The call I receive is often from one of three siblings. Their parents have passed, leaving the family home in Brooklyn they purchased in 1978. The house is filled with memories, but it also represents the largest asset in the estate. Two of the siblings want to sell and move on. The third is resistant, feeling as though they’re being asked to sell a piece of their childhood.
This situation is common and emotionally charged. Beneath the family dynamics are legal and financial obligations that demand precision. Selling an inherited property isn’t like selling your own home. The person in charge of the sale—the executor or administrator—is a fiduciary. This means they have a legal duty to act in the best interests of all the estate’s beneficiaries, not just their own.
My role in these cases is to provide clarity and a path forward. We work with the fiduciary to ensure the process is handled correctly, from securing the legal authority to sell to distributing the proceeds according to the will or the law.
The Executor’s Authority to Act
Before a single “For Sale” sign can be placed on the lawn, the first question is always: who has the legal right to sell the property? The answer is not “the children” or “the heirs.” The authority to sell real estate owned by a decedent rests with the court-appointed fiduciary of the estate.
If the decedent had a will, this person is the executor named in that document. We petition the Surrogate’s Court to have the will admitted to probate and have the court issue Letters Testamentary. This court order is the executor’s proof of authority. If there was no will, a close relative petitions to be appointed the administrator of the estate, and the court issues Letters of Administration.
Without these Letters, no title company in New York will insure the title transfer, and no legitimate sale can occur. The executor’s power is not absolute—it is governed by a strict fiduciary duty to manage the estate’s assets prudently for the beneficiaries. This includes selling the property for fair market value and acting transparently throughout the process.
Understanding Capital Gains and the “Step-Up”
One of the most significant financial considerations in selling inherited property is capital gains tax. Many families worry that they will face a massive tax bill based on the decades of appreciation in the property’s value. Fortunately, the tax code provides significant relief.
This relief is called the “step-up in basis.” For tax purposes, the property’s cost basis is “stepped up” to its fair market value on the date of the owner’s death. Let’s return to that Brooklyn home. If the parents bought it for $50,000 in 1978 and it was worth $1.5 million when the last parent passed away, the heirs’ cost basis is not $50,000. It is $1.5 million.
If they sell the house for $1.55 million, they only pay capital gains tax on the $50,000 of appreciation that occurred after they inherited it. This provision can save a family hundreds of thousands of dollars in taxes. It is one of the most powerful—and often misunderstood—aspects of inheriting real estate.
Navigating Liens, Debts, and Disagreements
A clean sale requires a clean title. Part of the executor’s job is to identify and resolve any claims against the property before it can be sold. These can include mortgages, home equity lines of credit, tax liens, or even a Medicaid lien if the parent received long-term care benefits.
All of the estate’s legitimate debts must be paid before any money can be distributed to the beneficiaries. The proceeds from the property sale often provide the liquidity needed to settle these final expenses. This is a critical part of an executor’s stewardship.
Sometimes, the biggest hurdle isn’t financial—it’s familial. When beneficiaries disagree about selling, an executor is caught in the middle. While an executor generally has the power to sell property under New York law—see, for instance, Surrogate’s Court Procedure Act (SCPA) § 1902, which grants fiduciaries the power to dispose of real property—they must do so in a way that is fair to everyone. Forcing a sale against the wishes of a beneficiary can lead to litigation. In these situations, we often mediate a solution, such as a buyout where one sibling purchases the others’ shares, or we proceed with a court-supervised sale if no agreement can be reached.
Ultimately, selling an inherited home is the final chapter of a family’s story with that property. It’s a process that requires not just legal and financial diligence, but also a profound respect for the legacy at stake.
If you have been named an executor and are responsible for an estate that includes real property, the first step is to formalize your authority. Schedule a consultation with our firm to discuss petitioning the Surrogate’s Court for the Letters you need to act.
