Who Gets the Property
When someone dies in Illinois, there is a process called intestate succession, and who gets what depends on whether or not there are living children, parents, siblings, and other relatives. Unless there is a will or other legal instrument in place that instructs otherwise, a spouse and children are the first to inherit the property in equal shares. If spouses or siblings do not exist, under Illinois intestate succession, parents and other decedents will be next in line to inherit the property. If someone does without a will and has no family, the property can escheat, meaning it is forfeited to the state. This, however, is rare because Illinois laws are designed to pass property on to anyone even remotely related to the deceased.
Sell, Buy, Rent, or …Don’t Claim
When inheriting a property in Illinois, there are a couple of options on what to do with it, and this also will depend on who has inherited it. The more persons who have an inherited share in the property, the more complicated the process can become. The home can be sold and the profits split, a relative can buy out the others out to keep the property for themselves, the inherited property can be rented out and those profits split, the list goes on. An important fact to know as well is that the property also does not have to be claimed in the first place. This is especially important if the property is underwater and would be a costly burden for those who would inherit it. The last option would be to file a lawsuit for partition, which essentially gets the courts involved and asks a judge to order the sale of the home and division of the profits. This is a time consuming and expensive process and should be avoided if possible.
Taxes
Everyone’s favorite topic in Illinois: taxes. Most will be happy to find out that when inheriting a property in Illinois there is actually no inheritance tax, and a graduated scale of estate taxes for estates with a worth of 4 million or more. Capital gains taxes can also, for the most part, be avoided because of what is called the “step-up tax”. When a property is inherited, it is inherited at its current market value on the date of inheritance, and therefore the only taxable income would be the difference between that value and the final sales price. So if a home was inherited and valued at $250,000, and then sold later for $300,000, the taxable gains will only be on the $50,000 increase, and not the entire profit of $300,000.
Consult Professionals
Wills and estate planning can clear some of the confusion when inheriting property, but it’s always a good idea to seek legal advice. Finding out the legal disposition of the property is important such as any outstanding mortgages or liens, and the status of the title. Inheriting property can also be tricky when more than one person is involved in the inheritance, and there are often several when it comes to spouses, siblings, and other relatives with interest. An attorney in conjunction with a real estate professional can be good mediators and also educate and lay out someone’s options after inheriting property.