She will have to pay taxes on it; even if you tear down the house there are still property taxes, although they may be very low. She might consider donating it to a charity?

she does not have to accept the house. she should consult
with a probate/estate attorney re her options. it is well worth
a one hour consult fee.

>She might consider donating it to a charity?

I have a friend who is charge of funding for a small offbeat non-profit and even they get regular offers of property like this. It's no use them, either, unfortunately, if it's not easily sold.

The charity thing is something I've been thinking about the last couple of days myself.
I plan to do some research on the taxes to get an idea if say it sold for $20k (random number) would the walk away after tax and any fees be way under $10k.
I've never sold a house, would a realtor even sell something like this and handle all paperwork? Any idea what a consult with a probate/estate attorney should cost? Want to know if I shop around.

And thanks for the advice given!

Why would she be paying taxes on a house willed to her by her mother? There shouldn't be any inheritance taxes on something that comes down in a direct line, unless it's worth over $650,000 (that threshold might even be higher now). Taxes are usually paid on estates that are either extremely large, OR that come down 'sideways' (aunt to niece, for example).

She definitely needs to consult BOTH a lawyer and an accountant so she gets accurate information on where she stands on this and what her options are.

Still, as long as there is some profit (and $10,000 is nothing to sneeze at), it would seem well worth selling the property for whatever she can get for it.

I know there is a few hundred dollars in liens against the house but I think that's it. So weedyacres I'll use your info as the basis for my questions when I talk to a pro. Seems like the best scenario so hopefully it works out like that :)
Do you have any links with specifics so I can go in more educated before talking to anyone? I'm going to search the IRS and California Tax websites later.

attorney fees vary depending on where you are. you can call your local
county bar association and they can give you a ballpark and maybe
some names of attorneys specializing in this. ask friends/ relatives
for recommendations of attorneys they have been satisfied with , but make
sure the attorney is knowedgable about probate/ real estate. a divorce
attorney or personal injury attorney won't be of any help!
your accountant should have some referrals.good advice to work
with an attorney and accountant. you might want to start with the attorney
who drafted the original will, if you think he/she is any good. good luck!

If there are liens against the house for property taxes, they may be taken from the estate.

You may be able to abandon the property to the city, county or state and get clear of it.

"Why would she be paying taxes on a house willed to her by her mother?" There might not be inheritance taxes, but wouldn't she be responsible for property taxes while it's in her possession? She'd also need to have insurance and probably pay for electrical service while it's on the market (no one wants to look at a dark house.) Depending on what she can sell for and how long it's on the market, she might lose money on the house.

I agree that she needs to meet with an atty with expertise in this area.

There shouldn't be any inheritance taxes on something that comes down in a direct line

I don't think that the relationship matters. Whether you inherit from a "direct line" relative or a stranger, it's the estate that pays any taxes due, not the person that inherits. When my father died, his wife (not my mother) became the sole owner of the house (title was held as tenants by the entirety). She named my brother, sister and I in her will, and when she passed away the home was sold and the proceeds were shared by us. We paid no taxes on that money, and she was not related to us at that time.

I would just get a Realtor, find out what the property is worth in its current condition and sell it as is.

Why would she be paying taxes on a house willed to her by her mother? There shouldn't be any inheritance taxes on something that comes down in a direct line, unless it's worth over $650,000 (that threshold might even be higher now). Taxes are usually paid on estates that are either extremely large, OR that come down 'sideways' (aunt to niece, for example).

She definitely needs to consult BOTH a lawyer and an accountant so she gets accurate information on where she stands on this and what her options are.

Still, as long as there is some profit (and $10,000 is nothing to sneeze at), it would seem well worth selling the property for whatever she can get for it.

Call a few real estate agents to come tour the home and discuss listing with them to sell it. Have them do comps and give an idea of their marketing plan.

Then your friend will know what the home is worth as far as selling. Your friend can ask the realtor questions about condition and liens. Realtor likely knows of items that must be fixed before a sale or realtor would recommend to sell AS IS, etc.

