Complete Guide to Selling Inherited Land in Oregon
Inheriting property can be both a blessing and a burden. Often, land is sold shortly after being inherited. There are several reasons why an heir might choose to sell inherited property:
1. They may not have a use for the property.
2. They may live too far away.
3. They may not want to maintain the property.
4. They may want to avoid paying annual property taxes.
5. They may want to sell the property quickly to avoid capital gains tax.
If you have inherited property, you'll need to take legal steps to obtain the title. You'll also need to decide what to do with the property. If you choose to sell it, there are several options available. In this article, we will discuss the steps involved in inheriting land in Oregon and explore the different options for selling your Oregon property.
I inherited property in Oregon, what should I do first?
If you have inherited property, the first step is to get clear title to the land. Clear title means that you are the legal owner of the property and you can sell it or do whatever you want with it.
To get a clear title, you will need to go through the legal process known as probate unless you meet one of the exceptions. Probate is the process of settling a person's estate after they die. This includes paying off any debts that the person owed (such as a mortgage) and distributing the assets to their heirs.
What is probate?
Probate is the legal process of administering the estate of a deceased person. This includes collecting the assets of the estate, paying the debts of the estate, and distributing the assets to the heirs.
Probate in Oregon is handled by the probate court in the county where the deceased person died or lived.
How to avoid probate in Oregon
In Oregon, probate is not always necessary. Certain types of property ownership can simplify the transfer of assets upon death. allowing them to pass directly to beneficiaries. These are some common exceptions to probate in Oregon.
Living trusts
Assets held in a revocable living trust do not go through probate. The trustee can manage and distribute the trust's assets according to the terms of the trust agreement without court supervision.
Joint ownership
Joint Tenancy: If the deceased owned property jointly with another person with the right of survivorship, the surviving owner automatically inherits the deceased's share of the property without going through probate.
Tenancy by the Entirety: For married couples, this form of joint ownership also allows the property to pass directly to the surviving spouse.
Transfer on death deed
A transfer on death deed allows someone to transfer their ownership of real estate to a designated beneficiary upon their death.
Small estate affidavit
It’s also possible to avoid probate if the total fair market value of the estate is below $275,000. Of the $275,000, no more than $75,000 can be personal property such as and no more than $200,000 may be from real estate.
The fair market value of the estate is determined 1) at the time of death or 2) if more than one year has passed since the death, then within 45 days before the filing of the affidavit. The fair market value of the estate is not reduced by liens or other debts such as a mortgage.
What happens during the probate process in Oregon
1. Validating the Will: If there is a will, it's "proved" in court. This is done either by an affidavit from the witnesses or by having the witnesses testify in court to confirm the deceased was of sound mind when signing the will.
2. Appointing a Personal Representative: This person manages the deceased's affairs. If named in the will, the court usually approves them. If there's no will, the court appoints someone, typically a spouse, adult child, or close relative. If no family members are available or willing, the court may choose a bank, trust company, or lawyer.
3. Notifying Creditors: A notice is published in a local newspaper to inform creditors they have four months to make claims against the estate. Known creditors are also notified in writing.
4. Notifying Heirs and Beneficiaries: Those named in the will or as heirs are informed of the probate proceedings.
5. Inventorying Assets: The personal representative identifies and values the deceased's assets. This step varies in complexity depending on the types of assets and records left.
6. Paying Debts: The personal representative pays any debts from the estate's assets before distributing the remainder to beneficiaries.
7. Filing Tax Returns: State and/or federal tax returns, along with any inheritance, gift, and estate tax returns, are prepared and filed by the personal representative.
8. Accounting: The personal representative submits an account of all financial transactions related to the estate to the court, heirs, and beneficiaries. If the heirs and beneficiaries agree, they can waive the formal accounting, and a verified statement can be filed instead.
9. Distributing Assets: After the court approves the account and all probate expenses are paid, the remaining assets are distributed to the beneficiaries named in the will or, if there's no will, to the legal heirs.
