Selling Inherited Property: 6 Important Steps

selling inherited property | Dandenong Family Lawyers

Selling Inherited Property

Selling inherited property can be complex, involving various legal and tax implications. Those who intend to sell an inherited property should thoroughly understand the steps involved in the sale process, particularly the application of capital gains tax (CGT), to avoid potential financial pitfalls.

Capital Gains Tax (CGT) on Inherited Property

In Australia, inherited property is subject to capital gains tax (CGT) if the owner decides to sell it. The CGT liability depends on several factors, including the date the property was acquired by the deceased, the date of inheritance, and whether the property was the deceased’s primary residence. Generally, if the property was acquired before 20 September 1985, it is exempt from CGT.

Determining the Cost Base

Calculating CGT requires properly determining the cost base of an inherited property. The cost base includes the property’s purchase price, acquisition costs, and any capital improvements made by the deceased.

For properties acquired after 20 September 1985, the cost base is the market value at the time of the deceased’s death. The cost base determination significantly impacts the amount of CGT payable.

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Selling the Property: Steps and Considerations

Selling inherited property involves several steps, which include:

  1. Obtaining Probate: Probate is the legal process of validating the deceased’s will and granting the executor the authority to manage the estate. This step provides the legal right to sell the property, and without it, the sale cannot legally proceed.
  2. Preparing the Property for Sale: To attract potential buyers, ensure the property is clean, well-maintained, and presentable. Minor repairs, renovations, or staging the property can significantly increase its market value and appeal.
  3. Addressing Legal Requirements: Fulfil all legal obligations related to the sale, including compliance with local property laws and tax regulations. This involves ensuring all required documents, such as the title deed and disclosures, are in order to avoid potential disputes and delays in the sale process.
  4. Ensuring Beneficiary Agreement: Obtain agreement from all beneficiaries regarding the decision to sell the property. Clear communication and consensus are vital to prevent conflicts and ensure a smooth sale process. It’s essential to respect the wishes and rights of all parties involved.
  5. Settling Estate Debts: Before distributing any proceeds from the sale, outstanding debts associated with the estate, such as mortgages, taxes, and utility bills, must be paid off. This step clears any financial liabilities, avoids legal complications, and protects the beneficiaries from potential claims against the estate.
  6. Engaging Professionals: Work with a real estate agent and legal advisor to streamline the selling process and navigate any complications. Real estate agents can provide market insights and handle the sales process, while legal advisors ensure all legal aspects are covered. Professional guidance can help achieve a successful and hassle-free sale.

Exemptions and Concessions

Specific exemptions and concessions are available that can reduce or eliminate CGT on inherited property. For example, if the property was the deceased’s main residence and is sold within two years of inheritance, CGT exemption may apply. Additionally, concessions exist for properties used to produce income, such as rental properties.

Record-Keeping and Documentation

Maintaining thorough records and documentation is essential when selling inherited property. This includes keeping records of the property’s acquisition details, probate documents, valuation reports, and any correspondence related to the sale. Proper record-keeping ensures compliance with tax regulations and simplifies the CGT calculation process.

Selling inherited property involves navigating complex legal and tax considerations, particularly regarding capital gains tax. Understanding the relevant laws, accurately determining the cost base, and utilising available exemptions can help effectively manage the sale process and minimise financial burdens. Seeking professional advice can also ensure that informed decisions are made throughout this process.

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