INHERITANCE January 3, 2025 10 min read

What to Do With an Inherited Property: A Complete Guide for Washington Heirs

Inheriting a house in Washington State comes with important decisions about probate, taxes, repairs, and whether to keep, rent, or sell. At Lead Property Buyers, we regularly work with heirs navigating these complex decisions during an already emotional time. This guide walks you through every step of the inherited property process in Washington.

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What You'll Learn:

  • • How Washington probate works and timeline expectations
  • • Tax implications and capital gains considerations
  • • Your four main options: Keep, Rent, Sell, or Disclaim
  • • What to do if the property needs repairs or has a mortgage
  • • How to handle multiple heirs and family disagreements

Step 1: Understand the Washington Probate Process

Before making any decisions about the inherited property, you need to understand whether it must go through probate and how long that process takes in Washington State.

Does the Property Need to Go Through Probate?

Not all inherited properties require formal probate. Here's when probate is and isn't necessary:

Probate NOT Required If:

  • • Property was held in a living trust
  • • Title was held as "Joint Tenants with Rights of Survivorship"
  • • Property had a Transfer on Death (TOD) deed
  • • Estate value is under $100,000 and meets small estate criteria

Probate Required If:

  • • Property was solely in deceased's name
  • • Title was held as "Tenants in Common"
  • • Estate value exceeds $100,000
  • • No estate planning documents exist

Washington Probate Timeline

Understanding the timeline helps you plan your next steps:

1

Month 1-2: Petition Filing

File probate petition with county superior court. Court appoints Personal Representative (executor).

2

Month 2-4: Creditor Notice Period

Required 4-month period for creditors to file claims. Cannot distribute assets during this time.

3

Month 4-6: Asset Inventory & Appraisal

Property appraisal completed. Estate assets inventoried and valued for tax purposes.

4

Month 6-9: Debt Payment & Tax Filing

Pay outstanding debts, file final income tax returns, file estate tax if applicable.

5

Month 9-12: Distribution & Closing

Assets distributed to heirs. Final accounting submitted. Probate officially closed.

Important: You typically cannot sell, rent, or make major decisions about the property until probate is complete or you receive court authorization. However, you can (and should) maintain the property during this period.

Step 2: Understand Tax Implications

One of the most common questions we hear from heirs is: "How much will I owe in taxes?" The good news is that inherited property receives favorable tax treatment in Washington.

The "Step-Up in Basis" Advantage

When you inherit property, the IRS gives you a major tax advantage called a "step-up in basis." This means the property's tax basis is adjusted to its fair market value on the date of death, not what the deceased originally paid for it.

Step-Up in Basis Example:

Original purchase price (1990): $150,000
Fair market value at death (2025): $450,000
Your new tax basis (stepped-up): $450,000
If you sell for $450,000: $0 Capital Gains Tax!

If you sell soon after inheriting for approximately the stepped-up value, you typically owe no capital gains tax.

Washington State Taxes

No Washington Taxes:

  • ✅ No state income tax
  • ✅ No state inheritance tax
  • ✅ No capital gains tax on inherited property sales (as of 2025)

You May Owe:

  • ⚠️ Federal estate tax (only if estate exceeds $13.61M in 2024)
  • ⚠️ Federal capital gains if property appreciates after inheritance
  • ⚠️ Property taxes (ongoing)

Tax Advice Disclaimer: Tax rules are complex and change frequently. Always consult with a qualified CPA or tax attorney regarding your specific situation before making decisions.

Step 3: Evaluate Your Four Main Options

Once you understand probate and taxes, you need to decide what to do with the property. You have four main options, each with different financial and emotional considerations.

1 Keep the Property (Move In or Hold)

Moving into the inherited home or holding it for future use can make sense emotionally and financially, especially if the property has sentimental value or is in a desirable location.

✅ Advantages:

  • • No capital gains tax if you move in immediately
  • • Can qualify for primary residence exclusion later ($250K-$500K)
  • • Preserve family history and memories
  • • Benefit from future property appreciation
  • • Avoid selling costs and hassle

⚠️ Considerations:

  • • Ongoing costs: property taxes, insurance, maintenance, utilities
  • • May need immediate repairs or updates
  • • Responsible for existing mortgage (if any)
  • • Ties up capital that could be invested elsewhere
  • • Requires property management if vacant

Best For: Heirs who want to live in the home, have financial capacity to maintain it, or believe in long-term appreciation in that market.