You really need this but don't sign anything to list with an agent yet.

Another option is to hire a licenced real estate appraiser to give the estimated market value. Realtor option is free plus you probably want to list it anyway. appriaser is probably $200-$500.

"Why would she be paying taxes on a house willed to her by her mother?"

Once you own it you have to pay property taxes and any other local assessments.

There is no national estate tax applicable for this level of estate. However, there may be State estate taxes. If so, the estate needs to settle those before the property can be disbursed.

Once a person owns the property - no matter how they got it - they are responsible for all ongoing taxes, fees etc. Any annual property taxes should be split between the new owner and the estate based on the portion of time the property was in their possession.

And yes, any house can be sold. You might not get much for it, but something is better than nothing. That is assuming their is no mortgage. If there is a mortgage that is larger than the anticipated sale price, she should just refuse the inheritance and let the estate take the loss. Either way, it is time to call an experienced lawyer to get this settled.

Lots of good info coming here. I've asked friends and relatives, even a friend who is in real estate who promised info and flaked. All I really get is the general "yeh that needs to be sold man!" :)
Just to be clear when I mention taxes I am just referring to sales tax, the actual property tax which is very low is being kept up to date.
I'm at work but when things calm down I'll re-read the whole thread in case I'm missing something or not answering a direct question. I appreciate the help.

"whatever the house sells for is still taxable"

This is incorrect (at least for federal taxes and many localities).

As the heir you get the cost basis of the property on the date of death (or other date selected by the executor).
This is the value the estate pays taxes on (if any are even due).

If you inherit a house valued at $50,000 by estate, and then sell it for $50,00 you have not made any taxable gain (at federal, but check state).

'Stepped up cost basis' on death is one of the last big tax shelters.

"What is the best way to unload a house in this type of situation? Do all the steps to move it into the daughters name have to be done first? Not that I know what those steps are......"

I wouldn't put the house in anyone else's name or the new owner will probably end up having to pay the taxes.

How to Refuse to Inherit a House
By Tom Streissguth, Demand Media-Legal Zoom

"For various reasons, you may wish to disclaim property that was willed to you by a relative. Beneficiaries may file such a disclaimer to save income and property taxes, avoid the expenses of ownership, or to pass the property on to another heir. Although a disclaimer can be a brief and simple document, it's important to follow the relevant state laws, as well as IRS rules and guidelines, whenever taking this action.

Step 1
Create a document, heading it "Disclaimer." IRS rules require that you prepare and execute this document within nine months of the death of the person who made the bequest. If you miss the deadline, the property automatically becomes a personal asset for income tax purposes......."

A link that may be useful

info.legalzoom.com/refuse-inherit-house-20716.html

Have you talked to the property owners on either side of the property? It almost seemed possible you were talking about our neighbor's house, which we (or probably the people on the other side, for that matter) would buy tomorrow provided they were realistic about what it's worth. Now, granted, that's literally under $5K, but the value isn't going to increase if they don't put several thousand dollars into it, like, yesterday (the roof has desperately needed replaced for a solid three years- it's not to the point of being condemned, but it's not far off, either).

"If you miss the deadline, the property automatically becomes a personal asset for income tax purposes......."

Except that your cost basis is set by the estate, and is stepped up to the value on the date of death.

Unless you sell for MORE than the cost basis, there is no federal income tax due.

If grandma paid $10 for th eplace 50 years ago, and it is worth $ 100,000 when she dies, your cost basis is the $100,000.
If you sell for $100,000 you have no income to report.

The estate will have to pay any property taxes or liens on the home before transfer of ownership. This year 2012 the exemption for estate taxes is 5,120,000.00 for estate tax purposes and set to revert back to 1,000,000 after 12/31/2012. So it is highly unlikely her estate will owe estate taxes. She will probably be able to sell it, perhaps as a tear down and receive some money.

She should consult with an attorney.

Another option if the land is valuable might be to tear down the house and sell the land. She should talk to a real estate agent about what it would likely sell for as is and what it might sell for if sold after tearing down the house.

