--- title: Making the Most of Inherited Property description: For someone new to property investment, the occasion of an inheritance may be the start of a significant opportunity. image: https://www.realized1031.com/hubfs/Images/photo/abstract/inherited-property-key-IS-1257354272.jpg --- [![Realized 1031 Exchange Marketplace](https://www.realized1031.com/hs-fs/hubfs/Images/Brand/Logo/Realized/Realized-Logo-Black.png?width=240&height=80&name=Realized-Logo-Black.png "Realized 1031 Logo") ](https://www.realized1031.com/) - [Wealth Management Gap](https://www.realized1031.com/the-wealth-management-gap) - [Our Process](https://www.realized1031.com/how-realized-works) - [Financial Advisors](https://www.realized1031.com/advisor) - [Resources](https://www.realized1031.com/resources) - [The Company](https://www.realized1031.com/about-us) - [Articles](https://www.realized1031.com/blog) [Register](https://www.realized1031.com/marketplace) [Log In](https://www.realized1031.com/login) - Better Business Bureau Rating: **A+** - [FINRA BrokerCheck](https://brokercheck.finra.org/firm/summary/22333) - [Call](tel:1-877-797-1031) **(877) 797-1031** # Making the Most of Inherited Property Posted Jan 21, 2021 ![inherited-property-key-IS-1257354272](https://www.realized1031.com/hs-fs/hubfs/Images/photo/abstract/inherited-property-key-IS-1257354272.jpg?width=753&name=inherited-property-key-IS-1257354272.jpg) For someone new to property investment, the occasion of an inheritance may be the start of a significant opportunity. If you have just inherited property and want to ensure that you lay the foundation to grow your wealth from the beginning, it’s a good idea to seek out trustworthy advisors to guide you. In this situation, step one is probably to determine your tax situation. If you directly inherit property from someone, the tax situation is reasonably straightforward. There is no income tax on inherited assets, and for most people, the inheritance tax does not apply. The Tax Cuts and Jobs Act increased the tax-exempt gifts to heirs to up to $11.18 million per person or $22.36 million for a married couple. (Note that the maximum is reduced by amounts you give while living, so if you take advantage of the annual $15,000 tax-free limit in gifts to your future heirs, that decreases the total you can bequeath at your death.) The more commonly applicable tax is [capital gains](https://www.realized1031.com/glossary/capital-gain-tax), which would be assessed when the heir sells the inherited property. Keep in mind that the property's tax basis is the fair market value at the time the grantor died. Any appreciation in value accumulated by the giver is erased from a tax perspective. For example: if you buy an investment property for $10,000 and during your lifetime it increases in value to $100,000, and in your will, you leave it to your daughter, her tax basis is $100,000. If she sells it for $100,000, she does not pay a tax on the capital gain that you earned and passed along to her. However, suppose she waits, and the property continues to appreciate before she sells it. In that case, she will owe capital gains taxes on the increase in value that occurs after she assumes ownership. If the inheritance is in the form of a trust, the tax status is more complicated. The heirs pay taxes on the income the trust has earned if the trust you establish is revocable. While the trust grantor is living, the taxes on any earnings are that person’s responsibility, but that obligation shifts to the heirs after the grantor’s death, at which time the trust will be assigned a separate tax identification number and file an annual tax return. If you inherit from an irrevocable trust, the grantor may have established it to provide income to you and other heirs in advance of their death and transfer the assets to the legal entity of the trust to avoid inheritance taxes. The [irrevocable trust](https://www.realized1031.com/glossary/trust-irrevocable) has a special legal status that allows the settlor to relinquish control of and benefit from the assets placed in the trust.  