If you’ve inherited a home or land, the “what now?” depends heavily on the state where the property sits. Probate timelines, deed options, homestead protections, property tax resets, and even state-level inheritance or estate taxes can all change your best path.
To avoid costly mistakes, our Florida Inherited Property Advisors recommend learning the state’s transfer and tax rules before you list, rent, or buy out co-heirs. Below is a clear, state-by-state framework—anchored by a Florida snapshot—to help you plan confidently.Note: Laws change and are state-specific. This is general information, not legal or tax advice.
The Federal Baseline (Applies in Every State)
- Step-up in basis: Heirs generally receive a basis equal to fair market value at the date of death (or alternate valuation date). This can reduce capital gains if you sell soon after inheriting.
- Capital gains on sale: If you sell after inheriting, gains are usually sale price minus stepped-up basis (less selling costs). Holding longer can create new gains.
- Federal estate tax: Only very large estates are affected. For 2025 the exemption remains historically high (over $13 million per person) but is scheduled to drop roughly by half in 2026 absent new legislation. Verify current IRS thresholds.
- No federal inheritance tax: The U.S. doesn’t impose a federal inheritance tax; some states do.
Our Florida Inherited Property Advisors recommend confirming the date-of-death value with a credible CMA or appraisal and keeping documentation for future tax filings.
The 8 State “Levers” That Change Your Path
States differ on eight key dimensions. Understanding these will help you navigate any jurisdiction.
- Probate and small-estate options
- Some states allow simplified “summary” or “small estate” procedures based on asset value or type.
- Independent vs. supervised probate varies; timelines can range from weeks to a year.
- Deed and non-probate transfer tools
- Transfer-on-death (TOD) deeds are available in many states—but not all.
- Enhanced life estate deeds (“Lady Bird” deeds) are recognized in a few states, including Florida.
- Payable-on-death (POD/TOD) designations for financial accounts can bypass probate.
- Homestead and spousal rights
- Rules can limit who inherits or how quickly you can sell. Protections often impact creditor claims and forced-sale rights.
- Community vs. separate property
- In community property states, surviving spouses may receive a full step-up in basis on both halves of community property.
- In separate property states, treatment differs.
- State estate and inheritance taxes
- A minority of states impose estate or inheritance taxes (with varying exemptions and rates). Some have both.
- Property tax reassessment and exemptions
- Transfers can trigger reassessment or loss of caps and exemptions, affecting carrying costs.
- Some states offer limited parent-child exclusions; others don’t.
- Medicaid estate recovery
- States differ on whether and how Medicaid seeks reimbursement from a decedent’s estate (often probate-only vs. broader claims).
- Deadlines and filings
- Expect timelines for probate initiation, spousal elections, tax filings, and property tax exemption applications.
Our Florida Inherited Property Advisors recommend starting with a one-page “State Rules Snapshot” that flags these eight levers for the property’s state.
Florida Snapshot: What Heirs Need to Know
Florida has several distinctive features that shape inherited property decisions.
- Probate routes: Florida offers formal probate and summary administration for smaller estates or when the decedent has been deceased for more than two years. The personal representative’s authority matters for listing and selling.
- Homestead protections: Florida homestead rules are strong. If there is a surviving spouse or minor children, transfers and sales can be restricted. Spousal rights (elective share, life estate vs. half-interest options) can affect timing and title.
- No state estate or inheritance tax: Florida doesn’t impose these, but federal estate tax may still apply to very large estates.
- No TOD deeds for real property: Florida does not recognize traditional transfer-on-death deeds for real estate. However, Enhanced Life Estate (“Lady Bird”) deeds are commonly used for planning to transfer outside probate while retaining control during life.
- Property taxes: Expect a reset when homestead status changes. The “Save Our Homes” cap and homestead exemption typically end at death unless a surviving spouse requalifies. Verify whether portability is relevant and plan for a higher tax bill if you hold.
- Insurance and vacancy: Carriers may limit or price coverage differently for vacant homes. Keep utilities on and address inspections and roof issues promptly.
- Medicaid estate recovery: In Florida, recovery is generally limited to probate assets, but planning and titling decisions can impact exposure.
What our Florida Inherited Property Advisors recommend:
- Confirm homestead status and spousal/minor-child rights before signing any listing agreement.
