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Visitor I

Inheritance tax house in Escrow CA

My husband passed on June 16, 2016. He passed in Salinas, CA and was a CA resident as was I when he passed. He died Intestate. He owned his father's house as Joint Tenants located in Escondido, CA. Therefore, I owned 25% interest in the house. A Probate was opened. The Probate was closed in April 2018. The house had to be sold because my brother in law could not buy me out. The house is now in Escrow for $475,000. The Escrow company sent me the package and there are several tax forms. However, neither CA and I now live in GA, have Inheritance Tax. The disbursement should be tax free. It looks like they are going to withhold taxes. The deed is an Estate Quit Claim deed clearly stating that this is an inheritance. My husband nor his brother ever lived in this house. The Escrow company told me I need an accountant because they cannot give me any advice. I need to know how to protect myself of 1) no taxes will be withheld from my 25% 2) I need something to give to the Escrow company to add to the package to protect my 25% from being taxed at closing. My brother in law owns 50% of the house, he may be taxed on that but I do not want to pay any part of his taxes due on this sale. Can you please guide me in the directions where I can stay protected?

1 Comment
Member II

Inheritance tax house in Escrow CA

We cannot give you any advice on inheritance tax as this is a forum for income tax. 

If you inherited the house by quit claim deed from the estate and then sold the house yourselves, meaning you and whoever else inherited the reminder of  the property, you would owe income tax on  any gain on the sale.  If you already owned 25% before the sale, the cost basis on that portion would be your costs basis at the time the house was purchased.if your husband was co-owner from the beginning.  (If this was a primary residence, you could write up that cost to the value at the time of passing, but I don't believe that applies to an investment property.

The other portion you inherited when your husband passed away would be valued at the time of his passing.  You should probably see an attorney to help you understand the difference between income and inheritance tax.  Since you no longer live in CA, they will automatically withhold an estimated amount of income tax on the sale.