Inherited my parents' home but don't want it
Inherited my parents' home but don't want it
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.
Re: Inerited my parents' home but don't want it
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.)
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
Re: Inerited my parents' home but don't want it
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:
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?
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:
https://www.kiplinger.com/taxes/gift-tax-exclusionThe 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.
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?
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Re: Inerited my parents' home but don't want it
do you live in a state or country that has a gift tax?
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Re: Inerited my parents' home but don't want it
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.
Re: Inerited my parents' home but don't want it
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
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Re: Inerited my parents' home but don't want it
Who is the executor of the estate?
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Re: Inerited my parents' home but don't want it
I am not a lawyer.delamer wrote: ↑Sat May 27, 2023 1:47 pmTrue, although owning a physical asset with several other people can be fraught.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.
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.
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.
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Re: Inerited my parents' home but don't want it
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.Stinky wrote: ↑Sat May 27, 2023 2:27 pmI am not a lawyer.delamer wrote: ↑Sat May 27, 2023 1:47 pmTrue, although owning a physical asset with several other people can be fraught.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.
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.
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.
A house and a job. Once the American dream. Two things I'll never again have. Life is simple (and good).
Re: Inerited my parents' home but don't want it
I see your point.Stinky wrote: ↑Sat May 27, 2023 2:27 pmI am not a lawyer.delamer wrote: ↑Sat May 27, 2023 1:47 pmTrue, although owning a physical asset with several other people can be fraught.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.
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.
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 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
Re: Inerited my parents' home but don't want it
I am the executor.
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Re: Inerited my parents' home but don't want it
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.
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.
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Re: Inerited my parents' home but don't want it
Thank you.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.)
Re: Inerited my parents' home but don't want it
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.
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.
Re: Inerited my parents' home but don't want it
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.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.
Re: Inerited my parents' home but don't want it
This post is right on.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.
"Earn All You Can; Give All You Can; Save All You Can." .... John Wesley
Re: Inerited my parents' home but don't want it
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.
Re: Inerited my parents' home but don't want it
This is good advice.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.
Poster bsteiner knows his stuff on questions of this type.
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Re: Inerited my parents' home but don't want it
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.
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Re: Inerited my parents' home but don't want it
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.
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.
Re: Inerited my parents' home but don't want it
I’ll pile on with agreement here. Simple, takes no fancy lawyering or positioning.bengal22 wrote: ↑Sun May 28, 2023 11:20 amThis post is right on.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.
Re: Inherited my parents' home but don't want it
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.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.
Re: Inherited my parents' home but don't want it
Barring a 8-figure dollar home, there will not be a current tax on any gift at the federal level.chassis wrote: ↑Tue May 30, 2023 11:00 amSell 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.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.
One thing that humbles me deeply is to see that human genius has its limits while human stupidity does not. - Alexandre Dumas, fils
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Re: Inerited my parents' home but don't want it
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.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:
https://www.kiplinger.com/taxes/gift-tax-exclusionThe 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.
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.