Daniel E. Hanley
Attorney at Law for Estate Planning and Beneficiaries of Real Property

San Jose, California, Estate Planning Attorney at Law since 1974 and licensed Real Estate Broker and Private Lender since 1980. In addition to estate planning law, I specialize in elder law, real estate transaction law and small business matters. Call me now for a free phone consultation.

We are attorneys at law and a licensed real estate broker and private lender who specialize in all aspects of legal and real estate services relating to selling the family home, estate planning, inheriting property and real estate transactions.

Regardless of whether a death of a loved one is sudden or expected, no one can truly prepare emotionally for the loss of a loved one as everyone grieves and handles such life-altering moments differently. While it is undeniable that losing a loved one creates an enormous emotional toll on people that, for many, seems to never-end, the financial implications of losing a loved one can linger well after someone has figured out how to emotionally cope with the loss and get on with their life.

The biggest asset many people inherit from a spouse, relative, or friend is real property. Most people think that inheriting real property is a blessing, why would anyone fear the implications of inheriting property? There's nothing to it, you just inherit the property, sell it, and suddenly, you are hundreds and thousands of dollars richer, right? Wrong.

The truth is, inheriting property is just the first step in a long and sometimes arduous process for a beneficiary to realize the potential benefits of their inherited gift. The real difficulty for a beneficiary who inherits real property is determining how to sell the home, so that potential conflicts with family members and others can be avoided, and all interested parties can reap the benefits that their deceased loved ones intended.

Inheriting an ownership interest in a substantial amount of real estate may seem like a dream come true. The fact is, even though you may eventually inherit more money, you also inherit more complications, potential conflicts, and corresponding headaches with the more real estate you inherit. For example, imagine a beneficiary that inherits property from their parents, who have lived in the same home their entire lives. Among numerous other jobs and duties, the beneficiary will need to divvy up and clear out decades worth of stuff from the home, prepare the house for sale, and place it on the market.

The good news is that there are several ways to lessen the stress and streamline the process, so that you are able to maximize the benefits of the gift that your loved one bestowed upon you.

The best way to accomplish your ultimate goal is to seek outside assistance from qualified professionals, who handle these type of issues on a day to day basis, as there are multiple complex legal variables associated with the process and the law is constantly changing, thus, only a qualified Estate Planning Attorney with Real Estate experience and up to date knowledge will be able to adequately address your particular situation.

There are important steps that beneficiaries of a home should take before selling the house.

The first step that a beneficiary of inherited property must do is ensure that the house is "safe," which includes performing the following tasks:

Changing the locks,

Directing the company that holds the homeowners policy to change the name of the insured to the estate,

Paying the utility bills, and

Paying the mortgage payments.

The next step calls for the beneficiary to act like an investigator by searching the house for financial documents such as checkbooks, bank statements, information on safety-deposit boxes, stock certificates, etc. Sometimes, people locate extremely important documentation in these cursory searches, such as wills or trusts and amendments thereof, promissory notes, binding contracts, and the like. Our law office experience in the field of Estate Planning has revealed that many times, people find documents that they never knew existed and even more surprising, often times these documents reflect that the intentions of the deceased person is contrary to what many believed.

The deceased person may also have important hidden items like keys, cash, wallets, and/or unknown luxury items like cars, jewelry, artwork etc. Therefore, it is imperative that the beneficiary looks in places like coat pockets, shoes, books, closets, medicine cabinets, antiques, and any other place that something of importance could be located and, yes, that means even looking under the bed.

An Estate Planning Attorney can provide the guidance necessary to make sure that all documents and items are properly accounted for and that the law is satisfied.

Clearing out a house filled with generations of personal items can be daunting. The following are some suggestions that recent research has shown to be the most effective when clearing out the house:

Methodically search one room at a time. Once the room has been completely canvassed and cleared, move onto the next room and so on.

Start with the furniture and other large items before moving onto the smaller items within each room that is searched, and

Keep a detailed/itemized list of the each item and what you plan to do with said items. This step is critical as countless lawsuits have arisen between family members due to accounting issues and family members' differing accounts of what "Mom said..." or "Dad said..." These types of fights between family members over inherited property can have disastrous effects that unfortunately, often cause family relationships to dissolve beyond repair.

