Selling family property that you’ve inherited isn’t all that different from selling any other piece of land you own. The hardest part may be deciding what to do with the land, especially if you have an emotional attachment to the property or have inherited it jointly with other family members who all need to agree.
To sell or not to sell
If the inherited land has been in the family for generations, the sentimental attachment may make selling out of the question—provided you can afford it. Alongside emotional considerations, financial implications will likely be the primary factor in deciding whether or not to sell inherited land. If you have inherited a large property, another option is to subdivide it and keep some of the land for yourself while selling the rest.
Before you can sell, the land needs to be legally transferred to you. If the deceased person left a will, the executor of the estate, appointed by a probate court, is responsible for overseeing the transfer of ownership. Any outstanding debts of the deceased person must be settled before inherited property is distributed. If the deceased person did not leave a will, an administrator will be appointed to divide the deceased’s property according to state intestacy laws.
Death and taxes
When you inherit land, figuring out how much tax you owe is a crucial step in deciding whether or not to sell. Typically, estate taxes are settled during the probate or administration of an estate. The federal government does not impose an inheritance tax on beneficiaries. However, six states—Iowa, Kentucky, Maryland, Nebraska, New Jersey, and Pennsylvania—do, although these inheritance taxes generally apply only to property valued above a certain threshold of at least $1 million.
You probably won’t owe much, if any, federal capital gain tax if you sell the property soon after inheriting it, but selling the land later on for an amount greater than the value assessed when you inherited it will result in capital gains taxes on the difference.
If there are any unpaid property taxes on the land, you will need to pay them, along with applicable real estate taxes on the property as long as you maintain ownership. Failure to keep current with property taxes can put you at risk of losing the land, and can delay any potential sale.
Other potential costs
Land ownership itself brings with it various costs. When you inherit land, you also become responsible for any mortgages or other liabilities on the property. If you can’t or don’t want to pay the mortgage, selling the land may be your best option.
If your land is located in a planned community—even if there is no home on the property—there is probably a local homeowner’s association that levies fees on a regular basis. You will be responsible for any unpaid past fees, as well as new fees for as long as you own the property.
Beyond taxes and fees, it’s important to consider the cost of maintaining your property. You’ll need to pay for everything from mowing the lawn to property insurance. If the land is far from where you live, you may also want to factor in travel costs to check up on it regularly, or security services to prevent trespassers or vandalism.
How to sell
Once the land is officially yours, get in touch with a real estate agent who can help you determine the value of the land and develop a marketing plan. You can, of course, sell the land on your own, but an agent can usually help sell the property more quickly.
If you decide to sell the land by yourself, hire an appraiser to assess the property’s value. Once you’ve established your asking price, contact the neighbors to see if any of them are interested in buying the land, and put up a sign in a place where it will be easily visible to people driving by. Although you can get by with just “For Sale” and your phone number, adding a bit of additional information about the property can help speed up the sale. Don’t forget to list your land on appropriate websites and tell your local contacts that you have land for sale.
Once you find a buyer, you’ll probably have to go back and forth a bit to find a price you can both agree on. If you’re not using a real estate agent, consider hiring an attorney to negotiate the purchase agreement. When the deed transferring ownership is signed and the money from the sale is in your bank account, all that remains is to report the transaction on your next tax return and pay any capital gain taxes owed.
Read more: How to Sell Your Land