For this edition of Living Akamai, Kay Mukaigawa of Engel and Volkers discussed the scenario of inheriting real estate and the things to be aware of.

“I’ll share a story where a homeowner didn’t even realize she had inherited a property because it wasn’t a typical relative, but it was her husband who passed away.

My friend’s mom (Sandy) asked me to sell her residence because she was moving to the mainland to live with her daughter.  I asked Sandy to check with her accountant to see if any taxes were owned since she had purchased the property many years ago

We sold the home for $800,000 and the accountant calculated a credit of $250,000 back to Sandy since was an owner occupant.  He then deducted original sales price and some improvements over the years and said she would owe about $90,000 in capital gains taxes.

I knew Sandy’s husband had passed away over 10 years ago, so I asked if she had done a Date of Death or Retrospective appraisal since she ‘inherited’ her husband’s portion of the house.”

We wanted Kay to define a ‘Date of Death Appraisal’

“The date of death or retrospective appraisal is done when a homeowner passes away to help determine the value of the property on the exact date of their passing for inheritance purposes.

When Sandy had this done, it gave her a new valuation or cost basis which meant she didn’t have as much of a gain.   She met with her accountant and after sharing the Date of death valuation of her home was now $550,000, her taxes decreased significantly.  She actually didn’t pay any taxes on the sale after ordering the Date of Death appraisal.”

For more information on this or other topics, visit evrealestate.com