Q: My father died late last year and left a piece of property to me and my two sisters.
Ownership is to be divided equally. The property is a house on Lake Michigan on the eastern shore, about due east of Chicago.
Local real estate agents have told us the property is worth between $1.2 to $1.5 million. We all live too far away to use or manage the property and have decided to sell. However, one sister insists on doing nothing this year and waiting until next spring to sell. She says she heard one should wait at least a year to sell inherited property and that it “feels right” to wait.
Can you give me some reasons why we should either wait or sell immediately? My own feeling is that the taxes for this property are going to be very high once my father’s “grandfathered”; tax rate lapses.
A: First, I’d like to offer my condolences on the loss of your father.
Although I’m sure you and your sisters are missing your Dad, I can’t think of any reason why you wouldn’t want to put your dad’s house on the market now — when vacation homes are selling like hotcakes. The carrying costs (taxes and maintenance) on a house that expensive could be costly, especially if none of you are near enough to use it regularly and make sure that small problems don’t turn into big issues.
I think the advice your sister is remembering refers to individuals who have experienced a huge trauma, like the death of a spouse or partner. In those cases, if the individual can afford to wait, it is a good idea to let a year go by while he or she adapts to the new circumstances of a new life.
In your case, you won’t gain anything by waiting a year to sell this property. You have inherited the property at the current market value (which may even be able to be adjusted to whatever price you sell it for this spring). That means you would pay no capital gains tax on your inheritance when you sell.
And after the expense of selling it (broker’s commission, transfer taxes, etc.), you would each pocket a significant amount of cash.
I think that you should sell now, especially since interest rates might rise significantly in the next year, which could dampen interest in an expensive vacation property.
But it doesn’t really matter what I think.
You and your siblings need to talk this out so everyone is comfortable with the plan. If you’re having trouble agreeing, ask an estate attorney to mediate.