Selling an Inherited Property in Pennsylvania

Inheriting a property can feel like a mixed bag—part sentimental, part financial stress. Does it need a pricey HGTV-worthy makeover? What about taxes—will Uncle Sam get a bigger cut than you? Is there a will, or will you be diving headfirst into the probate jungle? How do you transform that family home into a successful sale? Is it a maze of paperwork and red tape, or a straightforward path to cashing in? In this blog post, we’ll walk you through the steps of selling an inherited property, helping you turn potential stress into a rewarding payday.

Your Guide to Selling An Inherited Property in Pennsylvania

If you’re feeling a little unsure about the next steps, you’re not alone. In most states, the property will need to go through probate, a legal process where the courts step in to determine who officially owns it. Simply put, probate is how the court transfers ownership of the estate’s assets to the rightful heirs or beneficiaries. The timeline for this process can vary—it might be quick and painless if there’s a clear will in place, or it could take a bit longer if things are more complicated. Don’t worry; we’ll help you navigate it!

Determining the Executor

When there’s a will, there’s (usually) a way—at least when it comes to figuring out who the executor is. The executor is the person tasked with carrying out the deceased’s wishes during the probate process, essentially becoming the estate’s quarterback. However, any assets listed in the will—including real estate—can’t be sold until the will gets the Court’s stamp of approval. Once that happens, the executor can officially start handling business as outlined in the will. But what if there’s no will, or the will gets contested? That’s where things can get a bit more… bureaucratic. The probate court will step in to appoint an administrator—think of them as an impartial referee. This administrator’s job is similar to the executor’s: settle debts, distribute assets, and possibly decide if any real estate needs to be sold to cover expenses like back taxes or mortgages. While it’s not always a smooth ride, having a clear executor (or administrator) in place helps ensure the process doesn’t turn into a family reunion-sized headache.

Working with Lawyers and Real Estate Agents

Let’s face it—probate is anything but straightforward. That’s why having an experienced lawyer on your side is a must when selling an inherited home. They’ll help you steer clear of the legal landmines that can pop up during the process. Once you’ve gotten the green light from the probate court to sell the property, your next MVP is a real estate agent who knows their way around inherited homes. A seasoned agent with probate experience will be familiar with the unique rules and regulations that come with this type of sale. Not only can they help you find the right buyer to maximize your profit, but they’ll also provide invaluable guidance on where to focus your efforts—and your wallet. Need to know which upgrades are worth it? Or what fixes you can skip? They’ll help you make smart decisions to avoid wasting time and money. Trust their expertise, and you’re far more likely to sell the property quickly and for top dollar, instead of watching it languish on the market or sell for less than it’s worth.

Clear Debts

When you hear “inheritance,” do you picture a mysterious great-aunt leaving you a sprawling mansion tucked away in the woods? Or do you picture the reality: a property with liens on the title, years of unpaid taxes, and a mortgage that makes turning a profit feel like wishful thinking? Unfortunately, inheriting property often means inheriting debt—whether it’s in the form of taxes, mortgages, or a stack of maxed-out credit cards. Any assets you inherit will typically need to go toward paying off those debts before you see a single penny. And while a house might sound like a jackpot, it can quickly turn into a giant money pit if you’re not careful. That’s where an experienced estate advisor comes in. They can help you untangle the financial web and explore your options, ensuring you handle the estate in a way that’s both smart and stress-free. It’s all about turning the inherited headache into an opportunity—or at least avoiding a bigger one!

Clean & Repair the Property

Once ownership has been decided and the property is considered yours, your next step will be to decide whether you want to live in it, rent it out, or sell it. Many times, when a loved one passes they leave behind a house that is not in the best of shape. Whether the property hasn’t been kept up in the past decade and needs major cleaning and repair, or there were never any upgrades done and the house will need to be completely renovated to make it “market ready”, this is the part of an inheritance that is often forgotten about.

Do all heirs have to be in agreement to sell the property?

No, the heirs don’t technically have to agree to sell an inherited property—at least not if ownership has already been sorted out by a will or the probate court. In those cases, the decision-making falls to the executor or administrator. But let’s be real—family drama loves to crash the party, and things can get sticky when there’s no will or the court hasn’t appointed someone in charge. In these cases, all heirs must agree to the sale. Yes, that includes your cousin who always shows up late to family reunions and your sibling who thinks the property should be turned into an alpaca farm. Even properties put up for auction to pay off estate debts can hit a snag if one or more heirs object. Here’s the kicker: if a buyer wins the property at auction but an heir decides to raise a fuss, the sale gets put on ice until everyone works things out—or until the court plays referee and settles the dispute. So, while it’s possible to sell an inherited home without unanimous heir approval, it’s definitely smoother (and less dramatic) if everyone’s on the same page. Bottom line? Keep those family group chats civil, folks!

How to Settle a Disagreement

Disagreements among heirs over an estate can feel like a soap opera in the making, but fortunately, there are ways to keep the drama in check. Step one? Make sure there’s an executor in place. This person is the MVP, tasked with ensuring the deceased’s wishes—as outlined in the will—are carried out. With a clear point person, there’s less room for squabbles over who gets what. But what if there’s no executor and the will is being contested? Cue the mediator! A neutral third party can help untangle the mess and get everyone on the same page without dragging the family into a lengthy (and expensive) probate court battle. Mediation is not only more budget-friendly, but it also saves time—and probably a few Thanksgiving dinners down the line. In the end, keeping things calm and cooperative is the best way to honor your loved one’s legacy and avoid turning the estate into a battleground. Sometimes, a little compromise goes a long way!

