Tax Question: Capital Gains on Real Estate Inheritance

[MattyMcG92]

Thanks for the info, Matt. Think me and my other sister could simply ask that our names be taken off the will without going the cash gifting route?

Hi Nlt76,

Unfortunately, section 18 of the Succession Law Reform Act states that amendments to a Will need to be signed by the testator (the now deceased parent) and witnessed. Since the testator is deceased, he/she cannot amend the Will.

Unless the one sibling is extremely attached to the home, in scenarios like this, we usually advise the three beneficiaries to sell the home shortly after they inherit it. They are then free to gift proceeds to the first sibling. The first sibling can then purchase another residence, live there, and designate that residence as his/her principal residence for tax purposes moving forward.

Thanks,

Matt

 

[Keebler Elf]

Remember, if you and your sister own your own homes and designate those are your principal residences, the gains on your shares of the inherited home are taxable.

Thanks,

Matt

Apologies, I was following along until this. Is this solely if the home is willed to the 3 siblings (and they have to dispose of it) versus the estate selling the home and doling out the inheritance $$ to the siblings?

Based on your earlier post I thought having a principal residence doesn't matter to the siblings if they are inheriting the $$ of the home being sold by the estate (i.e., no capital gains because the estate sold the home, not the siblings). That might be a different scenario than the one you're addressing in post #21.

 

[MattyMcG92]

Apologies, I was following along until this. Is this solely if the home is willed to the 3 siblings (and they have to dispose of it) versus the estate selling the home and doling out the inheritance $$ to the siblings?

Based on your earlier post I thought having a principal residence doesn't matter to the siblings if they are inheriting the $$ of the home being sold by the estate (i.e., no capital gains because the estate sold the home, not the siblings). That might be a different scenario than the one you're addressing in post #21.

Hi Keebler Elf,

I edited out the last sentence because it is confusing. Thank you for bringing it to my attention. I was trying to address a scenario where ownership of the home is transferred to the three beneficiaries and they decide not to sell and simply allow the one beneficiary to continue living there. I was not clear about that in the post.

Cheers,

Matt

 

[nlt76]

Hi Nlt76,

Unfortunately, section 18 of the Succession Law Reform Act states that amendments to a Will need to be signed by the testator (the now deceased parent) and witnessed. Since the testator is deceased, he/she cannot amend the Will.

Unless the one sibling is extremely attached to the home, in scenarios like this, we usually advise the three beneficiaries to sell the home shortly after they inherit it. They are then free to gift proceeds to the first sibling. The first sibling can then purchase another residence, live there, and designate that residence as his/her principal residence for tax purposes moving forward.

Thanks,

Matt

Thanks Matt.

 

[Indiana]

The probate process is currently taking about 7 months to complete. And the “fee” is 1.5% of the estate. So there’s your inheritance tax by another name.