General information, not legal or tax advice

Selling an Inherited Home in Tennessee

Inheriting a home often comes at a hard time. On top of grief, there are papers to find, bills to pay and family decisions to make. If the home is in Manchester or anywhere in Coffee County, this page walks through what Tennessee law and the IRS say about selling it, in plain English, so you know what questions to ask.

This is general information, not legal or tax advice. Every estate is different. Please talk with a Tennessee probate attorney and a tax professional about your own situation before you sign anything or list the home.

Step 1: Find out who has authority

Tennessee law is clear that no one may step in and handle a deceased person's estate on their own. Under TCA 30 1 101, a person may not administer an estate until the court has issued letters testamentary or letters of administration. These letters are the papers that show who the personal representative is. Court forms use letters testamentary when there is a will and letters of administration when there is no will.

To ask for letters, TCA 30 1 117 says a verified petition is filed with the court. It lists details such as the decedent's name, date of death and residence, any will offered for probate, the heirs or beneficiaries, and the proposed personal representative.

Probate in Coffee County

Coffee County's government website says the Chancery Court for the 14th Judicial District has had exclusive jurisdiction over the administration of decedents' estates since 1980, and all petitions to administer an estate or probate a will must be filed in Chancery Court. A few other points from the county's probate page:

The court does not provide petition and order forms for a general probate.
In all probated estates, a release from TennCare is required, regardless of the age of the decedent.
The county posts forms for small estates, claims against an estate and probate status reports.

The Clerk and Master's office is in the Justice Center at 300 Hillsboro Boulevard in Manchester, phone (931) 723 5132. The county notes that clerks are not allowed to give legal advice about a specific situation, which is one more reason to have a probate attorney.

Step 2: Learn how the home passes under Tennessee law

Under TCA 31 2 103, real property of a person who died without a will vests immediately at death in the heirs set out in Tennessee's intestate succession law. Real property of a person who died with a will vests immediately in the beneficiaries named in the will, unless the will specifically directs that the real property be administered as part of the estate under the control of the personal representative.

The same statute says the personal representative takes the decedent's personal property to pay administration expenses, taxes, funeral expenses and debts. If the personal property is not enough, the personal representative may use the real property under the procedures in Title 30, Chapter 2, Part 4.

Tennessee also allows a will to be admitted to probate for the limited purpose of establishing a muniment of title to real estate and personal property, without granting letters testamentary or going through a full administration, under TCA 32 2 111. Your attorney can tell you whether that fits your estate.

If the home was titled jointly, for example with a surviving spouse, the deed itself may affect who owns it now. Bring a copy of the deed to your attorney.

Step 3: Know what the small estate process does not cover

Many families ask about a small estate shortcut. Tennessee's Small Estate Probate Act defines a small estate as one where the probate property is worth no more than $50,000, under TCA 30 4 102. But the same section defines property for this purpose as personal property only.

Under TCA 30 4 103, a petition for limited letters generally can be filed after 45 days from the date of death, unless the court waives the wait for good cause. The statutory form for those limited letters states that there is no real property at issue and that the letters give no authority to handle any real estate matters of the decedent. In other words, the small estate process is not a way to sell a house.

Step 4: When the court has to approve a sale

Whether you need a court order depends on the will, the estate and how title passed.

A will with a power of sale. Under TCA 35 50 109, a will can incorporate by reference the fiduciary powers listed in TCA 35 50 110. One of those powers lets the fiduciary sell real property of the estate by public or private sale, on terms the fiduciary judges best for the estate and its beneficiaries, without needing judicial authorization. A court can still restrain a fiduciary under TCA 35 50 109.
Selling to pay debts. If the personal property appears insufficient to pay debts and expenses, TCA 30 2 402 lets the personal representative, or a creditor with a filed claim, petition the probate court to sell the decedent's land. The surviving spouse, heirs and devisees are made parties. The court may order a sale subject to its confirmation, and it can ratify a private sale contract.
A home that vested in heirs or beneficiaries. When the home passed straight to heirs or beneficiaries under TCA 31 2 103, the people who now hold title are the ones a title company will look to. If several family members inherited together, plan on everyone agreeing on the sale and the paperwork.

Your probate attorney and the closing attorney or title company will confirm who must sign the deed and whether a court order is needed before you accept an offer.

Step 5: Title, deeds and title insurance

Before closing, a title company or attorney searches the public records to confirm who owns the property and whether there are liens or other claims against it. The Coffee County Register of Deeds does not do title searches.

You may hear about a quitclaim deed. The Legal Information Institute at Cornell Law School defines it as a deed that conveys the grantor's present interest, if any, without representing or warranting that the title is good. Because it makes no promise about title, ask your attorney before using one.

The CFPB says most lenders require a lender title policy, and an owner title policy is optional for the buyer. Clean, well documented title helps the buyer's lender and title company move forward.

Step 6: Protect the home while it is empty

Keep paying property taxes. Under TCA 67 5 2101, property taxes become a first lien on the property from January 1 of the tax year and are also a personal debt of the owner. See my Coffee County property taxes guide.
Call the insurance company. The Insurance Information Institute (Triple I) says most homeowners policies include a vacancy clause that limits or excludes coverage if the home is unoccupied, typically for 30 to 60 consecutive days. It recommends telling the insurer when a home will be vacant and asking about a vacant home policy or vacancy endorsement.
Look after the house. Triple I suggests keeping indoor heat at 55 degrees or higher in winter, shutting off the water or winterizing the plumbing, locking doors and windows, and having someone check the home weekly.
Know what a fiduciary may do. Among the powers in TCA 35 50 110 that a will can incorporate are paying taxes on estate property, repairing and maintaining it, and buying insurance to protect it.