- Get a title update early to catch liens or estate issues.
- Model net proceeds under sell-now vs. repair-and-sell vs. rent scenarios with updated property taxes and insurance.
Examples of How Other States Differ
- California (Prop 19): Transfers often trigger full reassessment of property taxes. Parent-to-child exclusions are limited to a primary residence and capped amounts, with claim filings required. TOD deeds are allowed. No state inheritance or estate tax.
- Texas: Probate can be efficient with independent administration; affidavits of heirship are sometimes used for title, though not always accepted by lenders. No state inheritance or estate tax. Homestead protections are significant; property taxes can be high. TOD deeds permitted.
- New York: Has a state estate tax with a “cliff” effect near the exemption threshold. No inheritance tax. Probate typically runs through Surrogate’s Court; ancillary probate may be required for out-of-state owners.
- New Jersey and Pennsylvania: NJ repealed its estate tax but maintains an inheritance tax for certain classes of beneficiaries. PA imposes an inheritance tax with rates varying by relationship. Timely filings and appraisals are important.
- Maryland: Uniquely has both an estate tax and an inheritance tax (with exemptions for close relatives).
- Washington and Oregon: Both have state estate taxes with relatively lower exemptions than federal levels; planning matters for larger estates.
- Arizona and Nevada: No state estate or inheritance taxes, TOD deeds available, and comparatively streamlined transfers.
If you’re managing properties in multiple states, our Florida Inherited Property Advisors recommend handling each property according to its state’s rules rather than assuming a “one-size-fits-all” approach.
30-Day Action Plan to Stay Compliant (Any State)
Week 1: Gather facts
- Death certificate, will/trust, and personal representative or trustee documents.
- Title report, mortgage/HOA statements, tax bills, insurance policy.
- Date-of-death valuation (CMA or appraisal) for basis.
Week 2: Map the state rules
- Identify the eight levers: probate path, deed options (TOD/Lady Bird), homestead/spousal rights, community property status, state estate/inheritance tax exposure, property tax reassessment rules, Medicaid recovery scope, deadlines.
- Start any required filings (probate petition, spousal elections, property tax exemption claims).
Week 3: Decide your strategy
- Model net outcomes for sell-now, repair-and-sell, rent, or buyout.
- If multiple heirs, document roles, budgets, and a decision rule (unanimous vs. majority with guardrails).
- Line up insurance coverage suitable for occupancy status.
Week 4: Execute with documentation
- Use a written family memorandum outlining agreements and reimbursement rules.
- Keep receipts for repairs and carrying costs.
- Calendar tax and legal deadlines.
Throughout this process, our Florida Inherited Property Advisors recommend keeping a single shared folder and a weekly 30-minute check-in to avoid miscommunication.
Quick FAQs
- Do heirs pay income tax on what they inherit?
Typically, no. Inheritances aren’t income for federal tax purposes, but subsequent income (like rent) and gains on sale can be taxable. - What’s the difference between inheritance tax and estate tax?
Inheritance tax is paid by the beneficiary in certain states. Estate tax is paid by the estate before distributions. Some states have one, a few have both, many have neither. - Can I avoid probate with a TOD deed?
In many states, yes—TOD deeds can transfer real property outside probate. Florida does not allow TOD deeds for real property; a Lady Bird deed is a common alternative used in planning prior to death. - How do property taxes change after inheritance?
Many states reassess at transfer or when homestead status ends. California has strict rules under Prop 19; Florida’s homestead exemption and caps often reset at death. File required forms quickly to preserve any benefits.
Our Florida Inherited Property Advisors recommend confirming these answers with a local attorney or CPA in the property’s state.
Final Takeaway and Next Step
The best path for inherited real estate is state-specific. By mapping the eight levers—probate route, deed tools, homestead and spousal rights, community property status, state-level transfer taxes, property tax shifts, Medicaid recovery, and deadlines—you can choose a strategy that preserves value and avoids surprises. Inherited Property Advisors can help you compare options, coordinate valuations, and keep co-heirs aligned. For clear next steps grounded in Florida rules or multi-state coordination, our Florida Inherited Property Advisors recommend reaching out early to save time, taxes, and stress.