When inheriting a house in New Jersey through the probate process there are some taxes you'll have to pay.  The taxes that will be paid are called Capital Gains tax.  Before getting into the specific rules of capital gains when inheriting a property, let us go over what it is exactly.

From the New Jersey Department of the Treasury, Division of Taxation, a capital gain is the profit you realize when you sell or exchange property such as real estate or shares of stock.  If you are a New Jersey resident, all of your capital gains, except gains from the sale of exempt obligations, are subject to this State's income tax (http://www.state.nj.us/treasury/taxation/njit9.shtml).  

When an heir inherits a property, the IRS (Internal Revenue Service) determines their basis in the property on the date of the owners death.  A basis is the difference between the cash price and future price of the property.  The IRS will use the house's fair market value to determine what your capital gains are.  Lets compare an inherited property to one that you have purchased.

Your House:

Purchased For: 100k

Current Marekt Value: 150k

If you were to sell your house you would be profit a total of $50,000.  You would be taxed on this profit.

Inherited House:

Purchase For: 100k

Current Market Value upon Death of original owner: 135k  (this would be your new tax basis)

If you were to sell the house for 150k now, you would profit only $15,000 and that would be your taxable income.

Another item to consider is what the tax rate will be.  In New Jersey there are long-term capital gains and short-term capital gains.  If the house is sold within one year of obtaining ownership, then this is considered a short-term and are taxed at a rate of ordinary income (i.e. same tax rate that is used against income from a job).  This rate is generally higher then the rate of long-term capital gains taxes.  The rate of long-term capital gains taxes may be regulated by the fedral government and is different depending on your tax bracket.  Since 2003 the long-term capital gains tax is 15%, but only 5% for the lowest two brackets.

Be advised though that holding out for a year in order to pay less taxes may be more costly as maintenance, property taxes will ad up quickly.  Do your homework and make the best decision for your situation.

If you wish to sell an inherited house and don't want to go through the hassles of fixing it up in order to sell on the market, or just not being certain when it will sell send Scott from http://www.ScottyBuys.com/Probate and he can help you out.  There is no obligation or cost.

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Having to watch over a vacant home is a full time job and one that can get old really quick.  Most times when you inherit a house from a deceased relative
it is either in another town or even on the other side of the country. 
Have you ever been driving through a neighborhood that had a vacant
home?  It is usually very easy to spot, either by the unkempt lawn or
the news papers have piled up.  Even if some one is hired to mow the
lawn and pick up the papers, there are always signs and those signs
scream out to vandals and thieves that this house is vacant.  

There are steps you can take to best keep the house in order and in sellable condition. 
In the end getting the best possible price for the home is the goal,
but sometimes selling it quickly can save you a ton of money and
headaches.  Until the time comes when the house actually sells please
take the following actions in order to best protect yourself and the
vacant house.

1) Get Vacant Homeowners Insurance.  This is a MUST, as the regular
homeowners policy will most likely be dropped by the provider once the
home is vacant for 90 days.  This is not always true, but when there is
an accident or a claim, the policy will not cover what you think as it
assumes the house is occupied.  Call your insurance company and tell
them about the vacant house situation, not all companies will cover a
vacant house so finding one that will is paramount.  

2) You’ll need someone to look after the house.  Call a neighbor,
friend or relative that lives in the neighborhood to have them help
maintain the house.  They should go into the property about once every
week, it’s important to stay on a routine schedule in order to catch
possible hazards, water leaks or break-ins. Doing so will limit the
damage or even prevent it.  

3) Get an Alarm system.  This has two benefits, one it with prevent
break-ins and two your new vacant homeowners policy might give you a
discount for having one installed.  Not only that but it will give you
the peace of mind that the house is safe.

4) Do preventative maintenance by turning off water to the house and
drain the pipes to prevent them from freezing in the winter.  If you
can not drain the pipes then during winter months keep the house
temperature between 58 and 60 degrees.  Also have the walk ways,
driveways and front steps cleared of any snow or ice in the winter
months.  In the summer months have the lawn mowed, shrubs trimmed and
just keep the house generally looking good.  

Yes this is a lot of work, but can not be left undone.  Did you know
that if you are an executor of an estate, New Jersey Probate Law says you can be held liable for
accidents that occur on or in the vacant property?  If a pipe leaks and
nobody checks on the house for weeks at a time, the damage could be
more  then $100,000 and cause deadly mold to form.  Once a house
displays signs of mold it INSTANTLY becomes very hard to sell and
expensive for remediation. 

If you wish to sell the house now, contact Scott from http://www.ScottyBuys.com no obligations or cost.

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The assets in a New Jersey Probate case is usually broken up into two classes, real and personal property.  Real property consistes of mainly real estate, or houses, vacant land or commercial property.  While personal property is pretty much everything else, such as bank accounts, the family car or collection of rare stamps.  The distribution of the assets can be a contentious ordeal and can drag on for years if someone contests.  

The last will and testimate would normally contain the guidelines for what happens to the estate's personal property.  It is very common for those benefiting under the will to inherit items of particular sentimental or real value, while the remaining items be sold at auction or to a third party such as a consignment shop or an investor.  Any contents not sold and are of little value can be disposed of.

A house that passes through probate in New Jersey can be sold with the approval of the court before the probate process has been completed.  Sometimes this is needed in order to pay off taxes or liens on the property.  The house can also be sold if nobody is interested in taking care of the house and would rather divide the proceeds up between the beneficiaries.   Some situations can arise where there are multiple heirs inline to inherit the house.  If one of them wants to stay and live in the house and the other(s) would prefer to sell off the property a conflict can occur.  This however can be avoided with a properly written will the specifically dictates what should happen with the house and directs the beneficiaries how to handle the situation.  

To complicate the matter, sometimes the house will not have to go through the probate property.  If the house was jointly owned by a couple, in most circumstances, the surviving spous will become the sole owner.  This is called a tenancy by the Entirety.  Another type of ownership can supersede a will and that is a Joint Tenancy with rights of survivorship.  Sometimes an elderly parent will create a joint tenancy with a child of their family home.  This is done to avoid the probate process and allow ownership of the house to pass immediately to the child upon death.

In most cases the best course of action is to sell the house.  It helps avoid family battles and can be an easy way to put thousands of dollars into your pocket.  If you are looking to sell a house that has been through probate or is currently in probate please contact Scott at Scottybuys.com/probate

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