2 Rent the Property (Become a Landlord)

Converting the inherited property into a rental can generate passive income while you decide whether to keep or sell long-term. In our experience at Lead Property Buyers, many heirs consider this option when the property is in good condition and located in a strong rental market.

✅ Advantages:

  • • Generate monthly rental income
  • • Tax deductions for repairs, maintenance, depreciation
  • • Benefit from property appreciation over time
  • • Delay selling decision without losing the asset
  • • Can sell later if rental doesn't work out

⚠️ Serious Considerations:

  • • Becomes a business requiring time, expertise, and capital
  • • Landlord responsibilities: tenant issues, repairs, legal compliance
  • • Property may need updates to meet rental standards
  • • Vacancy risk and non-paying tenants
  • • Lose step-up in basis tax advantage when you eventually sell
  • • Must pay taxes on rental income

💰 Financial Reality Check:

Many heirs underestimate rental costs. Budget for: property management (8-10% of rent), maintenance reserves (1% of value annually), vacancy (10-15% of annual rent), insurance, and property taxes. Make sure the numbers actually work before committing.

Best For: Heirs with landlord experience, financial reserves for repairs, and capacity to manage tenants (or pay for property management).

3 Sell the Property (Traditional or Cash Sale)

Selling the inherited property is often the most practical choice, especially when multiple heirs are involved, the property needs significant repairs, or you simply want to avoid ongoing costs and responsibilities.

✅ Advantages:

  • • Immediate liquidity – convert property to cash
  • • No capital gains tax if sold near stepped-up value
  • • Eliminate ongoing costs (taxes, insurance, maintenance)
  • • Easy to split proceeds among multiple heirs
  • • Clean break – no ongoing management responsibility
  • • Can move forward with your own financial plans

📊 Two Ways to Sell:

Traditional Sale (MLS with Agent)

List with real estate agent, market to retail buyers, close in 60-90 days.

Best if: Property is in good condition, you can wait 2-3 months, and you want maximum price.

Costs: 6% agent commission, repairs/staging, carrying costs during listing period.

Cash Sale (Direct to Buyer)

Sell as-is to cash buyer, no repairs needed, close in 7-21 days.

Best if: Property needs repairs, you need fast cash, multiple heirs want quick settlement, or you live out of state.

Costs: No commissions, no repairs, no carrying costs. Net offer is typically 70-85% of retail value.

Best For: Heirs who want liquidity, live out of state, need to split proceeds among multiple parties, or don't want ongoing property responsibilities.

4 Disclaim the Inheritance (Refuse It)

In rare cases, it makes sense to refuse an inherited property. You might disclaim if the property has more debt than value, significant legal issues, or environmental problems.

⚠️ Important Rules:

  • • Must disclaim within 9 months of death
  • • Cannot accept any benefits from the property first
  • • Disclaimer must be in writing and irrevocable
  • • Property passes to next heir in line (per will or state law)
  • • Used for tax planning or to avoid creditor issues

Best For: Properties with underwater mortgages, major legal liabilities, environmental hazards, or tax planning situations. Consult an attorney before disclaiming.

Step 4: Handle Special Situations

Many inherited properties come with complications that require specific strategies. Here's how to handle the most common scenarios.

Multiple Heirs: Navigating Family Decisions

When siblings or multiple family members inherit property together, disagreements are common. One heir may want to keep the home, another wants to sell immediately, and a third wants to rent it.

Strategies for Multiple Heirs:

  • 1. Buy-Out Agreement: One heir purchases others' shares at appraised value
  • 2. Sell and Split: Most common solution – sell property and divide proceeds equally
  • 3. Partition Action: Legal process forcing sale when heirs can't agree (last resort)
  • 4. One Heir Becomes Landlord: Managing heir gets majority share, others receive passive income

Pro Tip: Get everything in writing. Even among family, document who pays for what, how decisions are made, and how proceeds will be divided. This prevents disputes later.

Property Has an Existing Mortgage

Many people assume they must immediately pay off an inherited mortgage, but that's not always true or necessary.

Your Options When There's a Mortgage:

Keep Making Payments

Thanks to the Garn-St. Germain Act, lenders cannot call the loan due when you inherit. You can continue making payments without refinancing.

Refinance in Your Name

If you're keeping the property, refinancing may get you a better rate or remove other heirs from the title.

Sell the Property

Mortgage is paid off from sale proceeds. If you sell for more than the mortgage balance, you keep the equity.

