The passing of a loved one can be an emotional time in the life of an individual. Coupled with the complexity of managing a loved one’s estate, the period where people should be coping with a loved ones passing, can become unbearably stressful.
Although the topic is tough to breach, it is important to seek legal advice from an experienced estate attorney to ensure the transfer of an individual’s assets is accomplished in the most efficient manner. The most complicated aspects of most estates are the real property components, whether a residential home, or net lease commercial real estate properties. To eliminate the tedious process of having your relatives apply for authorization from the state to act on behalf of the estate, a will or trust should be created which details all necessary procedures to dispose or hold the properties. If the property owner left a Will, the Executor is the authorized person. If the property is in a Trust, the Trustee is the authorized person. If there is no Will or Trust, someone must step forward and take responsibility to become the authorized person.
If there is no will or trust, the authorized person is the individual who files a petition to open a probate estate by volunteering to act as the administrator of the estate. After this step is completed, the administrator of the estate must file a petition with the court to obtain letters testamentary and open the probate estate. Once the executor, trustee, or authorized individual has received letters testamentary from the court, the assets of the deceased individual can be distributed as directed.
Once the real property is distributed as directed, the IRS or state may enact an inheritance tax or estate tax on the distributed assets. Estate taxes can be substantial on estates that have large commercial real property holdings. The current estate tax exclusion mandated by the IRS is $5.45 million. On property holdings less than this amount there will be no estate taxes against the assets.
However, for estates with large single tenant net lease property or other real estate holdings, the estate tax can be as high as 40% of the value of the real property at the time of inheritance. This causes many beneficiaries to be forced into the sale of the property simply to pay the tax bill. The estate tax bill is mildly offset by the basis of the property being adjusted to the fair market value of the real property upon the owner’s passing. This means that a property which an individual purchased in 1950 for $10,000 and is now worth $10 million, will not incur capital gains tax on the sale of the property. This tax provision can result in substantial savings.
Beneficiaries should contact licensed profiles like Sale Leaseback Broker Virginia upon the disposition of inherited assets. This will ensure that the property is sold at a maximum value while adhering to all legal obligations and minimizing the tax payment.
Authors at Calkain provide extensive insight into Real Estate.