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  1. #1

    Default Pros and Cons of Selling a House in Probate

    My question involves estate proceedings in the state of: California

    My mom passed away last year and I am the administrator in a probate process. Is there a different between selling the house in Probate versus outside the probate once everything has been transferred? What are the pros and cons? There are no other beneficiaries other than myself and my sister.

    Thank you!

  2. #2
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    Default Re: Pros and Cons of Selling a House in Probate

    If you sell it in probate, you do it under your signature as exectutor and the deal is done in one fell swoop.

    Outside of probate implies that the house would first be transferred to you and your sister, then sold by that partnership.

    So selling out of probate would cut the transactions, decisions and title escapades in half. And there is no chance of you getting into a disagreement during the sale with yourself.

    I think the taxes would be close to a wash in dollar cost, but there again, they would only show on the estates taxes.

  3. #3
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    Default Re: Pros and Cons of Selling a House in Probate

    Quote Quoting renovatio522
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    My question involves estate proceedings in the state of: California

    My mom passed away last year and I am the administrator in a probate process. Is there a different between selling the house in Probate versus outside the probate once everything has been transferred? What are the pros and cons? There are no other beneficiaries other than myself and my sister.

    Thank you!
    Depends on what the will says. If it says both inherit jointly you are stuck with deeding it from the estate to the two of you unless you get a written agreement from your sister that the estate may sell it.

    If the will says sell it and split the proceeds then you are good to go by having the estate sell it.

    Please don't open new threads every time you have a question. It's all one topic. Keep it to one thread.

  4. #4
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    Default Re: Pros and Cons of Selling a House in Probate

    Quote Quoting MaltbyMark
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    I think the taxes would be close to a wash in dollar cost, but there again, they would only show on the estates taxes.
    That's not quite correct. Assuming that the estate sells the house it will report the gain or loss on the estate tax return. But assuming that the estate distributes sufficient income to the beneficiaries that year the estate will not pay the tax on the gain or use the loss. Instead, it will flow through to the beneficiaries and they will put the income/loss on their returns. That is usually the most advantageous way to go. The tax rate schedule for estates is more progressive than for individuals, so if the estate pays the tax that tax is likely to be more.

    The estate selling it is generally the best way to go if selling the property is the goal of the beneficiaries anyway. Just make sure that the sale and distribution of sufficient income to the beneficiaries occurs in the same tax year. Note that does not mean that the entire proceeds of sale necessarily have to be distributed during that tax year. It would be a good idea to get advice from a tax professional to ensure you do what is needed to get the best tax result here.

  5. #5
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    Default Re: Pros and Cons of Selling a House in Probate

    Quote Quoting Taxing Matters
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    That's not quite correct. Assuming that the estate sells the house it will report the gain or loss on the estate tax return. But assuming that the estate distributes sufficient income to the beneficiaries that year the estate will not pay the tax on the gain or use the loss. Instead, it will flow through to the beneficiaries and they will put the income/loss on their returns. That is usually the most advantageous way to go. The tax rate schedule for estates is more progressive than for individuals, so if the estate pays the tax that tax is likely to be more.

    The estate selling it is generally the best way to go if selling the property is the goal of the beneficiaries anyway. Just make sure that the sale and distribution of sufficient income to the beneficiaries occurs in the same tax year. Note that does not mean that the entire proceeds of sale necessarily have to be distributed during that tax year. It would be a good idea to get advice from a tax professional to ensure you do what is needed to get the best tax result here.
    What about the stepped up basis to fair market value?

  6. #6
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    Default Re: Pros and Cons of Selling a House in Probate

    Quote Quoting llworking
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    What about the stepped up basis to fair market value?
    That of course applies to the home whether sold by the estate or sold by the beneficiaries after the home has been distributed them. But as you know, the step up makes the basis in the property equal to the fair market value (FMV) on the date of the mother died. The estate has now had that home at least 8 months and perhaps as long as 20 months since the OP said the mother died "last year". So depending on what price change has occurred since death there might be some significant gain here. This is California after all, and in some parts of that state real estate values can go up a lot in even just a few months.

  7. #7
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    Default Re: Pros and Cons of Selling a House in Probate

    Quote Quoting Taxing Matters
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    That of course applies to the home whether sold by the estate or sold by the beneficiaries after the home has been distributed them. But as you know, the step up makes the basis in the property equal to the fair market value (FMV) on the date of the mother died. The estate has now had that home at least 8 months and perhaps as long as 20 months since the OP said the mother died "last year". So depending on what price change has occurred since death there might be some significant gain here. This is California after all, and in some parts of that state real estate values can go up a lot in even just a few months.
    I wasn't paying that much attention to the fact that we are talking about California. Yes, that is one place where significant gains could be seen in 8-20 months.

  8. #8
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    Default Re: Pros and Cons of Selling a House in Probate

    Quote Quoting Taxing Matters
    View Post
    That's not quite correct. Assuming that the estate sells the house it will report the gain or loss on the estate tax return. But assuming that the estate distributes sufficient income to the beneficiaries that year the estate will not pay the tax on the gain or use the loss. Instead, it will flow through to the beneficiaries and they will put the income/loss on their returns. That is usually the most advantageous way to go. The tax rate schedule for estates is more progressive than for individuals, so if the estate pays the tax that tax is likely to be more.

    The estate selling it is generally the best way to go if selling the property is the goal of the beneficiaries anyway. Just make sure that the sale and distribution of sufficient income to the beneficiaries occurs in the same tax year. Note that does not mean that the entire proceeds of sale necessarily have to be distributed during that tax year. It would be a good idea to get advice from a tax professional to ensure you do what is needed to get the best tax result here.
    Thank you for the clarification

  9. #9
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    Default Re: Pros and Cons of Selling a House in Probate

    Quote Quoting renovatio522
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    Is there a different between selling the house in Probate versus outside the probate once everything has been transferred?
    Without you explaining exactly what you mean by the two things you're seeking to compare, there's no way to answer your question intelligently. You should also clarify what "once everything has been transferred means and tell us about any relevant provisions in your mother's will. And, as I suggested in your other thread, probating an estate is not a good DIY estate, and you should retain, or at least consult with, an attorney.

  10. #10
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    Default Re: Pros and Cons of Selling a House in Probate

    In order for the sale to be confirmed, the court requires that the new buyer, plus any other interested party, come to probate court to confirm the sale.

    Thanks
    Jeffrey Burr Estate Planning and Probate Attorneys

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