Let It Go to Foreclosure (Worst Option)

If property is worth less than mortgage and you don't want it, you can walk away. Foreclosure doesn't impact your personal credit since you didn't take out the loan.

Property Needs Major Repairs

Many inherited homes haven't been updated in decades or were neglected during the owner's final years. Deciding whether to invest in repairs depends on your end goal.

If You're Keeping or Renting:

  • ✓ Make necessary repairs for safety and habitability
  • ✓ Prioritize: roof, foundation, electrical, plumbing
  • ✓ Budget 1-2% of home value annually for maintenance
  • ✓ Consider cosmetic updates to increase rental income

If You're Selling Soon:

  • ✓ Traditional sale: Make cosmetic repairs to maximize price
  • ✓ Cash sale: Sell as-is without any repairs
  • ✓ Get 2-3 contractor estimates before investing
  • ✓ Calculate if repair ROI justifies the expense

Reality Check: Most heirs overestimate the return on repairs. If the house needs $40K in updates, you may only recoup $25K in increased sale price. Sometimes selling as-is to a cash buyer nets you more money when you factor in time, stress, and repair costs.

Out-of-State Heirs

If you live in another state and inherited a Washington property, managing it from a distance adds complexity:

Long-Distance Heir Challenges:

  • • Must travel to Washington for probate court appearances
  • • Difficult to oversee repairs or property maintenance
  • • Can't easily show property to buyers or renters
  • • Higher risk of vandalism or deterioration if vacant
  • • Costly to carry vacant property for months

→ Solution: Most out-of-state heirs sell quickly to avoid ongoing management hassles. Cash buyers who purchase as-is make this process much simpler.

Making Your Decision: Key Questions to Ask

Use these questions to clarify which option is best for your situation:

Do I have emotional attachment to this property?

Emotion is valid but shouldn't override financial reality. If keeping it creates financial stress, it may not honor your loved one's memory.

Can I afford the carrying costs (taxes, insurance, maintenance)?

Even if the mortgage is paid off, properties have significant ongoing costs. Budget realistically.

Do all heirs agree on the decision?

If siblings disagree, selling is often the cleanest solution. Family disputes over property can last years.

What's my timeline?

If you need money now or want to avoid months of hassle, cash sales work best. If you can wait for maximum price, traditional listing may be better.

What condition is the property in?

Updated homes sell easily on MLS. Properties needing $20K+ in repairs often net more when sold as-is to cash buyers.

Am I prepared to be a landlord?

Renting seems passive but requires active management, financial reserves, and legal knowledge. Be honest about your capacity.

Final Thoughts: There's No "Right" Answer

Every inherited property situation is unique. The "right" decision depends on your financial position, family dynamics, emotional attachment, and future goals.

What we see at Lead Property Buyers is that heirs who make informed, realistic decisions early tend to have better outcomes than those who delay or avoid the decision. Whether you keep, rent, sell, or disclaim, taking action based on facts rather than fear or guilt typically leads to the best results.

Most importantly: don't let the property become a burden that prevents you from moving forward with your own life and financial goals. Sometimes the most respectful way to honor a loved one's legacy is to make a practical decision that benefits your family's future.

About the Publisher

Lead Property Buyers

We are principal buyers operating in Washington and Oregon. We purchase properties directly and may assign our purchase rights to other buyers. This content is provided for educational purposes based on our experience in the Pacific Northwest real estate market.

Non-Brokerage Model

WA & OR Focus

Educational Content

Important: This article provides general information and should not be considered legal, financial, or professional advice. We recommend consulting with qualified professionals regarding your specific situation.

Need Help With an Inherited Property in Washington?

If you've inherited a property and need to sell quickly or want to explore your options without pressure, Lead Property Buyers can help you understand how selling directly works in your specific situation. We purchase inherited properties throughout Washington and can typically close in as little as 7-14 days if that timeline fits your needs. We offer educational conversations without representation or obligation.

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Disclosure

This article is for informational and educational purposes only and does not constitute legal, financial, tax, or estate planning advice. Inheritance laws, probate procedures, and tax regulations vary by situation and are subject to change. We purchase property as a principal buyer and may assign contractual interests. We are not acting as a real estate broker or agent and do not represent buyers or sellers. For specific advice regarding your inherited property situation, please consult with licensed attorneys, CPAs, estate planners, or financial advisors who can address your unique circumstances.