Step 7: Understand the taxes

No Tennessee inheritance tax. The Tennessee Department of Revenue says the inheritance tax is no longer imposed after December 31, 2015, and is repealed for dates of death in 2016 and after.
Stepped up basis. IRS Publication 551 and Publication 523 say the basis of an inherited home is generally its fair market value on the date of death, or on the alternate valuation date if the personal representative chooses it. If a federal estate tax return (Form 706) was filed, the IRS says to use the value reported there. Your gain or loss on the sale is figured from that basis, so ask your tax professional how to document the value on the date of death.
Holding period. IRS Publication 544 says inherited property is treated as held longer than 1 year, no matter how long you actually owned it.
Main home exclusion. IRS Topic 701 explains that you may exclude up to $250,000 of gain on the sale of your main home, or up to $500,000 on a joint return, if you meet the ownership and use tests: at least 2 years of the 5 years before the sale. This exclusion is tied to your own main home, so whether it can help with an inherited house depends on your facts.

A tax professional can tell you what to report and what records to keep.

Step 8: Disclosure when you sell

Tennessee's Residential Property Disclosure Act lists transfers that are excluded in TCA 66 5 209. Several can come up with an inherited home:

Transfers by a fiduciary in the course of administering a decedent's estate, guardianship, conservatorship or trust
Transfers under a court order, including transfers ordered in the administration of an estate
Transfers made solely to a spouse or to people in the lineal line of consanguinity of a transferor
Transfers where the owner has not lived on the property at any time within three years before the transfer

Whether your sale fits one of these depends on who is selling and how. Ask your attorney. An exemption from the state disclosure statement does not change everything else. Real estate licensees must still disclose adverse facts they know about under TCA 62 13 403, and the federal lead based paint disclosure applies to most homes built before 1978. EPA lists its exceptions as including foreclosure sales, housing built after 1977 and housing a certified inspector has tested and found free of lead based paint. My guide to Tennessee seller disclosure has more detail.

Step 9: Get the home ready to sell

Gather papers: copies of the death certificate, the will if there is one, the letters from the court, the deed, recent tax bills and the insurance policy.
Collect home records such as repair receipts, warranties, any survey, HOA documents and septic or well information.
Decide together, as a family, whether to sell and who will be the point of contact with the attorney, the title company and me.
Decide how much work to do. Some families clean out and refresh the home. Others sell it in its current condition. My guide to selling a house as is explains what that means in Tennessee, and the prepare to sell checklist helps if you plan to fix things up.
Get a home value report. It is an opinion of market value to help you plan, not an appraisal.

When to talk to a probate attorney

Talk with a Tennessee probate attorney before you list if:

No one has letters from the court yet, or you are not sure who has authority
There is no will, or the will is unclear about the house
Several heirs inherited and do not all agree
The estate has debts and the personal property may not cover them
A family member lives in the home, or the home is rented
You are not sure whether your sale is exempt from the disclosure statement

How I help

I help families across Manchester and Coffee County sell inherited homes with care. I will work alongside your probate attorney and closing attorney or title company, prepare a home value report, help you decide what to fix and what to leave, and market the home on the MLS to buyers looking in the area. Legal questions go to your attorney, and tax questions go to your tax professional.

Keep reading:

Have questions about an inherited home in Manchester?

I am glad to talk it through, with no pressure and no obligation. Call or text me at (615) 497 1658, or request your free home value report below.

Common questions

Do I have to go through probate to sell an inherited house in Tennessee?

It depends on the will, the estate and how title passed. Under TCA 31 2 103, real property generally vests at death in the heirs or the beneficiaries named in the will, unless the will directs the personal representative to administer it. Under TCA 30 1 101, no one may administer an estate without letters from the court. A Tennessee probate attorney can tell you what your estate needs before you list.

Where do you file probate in Coffee County, TN?

Coffee County says all petitions to administer an estate or probate a will are filed in Chancery Court, which has had exclusive jurisdiction over decedents estates since 1980. The Clerk and Master is at 300 Hillsboro Boulevard in Manchester, (931) 723 5132.

Can an executor sell a house without court approval in Tennessee?

Sometimes. A will can incorporate the fiduciary powers in TCA 35 50 110, which include selling estate real property without judicial authorization. A sale to pay estate debts under TCA 30 2 402 goes through the court. Ask your probate attorney which applies.

Can I use the Tennessee small estate process to sell a house?

No. Under TCA 30 4 102, the Small Estate Probate Act covers personal property only, in estates where probate property is worth no more than $50,000, and the limited letters form in TCA 30 4 103 says it gives no authority over real estate.

Is there an inheritance tax in Tennessee?

Not for deaths in 2016 or later. The Tennessee Department of Revenue says the inheritance tax is no longer imposed after December 31, 2015.

Do I pay capital gains tax when I sell an inherited house?

Possibly, on any gain. The IRS says the basis of an inherited home is generally its fair market value on the date of death, and inherited property is treated as held longer than 1 year. Talk with a tax professional about your own sale.

Matt Sargent is a Tennessee licensed affiliate broker with Keller Williams who helps buyers and sellers in Manchester and Coffee County. Call (615) 497 1658 or send a message.