Oct 18, 2013 6:07 pm

Re: Inerited my parents' home but don't want it

Post by Silverado »

bengal22 wrote: Sun May 28, 2023 11:20 am
Jack FFR1846 wrote: Sun May 28, 2023 10:37 am I would think the cleanest and cheapest way to go about this is as follows.

OP does inherit the home.
OP sells the home.
Basis becomes fair market value at death so gain will be near zero.
OP keeps the money from the sale of the house.

As OP was the inheritor, there's no reason to involve other siblings.

This all assumes as the original post stated, that the OP only has inherited this house.

If the OP later wants to gift other siblings money, that can be worked and kept under the $17k per person amount.
This post is right on.
I’ll pile on with agreement here. Simple, takes no fancy lawyering or positioning.
chassis
Posts: 2172
Joined: Tue Mar 24, 2020 4:28 pm

Re: Inherited my parents' home but don't want it

Post by chassis »

js2 wrote: Sat May 27, 2023 1:00 pm I've inherited my late parents' home, however I do not want it. I have three siblings who have no interest in the ownership of it either. While I do appreciate the generosity of leaving this asset to me, what would make me happiest is to sell it and split the proceeds among myself and three sisters. Is there a way to do this without triggering a gift tax? Can I just sell it, split the money 4 ways and distribute without tax implications? Has anyone done something similar? Appreciate any feedback.
Sell it and distribute the proceeds annually in amounts that do not trigger gift tax. Depending on the amount involved this could take more than one year, in other words several years.
delamer
Posts: 17348
Joined: Tue Feb 08, 2011 5:13 pm

Re: Inherited my parents' home but don't want it

Post by delamer »

chassis wrote: Tue May 30, 2023 11:00 am
js2 wrote: Sat May 27, 2023 1:00 pm I've inherited my late parents' home, however I do not want it. I have three siblings who have no interest in the ownership of it either. While I do appreciate the generosity of leaving this asset to me, what would make me happiest is to sell it and split the proceeds among myself and three sisters. Is there a way to do this without triggering a gift tax? Can I just sell it, split the money 4 ways and distribute without tax implications? Has anyone done something similar? Appreciate any feedback.
Sell it and distribute the proceeds annually in amounts that do not trigger gift tax. Depending on the amount involved this could take more than one year, in other words several years.
Barring a 8-figure dollar home, there will not be a current tax on any gift at the federal level.
One thing that humbles me deeply is to see that human genius has its limits while human stupidity does not. - Alexandre Dumas, fils
User avatar
Jimbo Moneybags
Posts: 685
Joined: Fri Sep 24, 2021 3:26 pm
Location: Boardwalk

Re: Inerited my parents' home but don't want it

Post by Jimbo Moneybags »

Pops1860 wrote: Sat May 27, 2023 1:37 pmYou only incur a gift tax liability if you exceed the annual limit "per person/per year."

Kiplinger describes it succintly:
The tax-free gift limit (gift tax exclusion) for 2023 is $17,000 (it was $16,000 in 2022). As a result, you can give up to $17,000 to as many people as you want in 2023 without having to worry about paying the federal gift tax. And, again, if you're married, your spouse can also give $17,000 to the same people. Between you and your spouse, that's a total of $34,000 per person in 2023. In addition, if you stay under the gift tax limit for each gift recipient, you don't have to file a gift tax return for the year.
https://www.kiplinger.com/taxes/gift-tax-exclusion
Not quite. Keeping gifts under the annual exclusion amount (currently $17k per person) avoids the need to file IRS Form 709 and those gifts do not count against the givers lifetime gift tax exclusion.

But even if the gifts exceed that annual exclusion amount, a giver has no gift tax liability until they have exhausted their lifetime gift tax exclusion, currently $12.92 million.
Post Reply