Trying to sell inherited property can tax even the most patient beneficiaries.
It may take months or even years before probate is finalized and you’re free to sell inherited property.
Here are our tips on how to sell inherited property in Ontario, and what to do if you’re the estate trustee.
What is Inherited Property? Rules for Inheritance
Your parent has died and left you their home in Windsor and cottage in Muskoka. What to do with inherited property?
You can accept their bequest, disclaim (reject) it, or sell inherited property. You can even rent real estate for income, or live in inherited property and leave it to your children or beneficiaries.
If you’ve been appointed estate executor or personal representative in an Ontario Will that includes inherited property, call Axess Law. We’ll file an application in an Ontario probate court for a certificate of appointment of estate trustee with a Will to make an inherited property transfer legally valid.
When There is No Will
Now suppose there is no Will. Do you still inherit?
Possibly. You may acquire all or a share of real property like a home or land without a Will if:
you were legally married and the property is a matrimonial home
your name is on title to the property as a joint tenant
or you were financially dependent on the deceased.For example, if you are a minor or an adult child with a disability.
Talk to Axess Law if a spouse or family member has died without a Will. We’ll help you figure out what to do next.
8 Steps to Sell Inherited Property
You’ve viewed the property and decided it’s not for you. You can sell inherited property in 8 steps.
1. Get a grant of probate.
Estate trustees require a legal certificate of appointment of estate trustee with a Will or without, to sell estate assets. Axess Law files your application in an Ontario probate court and ensures all the paperwork is in order. If you’re not the estate executor, ask to see a certified true copy of the probate certificate.
Getting probate takes about three to five months.
2. Decide to sell, lease or buy.
Check with other beneficiaries if you inherit only a share and not full title to real property. Ensure everyone is willing to sell, lease, or buy out others before you take any other action. You could be challenged in court if a property was a matrimonial home, shared with a financially dependant common law partner, or others are on the title. Who owns the matrimonial home.
3. Appraise properties’ fair market value.
A licensed realtor in Ontario can advise you on what the deceased’s property is worth in today’s housing market. The estate trustee may have this information already, as part of their court submission when they paid estate administration taxes.
4. Obtain property titles.
Inherited property is not legally yours until you have the title. Axess Law arranges transfers of title to properties when we close real estate transactions. Our real estate lawyers can secure and transfer titles to you as part of an estate’s distribution.
5. List properties for sale.
You can list real property for sale before probate is granted. You just can’t finalize a sale.
Buyers can become frustrated when a property they want to purchase is delayed by legal estate requirements. Be open with buyers if you are awaiting probate or, for any reason, are unable to conclude a sale in the usual 15 to 30 days.
If estate distribution is delayed, Axess Law can draft an escrow agreement to allow buyers to occupy a home before legal possession.
6. Register the property title transfer in Ontario.
Once sold, the property deed passes to the new owner. Axess Law will transfer title to property to the buyer and remove the owners’ names from legal documents.
7. Turn over the keys.
Axess Law arranges for the new owner to receive the keys.
8. Pass the accounts.
Estate trustees can be asked to pass the accounts by providing financial records to a probate court demonstrating properties were listed and sold at fair market value. Keep accurate records of all your transactions.
Do You Pay Tax If You Sell Inherited Property?
Canada has no inheritance taxes, but you could be liable for capital gains tax.
Say the deceased leaves you their principal residence. You can avoid capital gains tax by using the home as your principal residence. What qualifies as a principal residence.
Converting a principal residence to a rental property will trigger capital gains tax when you sell. Selling inherited property outright also incurs capital gains tax: 50% of the difference between the home’s fair market value when you inherited it and the sold price. Ask a tax advisor to calculate the capital gains tax for you.
But if the deceased leaves you a secondary home (vacation home, income property, or other homes they left vacant, used occasionally, or leased to others), capital gains tax is owed before taking possession.
For instance, if your parent paid $80,000 for a secondary home and its fair market value when you inherit is $155,000, capital gains tax is owed on the difference ($75,000). More on capital gains tax.
You can pay the capital gains tax from your own finances or disclaim (decline) the gift. Depending on the deceased’s wishes, it may pass over to another beneficiary or the estate trustee can sell inherited property as part of the estate’s assets. Assets included in estate administration taxes.
Before you decide on any strategy, talk to a tax advisor.
Who Pays Mortgages for Inherited Property
Estate trustees are responsible for mortgages, utility payments, and property taxes for an inherited property until the estate is distributed. Any upkeep required, from mowing the lawn to renewing mandatory fire insurance, comes from estate assets. Most banks or credit unions are fully covered, through mortgage life insurance policies, for principal balances remaining when a homeowner dies. If not, the deceased may have a regular life insurance policy for discharge of mortgages.
If they’re not, the mortgage life insurance has expired (as it can), or the insurance claim is denied, the executor will have to use estate assets, such as cash or other life insurance policies, or sell the property to make up the difference. See questions to ask real estate lawyers.
Why You Need a Real Estate Lawyer
Let your Axess Law real estate lawyer close the sale for inherited property. We work with your real estate agent to conclude an estate property sale, or liaise with your lender when you refinance a mortgage for inherited property in Ontario. Axess Law keeps your sale on time and our mortgage discharge fee low. See questions to ask real estate lawyers.
Our professional legal team reviews the agreement to ensure it protects your financial interests, and that crucial closing dates are met. Vague contract? No problem. Axess Law negotiates with the buyer’s lawyer to extend timelines, or discuss conditions that may be holding up your sale. What to include in the offer to purchase. What to include in the offer to purchase.
We refinance mortgages for estate beneficiaries who inherit real property and transfer title to the property to new owners. Your Axess Law lawyer offers brief legal advice and referrals if you are challenged by other beneficiaries or spouses over title to an inherited or matrimonial home. Our Wills and estate lawyers can give you practical tips on estate executor duties, including:
- gathering and appraising assets
- applying for probate for real property like homes, land, or vacation cottages
- paying outstanding property taxes
- arranging mortgage and utility payments
- distributing real estate to rightful beneficiaries, or sell or lease it
- and much more.
Your first probate consultation is free. Call for your appointment. Hiring probate lawyers for inherited property. What is probate?
Affordable Legal Services, Anywhere in Ontario
Access lawyers for less in the Greater Toronto Area, Ottawa, or anywhere in Ontario when you buy, sell, or transfer property. Axess Law’s flat fee real estate lawyers are affordable, and our rates are all inclusive (excluding taxes, disbursements, and third-party charges). Axess Law offers you only the legal services you absolutely need. Your final invoice includes no surprises or hidden charges. Your itemized statement of adjustments is explained when we deliver it, and we answer any questions you have about it.
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