What to Do With Inherited Real Estate

What happens to inherited real estate depends almost entirely on how it was titled — that one detail determines whether it passes automatically, requires probate, or needs a different process entirely. Here's how to figure out which applies, and what to consider once you know.

How title was held determines what happens next

Joint tenancy with rights of survivorship, or property in a living trust, generally passes to the survivor or trust beneficiary without probate.
A transfer-on-death or beneficiary deed — recorded in advance, currently authorized in roughly 30 states, with the mechanics varying by state — passes the property directly to the named beneficiary, also without probate.
Property held solely in the deceased person's name, with none of the above in place, is the case that generally requires probate before it can be sold, refinanced, or formally retitled.

Get it appraised as of the date of death

In the U.S., inherited property typically receives a "stepped-up basis" — its cost basis resets to fair market value on the date of death rather than what the original owner paid. A date-of-death appraisal or comparative market analysis establishes that value, which can substantially reduce or eliminate capital gains tax if the property is later sold.

Keep, sell, or rent

Keeping it means ongoing property tax, insurance, and upkeep — and if you're inheriting alongside siblings, everyone generally needs to agree. Selling is often the simplest path with multiple heirs, though it usually has to wait until probate (if required) is complete. If the property is already rented, the lease generally stays binding on the new owner — notify the tenant of the ownership change and where rent should now be sent.

Insurance, property tax, and an existing mortgage

A vacant inherited property often needs a different insurance policy — standard homeowner's coverage frequently limits or excludes vacant-home claims.
Some jurisdictions offer a temporary continuation of the deceased owner's property tax exemption during the transfer process, but this is rarely automatic and usually requires filing for it.
Federal law (the Garn-St. Germain Act) protects an heir from being forced to immediately pay off or refinance an existing mortgage just because of the death — payments can generally continue under the original loan terms as long as they're kept current.

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Frequently asked questions

Do I have to go through probate to sell inherited real estate?

Usually, if the property was solely owned and no transfer-on-death deed, joint tenancy with survivorship, or living trust already provided a way around it. Check exactly how title was held before assuming either way.

What does "stepped-up basis" actually mean for me?

It means the property's value for tax purposes resets to what it was worth on the date of death, not what the original owner paid decades earlier. That matters most if you later sell — it can significantly reduce the capital gains tax owed on appreciation that happened during their lifetime.

Can the bank force me to pay off the mortgage right away?

No. Federal law specifically protects heirs from being forced into immediate payoff or refinancing solely because of the owner's death — you can generally keep making payments under the existing loan terms.