"Another option if the land is valuable might be to tear down the house and sell the land."

Just sell it with the house intact.

Let the buyer bear the expense of a tear down.

There are many different type of taxes and they have different rules. There are a few that I can think of concerning this house.

1. Federal estate and/or gift tax (inheritance tax is not the term used by our government.)
http://www.irs.gov/businesses/small/article/0,,id=98968,00.html
2. State and local estate tax
3. Excise(sales) tax based on the sale of the house in some states.
4. Property tax
5. Federal income tax
6. State and local income tax

Many of these taxes are inter related. The heir may not have to pay any or all of these taxes depending on the circumstances. The heir still need to find out what the laws are regarding these taxes.

Attorneys are extremely expensive; several hundred $ an hour. In small estates like this, it not worth the attorney fee unless he/she will work for a nominal fixed fee.

The research for your tax liability is not that hard. Anyone with a high school reading level should be able to figure it out by doing dilligent reading of the IRS publications and google searches. Additionally, if you go talk to county or state records office they can often give you the necessary information to get you started.

Any house will sell... believe me! I have an investor client that has bought one home for $12,000 (3br/2 full baths, all brick), and we are closing on another this Fri. that he paid $11,000. Both are in horrible shape, but he is a handy man and loves these types of properties.
Most agents will forgo the conventional commission and expect a minimum commission of about $2000. This way each agent will get $1000. Any lower and it is just not worth our time.

I have a friend who is also is this position. Her father had been on Medicaid approximately 1 year previous to dying, so that would be a huge lien against a condo that has little value. My friend has been paying the bills of the estate. I advised her not to do this -- somewhere I had heard the advice not to comingle funds. I told her to see an attorney ASAP -- because she might be better off refusing her inheritance. What happens if you refuse the inheritance? Thanks
Susan

Bumping up because I am in a similar situation, only my sibs and I did not inherit the house, we are the surviving relatives. Our names are not on the deed, which has complicated things.

This happened three years ago, we got involved because an aunt by marriage who lives locally was being asked to do something. I paid the funeral home, my sister has been paying taxes and to consult with a lawyer regarding next steps (she is also a lawyer). The best spontaneous offer (people passing the property and contacting aunt or finding out who has been paying taxes) has been less than $2,500 (although Zillow and the like list $70k for similar homes). A few days ago the house was condemmed, and the city gave us three weeks to bulldoze it..

We all Iive hundreds to thousands of miles away.

I am ready to let the CITY bulldoze it.

Any thoughts?

You posted on a 4 year old thread. So who owns the house in question? Has it gone through probate? Are you and your sister the legal heirs ? There are laws in each state about what happens to property if a person dies without a will. If there was a will, inheritance is potentially already clear. If no will, there are laws that apply. Has the estate gone through probate? As surviving relatives, do you and your sister have any claim to the house? It is unclear why your sister has been paying the expenses. See what the attorney advises and follow their recs. I would not pay any money towards the house at this point lafdr

Right. People will try to get you to pay someone else's bills. Don't do it. Unless you are the executor and you are paying bills for the estate out of the proceeds of the estate.

Thank you!

I bumped it because I found this thread when doing a search.

I don't know who technically owns the house. The names on the deed are my uncle, who died three years ago, and my cousin who died two years ago. We are the legal heirs. There is no executor, no estate, no probate, no will. I believe in Alabama the executor has to live in Alabama.

We were trying to help out from afar, because folks were harassing my aunt. Apparently she does not own the house, but I am not clear why, and she is in no physical or financial position to do much.

The biggest problem is that it is an eyesore.

Was your aunt the spouse/mother of your uncle and cousin (if so I don't understand why you are the heirs and not her)? If so, did she never take any action herself to settle their estates? (did she assume that there was nothing to be done because of low value? if they owned the property, that is the estate.)