The beneficiary should make special note of items that may hold some intrinsic or sentimental "value" because many times the determination of value, like beauty, is in the eye of the beholder. The following are some practical considerations for beneficiaries to consider:

Write down the family history/significance of various items, especially items that may be considered heirlooms or have some special importance. The best way to do this is by having an attorney coordinate with the executor and beneficiaries of the estate to gleam all knowledge about said items, thereby making sure the items are distributed accordingly.

Catalogue the contents of the home by taking digital photographs, especially if some of the beneficiaries are not close or live in distant areas, or would otherwise question and/or dispute the contents of the estate.

Ask your attorney to assist you in determining the personal property value if the value of an estate item is unclear.

Estate planning attorneys can perform all or part of the work, offer tips on how to divide mementos and other similar goods, as well as provide invaluable guidance regarding the procedure to sell or gift away possessions.

Hiring an Estate Planning Attorney is a great place to start when inheriting real property because even if there are certain tasks the attorney is unwilling or unable to perform, estate planning attorneys often work in conjunction with other trusted and qualified professionals; thus, estate planning attorneys are in a great position to form a strong team to help make sure you get the job done right!

Once the family members and other beneficiaries have retrieved everything they want, get rid of the rest. The following are some easy ways to get rid of the "junk":

Hold a garage sale,

Hire an estate-sale company to deal with the "junk." If the value of the contents meets the estimator's minimum, the company will run the sale and remove the unsold items. Estate-sale firm service charges usually run about one-third of the proceeds, or at a minimum, $1,000. to $1,500., or

Donate the items to charity. There may be positive tax benefits in pursuing this route. However, new laws have tightened restrictions on deductions for noncash items. If you intend to deduct the donations, either on the estate's tax return, or on your own, IRS rules require that the items be in "good" condition and that you have a receipt.

A qualified attorney can help you to determine the value of these type of items, as well as guide you in how you should dispose of said items.

Since many people inherit real property from people who may have lived in the home for decades, it is a wise decision to get the property presentable for resale before putting the house on the market. At the very least, a beneficiary of inherited property should:

Hire a cleaning service to perform an extensive/intensive cleaning of the house,

Pull up old carpets covering hardwood floors,

Replace old-fashioned light fixtures and other out of date fixtures with inexpensive contemporary ones,

Paint the walls in earth tone shades to help to modernize and increase the aesthetics and hence, marketability, of the property.

Depending on the circumstances of your situation and the condition of the inherited property, an Estate Planning Attorney can suggest further ways to make the house ready for sale to ensure that you are able to realize the maximum profit from the sale of the real property.

Note that the tax basis of the home, which determines the gain and loss and therefore the tax ramifications you will face, is the value of the home at the date of death of the person devising the property. Any appreciation between the date of death and the sale will be taxed as long-term capital gain that has varying values depending on the size of the estate.

Example: Dad and Mom purchased a home in 1963 for $30,000. They made no improvements since they bought the home. When the survivor died in 2010, the home was worth $975,000. The value was determined by a fee appraiser. The real home is sold in 2011 for $1,050,000. with selling costs of $50,000. The tax consequences are as follows:

* Check with your tax advisor as there have been recent changes in Federal Law (President Obama's Tax Act - December 2010).

Some people think that giving the home to their children while they are alive is a good way to avoid probate. That is not the case! Disastrous tax implications will arise in this scenario because the tax basis for the gift equals the purchase price of the home. The tax consequences are as follows:

These unfavorable tax results and probate can be avoided by having the home transferred into a revocable living trust (see Estate Planning).

One of the advantages of preparing the house for sale is that you can subtract the cost of preparing the house for sale, as well as other costs of the sale, from the proceeds. If a loss is realized, it is deductible. This means that a beneficiary can divide any gains or losses on the sale of the property and report them on their personal income returns.

In addition to selling the family home, our firm also offers a full range of legal, real estate and loan related services including bankruptcy, foreclosure, elder law, estate planning, probate, real estate exchanges, real estate loans, real estate transactions and small business matters.

If you have questions about property inheritance and selling the family home, please do not hesitate to contact our San Jose estate planning attorney and licensed real estate broker today. Call us now for a free phone consultation at 408-293-0344 or contact us via e-mail by filling out the form on the Contacts page and a representative from our office will reply immediately.

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