Inherited Property Real Estate Guide: The 4 Paths and What Each Actually Costs

Inheriting real estate is simultaneously a financial event, a legal process, and an emotional experience. Most heirs receive a house and a stack of estate paperwork with no framework for the four decisions that actually matter: whether to sell immediately, keep and rent, move in, or execute a sibling buyout. Estate attorneys cover the legal process. Financial planners cover the investment allocation. iBuyers and cash offer companies target distressed estates at below-market prices. A brokerage with no cash offer and no estate law practice can give you the complete transaction mechanics for all four paths with no product conflict.

What are the options when you inherit a house?

Four paths: (1) Sell — convert equity to cash, cleanest exit, triggers the stepped-up basis tax event. (2) Keep and rent — generates income, preserves the asset, adds landlord responsibility. (3) Move in — converts rental or second home use to primary residence; 2-of-5-year clock starts for capital gains exclusion eligibility. (4) Sibling buyout — one heir buys out others’ interests; requires financing and an agreed valuation.

Do you pay capital gains tax when you inherit a house?

Usually no — or very little. The stepped-up basis resets the cost basis to fair market value at the date of death. If you sell soon after inheriting at or near that value, the taxable gain is minimal. Even if you sell the day after inheriting, any gain above the stepped-up basis is taxed at long-term capital gains rates (0/15/20%), never short-term. The exclusion ($250K single / $500K married) also applies if you move in and live there 2 of 5 years.

How long does probate take for a house?

Typically 6–18 months for most states. California: 9 months to 2+ years. Texas with independent administration: faster, sometimes 3–6 months. A living trust avoids probate entirely, allowing much faster property transfer. Contested wills, title issues, or unpaid debts extend any timeline.

What is the federal estate tax exemption for 2026?

$15,000,000 per individual ($30,000,000 for married couples). The vast majority of estates — including those with valuable homes — fall below the federal exemption and owe no federal estate tax. 12 states have their own estate taxes with lower exemptions (Oregon: $1M, Massachusetts: $2M). Always check your specific state’s estate tax threshold.