How long does probate take in Oregon?
Probate in Oregon takes a minimum of four months, but can easily take six to nine months or much longer. An extended timeline to sell a property can contribute to a longer total probate timeline.
How much does probate cost?
Some Oregon probate costs are predictable. The personal representative is entitled to receive a set amount of compensation according to ORS 116.173, unless the court grants a request for a different amount of compensation. This amount is a commission based on the whole value of the estate:
- Seven percent of any sum not exceeding $1,000.
- Four percent of all above $1,000 and not exceeding $10,000.
- Three percent of all above $10,000 and not exceeding $50,000.
- Two percent of all above $50,000.
- One percent of the property, exclusive of life insurance proceeds, not subject to the jurisdiction of the court but reportable for Oregon estate tax or federal estate tax purposes.
Other costs can be expected, but are not as easy to estimate:
- Court and filing fees
- Attorneys fees
- Personal Representative compensation - Oregon state law sets Executor fees by statute. Fees can range from two to seven percent, based on estate value
- Professional fees, such as an appraiser or surveyor
- Personal representative bond, required with some exceptions
Estate tax and capital gains tax in Oregon
Landowners often wonder how inherited property is taxed. Oregon charges an estate tax ranging from 10% to 16% on estates that are valued at more than $1 million. However, there are exemptions for surviving spouses and for heirs that live in Oregon
There is also a federal estate tax, but this is only triggered for inheritance worth several million dollars.
You may also have to pay capital gains tax. A capital gain is when you sell property for more than its tax basis. When you inherit real estate, the property’s tax basis readjusts to fair market value. That means that if you sell a property right away at market value, you would owe little or no capital gains tax.
Short-term capital gains will apply if you sell the property with a gain less than a year after inheriting. Long-term gains will apply if you sell the property after a year or more. The taxable amount would be the difference between the property value at inheritance and the sale price. The federal tax rate on capital gains is 0%, 15%, or 20%, depending on your tax bracket and filing status.
You may have to pay capital gains tax at the state level as well. Long-term capital gains tax rates in Oregon range from 4.75% to 9.9%, depending on the taxpayer’s income level.
Sell inherited property as-is
Once you’ve decided to sell the land, there are three options for selling your Oregon land.
List it with a real estate agent
A real estate agent can help you list your land on the MLS and find potential buyers. They can also negotiate the sale price and handle the paperwork. However, it can take a long time to sell vacant land, and there's no guarantee you'll find a buyer. You may also have to invest in cleaning up the land before it's ready to list for sale.
Sell the land by owner
You can save on real estate agent commissions by selling your land yourself. You can list your land on websites like Zillow and Trulia, or you can put up signs in the area where the land is located. However, you'll be responsible for all the paperwork, dealing with potential buyers, and negotiating contracts. This can be a lot of work, and it may not be worth it if you're not familiar with the real estate market.
Sell to a cash buyer
Cash buyers like our company are willing to buy land quickly and without any contingencies. This can be a good option if you need to sell your land quickly, but you'll likely have to sell it at a discount.
Still, you may just want to move on from the property you've inherited. The convenience of selling hassle-free may be more important than getting the full market price. It's also the fastest way to sell vacant land - the whole process typically takes less than two weeks to sell land. If you like the idea of selling your inherited land quickly, consider requesting a cash offer today.
Frequently asked questions
Does Oregon allow transfer-on-death deeds?
Yes, Oregon allows real estate to be transferred with transfer-on-death deeds.
Conclusion
Inheriting property in Oregon can bring some challenges initially. The first crucial step is to secure a clear title to the property, often involving the probate process unless certain exceptions apply. Once the legal aspects are sorted out, consider your options for managing or selling the property. Each choice has its pros and cons, depending on your timeline, financial needs, and willingness to engage in the selling process. Ultimately, the best decision will depend on your personal circumstances and goals.
Please consult your financial advisor, accountant, real estate attorney, or tax specialist. This article is for informational purposes and is not tax or legal advice.
