Q: My mother passed away in December, 2005. She willed her commercial property to me and my three siblings.
Her will contains a directive to sell the property. I am the only executrix and have power to decide when the property is sold. Do you have any advice on how I should handle this situation?
A: Why did your mother want you to sell the property? Did she believe it would be too much of a burden? Or, did she want her children to have the cash to use individually, to better their own lives? Or, perhaps she simply thought her four children would fight over the property rather than work together to build its value.
Another important question to answer is this: What do you and your siblings want to do with the property? If everyone agrees to sell the property, then you should find a great agent who specializes in commercial properties in the area and sell it.
If you and your siblings agree to keep the property, then you need to figure out how that will work out now, and in the future. Someone will need to manage the property, handle the finances, and do the necessary repair work from time to time. And, what happens if someone wants to cash out? Will the other siblings purchase the property and redivide it, and if so, how will you value the property at that time?
If you know the answer to these questions, it may help guide you in terms of what you do now.
I think should hire a real estate attorney to help walk you through this process so that you avoid a potential emotional and financial quagmire. If you decide to sell, a good real estate attorney may be able to help you find the right agent to list and sell the property.
As for the tax situation, talk to an accountant, tax attorney, or enrolled agent. Typically, you would have inherited the property at its market value the day your mother passed away.
Since she died more than a year ago, you and your siblings may owe capital gains tax if the property has increased in value since then. For example, if the property was worth $1 million at the date of death and is now worth $2 million, you may pay taxes on that second million in profit. But you’d pay taxes at the long-term capital gains rate (plus state sales tax).
There are other considerations in determining how much you will have to pay and you would be wise to seek out a tax advisor to help you sort out the tax consequences of the sale.
To find a good real estate or tax attorney contact your local bar association and ask for the name and number of the attorney who chairs the real estate or tax committee. To find an accountant, check out the American Institute of Certified Public Accountants (www.aicpa.org) and for an enrolled agent, check out the National Association of Enrolled Agents (www.naea.org).