Best Practices

But what if the issue is around the executor themselves? Disputes can occur when a family member is named as the executor or trustee of a will, causing strife with the other family members. If this has happened to you, an option is for the person to decline the appointment and choose an independent fiduciary, such as an estate-planning attorney, to administer the will. Stepping back while a neutral party steps in might not just keep arguments from cropping up, but might also give everyone the time and space to deal with difficult emotions before it permanently damages your family. 

How is inherited property taxed when sold?

State and local governments in the United States collected over $5.3 billion in revenue from estate and inheritance taxes in 2020. That’s a lot of taxes! But with laws and regulations different from state-to-state, you’ll want to do your research and contact a lawyer with knowledge and experience of taxes and estate planning as you deal with a surprise inheritance or you’re writing your own will. 

State Tax Laws

Pennsylvania is one of the few states with an inheritance tax, and the rate depends on your relationship to the deceased:

• 0%: Spouses and parents inheriting from children under 21

• 4.5%: Direct descendants (children, grandchildren, etc.)

• 12%: Siblings

• 15%: All others (friends, nieces, nephews, etc.)

The tax applies to most assets, including real estate, cash, and investments, but life insurance proceeds and some retirement accounts may be exempt.

Taxes are due within nine months of the person’s passing, with a 5% discount for early payment (within three months). Executors are responsible for ensuring the tax is paid before distributing the estate.

For inherited real estate, make sure the tax is settled before transferring ownership or selling. When in doubt, consult an estate lawyer or tax professional to navigate Pennsylvania’s inheritance tax laws effectively.

Capital Gains Tax on Inherited Property in Pennsylvania

Capital Gains on Inherited Property in Pennsylvania

When you inherit property in Pennsylvania, capital gains taxes come into play if you decide to sell. The good news? The IRS applies a “stepped-up basis,” adjusting the property’s tax value to its fair market value (FMV) at the time of inheritance. This minimizes your taxable gain if you sell the property.

Example:

• Original Purchase Price: $100,000

• FMV at Inheritance: $300,000

• Sale Price: $320,000

• Taxable Gain: $20,000

Tax Rates:

• Federal Tax: Long-term gains are taxed at 0%, 15%, or 20%, depending on your income.

• State Tax: Pennsylvania taxes capital gains as income at a flat rate of 3.07%.

Key Strategies:

• If you live in the home for at least two of the five years before selling, you may qualify for a federal capital gains exclusion ($250,000 for individuals, $500,000 for couples).

Always consult a tax professional to navigate the complexities and make the most of your inheritance.

Estate Taxes

An estate tax is like a toll the estate has to pay to the government before anyone can inherit anything. Concerned that it might take a big chunk out of your loved one’s estate? Relax! The estate tax only kicks in if the estate exceeds a certain size—$12.92 million for individuals in 2023, to be exact.

This means unless the estate is worth $12,920,001 or more, it won’t owe a dime in estate taxes. Anything under that amount is passed on tax-free. And here’s the kicker—fewer states are even keeping estate tax laws on the books these days, opting to let go of millions in revenue. So, unless you’re dealing with a mega-estate, you can breathe easy!

Inheritance Taxes

Only six states have an inheritance tax, meaning that it is likely that you are in the lucky majority that won’t have to deal with this. But if you live in one of those six states – Maryland, Nebraska, Kentucky, New Jersey, Pennsylvania, and Iowa – you as a beneficiary/Heir to an estate will be required to pay taxes on your inherited assets and properties. But don’t worry – even if you live in a state that has an inheritance tax, you won’t have to pay a dime if the deceased lived in one of the 44 states that does not have this tax.

Proving Legal Ownership to Sell and Inherited Property

Before selling an inherited property, you’ll need official documentation from the court that confirms your role as the executor or administrator of the estate. These papers are your legal “green light” to manage and sell the property.

When it’s time to close the sale, be prepared to provide the deed, title insurance, and any other key legal records to prove ownership. Without these, the sale process can hit unnecessary delays.

Also, don’t forget to do your homework! Some jurisdictions may require additional documents, such as past surveys, inspections, or paperwork related to the property’s history or condition. Knowing what’s needed in advance can save you time, headaches, and possibly money when selling an inherited property.

Is there an easier way to sell?

Absolutely! At Restart Home Buyers, we specialize in taking the stress and hassle out of selling inherited properties. As a trusted direct house-buying company, we’ve built our reputation on purchasing inherited homes, condos, and properties for cash—saving you time, money, and headaches.

We offer competitive cash offers and buy homes in any condition, whether it’s a move-in-ready property or one that’s been neglected for years. Even if the house has major storm damage or needs extensive repairs to bring it up to market standards, you don’t have to lift a finger. Once you accept our offer, we’ll handle all the heavy lifting, from costly repairs to the clean-up.

Selling a property in probate? No problem! We have experience navigating the often-confusing probate process and can guide you every step of the way. Our goal is to make selling an inherited property as smooth and stress-free as possible so you can move forward with your life.