If this aunt truly has no claim on the property, and you are the heirs of your uncle/cousin, you can file the paperwork to transfer title. Or buy it for $1 from the estate. Tell the city that you are in the process of doing so, explain that your aunt has been unable to cope with it or has no responsibility and you are stepping in -- and see if they will give you more time -- then accept one of those offers to buy. Unless you think that you can and want to get more for the land or house in as-is condition on the market -- people making offers will often make them ridiculously low, knowing if you made the effort that you could get more. Obviously the place has some value or people wouldn't be making offers. My city will condemn and tear down a house that is abandoned/eyesore/nuisance even when they are quite repairable, even if still being occupied by the owner!, so don't let that be your guide to value.

I hear you that you don't really want to deal with it, but you are already investing in the property by paying taxes, so do what you have to do. If the city 'dozes it, the property taxes are still owed I believe and they will charge you for the bulldozing -- they don't do it for free. Another possibility might be to get the city to declare it abandoned and let them take possession of it. to do what they want with it. You might need to fill out paperwork refusing to inherit (as mentioned on another thread) and stop paying the taxes -- I wonder if the fact that your sister assumed the responsibility will muddy the waters.

Certainly the attorney that your sister has consulted will have more valid advice than we will -- what has that advice been?

Raee, aunt is by marriage has no money but is local. As you wrote, sister is an attorney......by profession, the sister is able to provide assistance.

Thank you so much. My sister says the aunt is not the heir because "my uncle's share was gone before my cousin left it". I don't know what that means, but she does. A year ago I thought my sister hired the lawyer to "clear the title", which I thought meant prove that those on the deed where deceased, but all he did it was say who was on the deed. Not sure what he is saying now. Since I posted here, she emailed him that she thinks the buyer would accept "a quit claim deed", but that we have to get an administrator appointed to effect the transfer.

I guess she knows what she'said doing. I posted here because I was wondering if there were "house flippers" who had an opinion. This has been very helpful. Thanks again.

Yeah, I don't know what that means either. "sister cousin". Perhaps you could get your sister to explain it more clearly. So, the aunt in question was not married to the uncle in question? (JimMat, that would be one definition of an "aunt in law" as opposed to an aunt by blood.)

Doubt house flippers would have any better ideas about how to clear up title to an estate property but IDK.

Sorry; that was supposed to say cousin. Fixed it. And the aunt WAS married to the deceased uncle.

With regard to house flippers, your responses were exactly what I was hoping for, and I shared them with my sister.

Seems like you would need to do a title search on the property to figure out how it was originally held. If it was held as joint tenancy with right of survivorship (JTWROS) between the uncle and the OP's cousin it is possible the aunt might be left out. If the aunt is not the OP cousin's biological or adopted mother then siblings might be the heirs if cousin died intestate. This could be true if cousin had no spouse, child, parent, sibling, grandparent, or aunt/uncle still alive. There's a lot of coulds and ifs here. I think you need to pay for an attorney in Alabama who knows local law.

Thank you. We did pay a lawyer to do a title search. I will check his email to see if there is mention of JTWROS

" This could be true if cousin had no spouse, child, parent, sibling, grandparent, or aunt/uncle still alive. "

All true.

I wonder if ""my uncle's share was gone before my cousin left it". " means that since my uncle died first, it became my cousin's alone, so that when SHE died, it was no longer uncle's to pass to his wife.

That must be it, if the cousin is not the child of the aunt/uncle.

Someone definitely needs to be appointed administrator to deal with the city and dispose of the property. Unfortunately, to hire someone locally to do that will cost money, possibly more than you will realize from the property sale (after taxes, fines etc are paid). Maybe you and your sister can walk your aunt through it and have her be your local proxy, where you actually handle everything from a distance and all she needs to do is sign the paperwork. It is the estate that is liable for any fines, charges, and taxes from the city, not you or your aunt personally, and the administrator only needs to pay for those things from the proceeds of the sale. If it sells for enough, you could even be reimbursed for the funeral and taxes that you've paid already.

Hopefully the city will agree to give you more time. And the probate court will need to expedite the process if at all possible; if all of the heirs can give statements that you are aware of the proceedings when the case is filed maybe the court would waive the waiting period.

Thank you!