Whatever the origin of your inheritance, once you can manage your asset, you can use the tools available to you to seek to minimize the recognition of taxable gains. Delaying or avoiding capital gains taxes through the use of strategies like 1031 exchanges and other tax-deferred investments may be one component in building your sound financial future.   This material is for general information and educational purposes only. Information is based on data gathered from what we believe are reliable sources. It is not guaranteed as to accuracy, does not purport to be complete and is not intended to be used as a primary basis for investment decisions. Download The Capital Gains Tax Calculator [![Cap Gains Calculator For Investors](https://www.realized1031.com/hs-fs/hubfs/Images/UI/graphics/composites/laptop-capital-gains-calculator-spreadsheet.jpg?width=500&height=290&name=laptop-capital-gains-calculator-spreadsheet.jpg "Estimate the cap gains tax owed ...") ](https://www.realized1031.com/blog/making-the-most-of-inherited-property#blogform) Download Calculator ---   --- ### Cap Gains Calculator For Investors ![Download The Capital Gains Tax Calculator](https://www.realized1031.com/hs-fs/hubfs/Images/UI/graphics/composites/laptop-capital-gains-calculator-spreadsheet.jpg?width=500&height=290&name=laptop-capital-gains-calculator-spreadsheet.jpg) Estimate the cap gains tax owed after selling an asset or property By providing your email and phone number, you are opting to receive communications from Realized. If you receive a text message and choose to stop receiving further messages, reply STOP to immediately unsubscribe. Msg & Data rates may apply. To manage receiving emails from Realized visit the Manage Preferences link in any email received. Search ### [Why Realized](https://www.realized1031.com/why-realized) - [Wealth Management](https://www.realized1031.com/the-wealth-management-gap) - [Why Realized](https://www.realized1031.com/why-realized) - [Our Process](https://www.realized1031.com/how-realized-works) - [Scenarios](https://www.realized1031.com/scenarios) - [Private Client Program](https://www.realized1031.com/private-client) - [Realized Exchange Services](https://www.realized1031.com/realized-exchange-services) ### [The Company](https://www.realized1031.com/about-us) - [The Team](https://www.realized1031.com/about-us) - [FAQ](https://www.realized1031.com/frequently-asked-questions) - [Testimonials](https://www.realized1031.com/testimonials) - [Press](https://www.realized1031.com/press) - [Careers](https://www.realized1031.com/careers) ### [Partners](https://www.realized1031.com/partners) - [Financial Advisors](https://www.realized1031.com/advisor) - [Broker Dealers](https://www.realized1031.com/partners/broker-dealers) - [Real Estate Agents](https://www.realized1031.com/partners/real-estate-agents) - [Certified Public Accountants](https://www.realized1031.com/partners/certified-public-accountants) ### [Resources](https://www.realized1031.com/resources) - #### Learn - [Articles](https://www.realized1031.com/blog) - [Glossary of Terms](https://www.realized1031.com/glossary) - [Capital Gains Tax Rates](https://www.realized1031.com/capital-gains-tax-rate) - #### Watch - [Video Library](https://www.realized1031.com/videos) - [Webinar Archive](https://www.realized1031.com/webinars) - #### Read - [Delaware Statutory Trust](https://www.realized1031.com/delaware-statutory-trust) - [Tenants-In-Common](https://www.realized1031.com/tenants-in-common-tic) - [1031 Exchange](https://www.realized1031.com/1031-exchange) - [Qualified Intermediary](https://www.realized1031.com/qualified-intermediary) - [Qualified Opportunity Zones](https://www.realized1031.com/opportunity-zones) #### Realized - 500 W 13th Street Austin, TX 78701 - (877) 797-1031 ##### [Contact Us](https://www.realized1031.com/contact-us) - [![Realized on Facebook](https://www.realized1031.com/hs-fs/hubfs/Images/UI/Social/Icons/Mix/social-facebook-whiterev.png?width=60&height=60&name=social-facebook-whiterev.png)](https://www.facebook.com/Realized/) - [![Realized on LinkedIn](https://www.realized1031.com/hs-fs/hubfs/Images/UI/Social/Icons/Mix/social-linkedin-whiterev.png?width=60&height=60&name=social-linkedin-whiterev.png)](https://www.linkedin.com/company/realized/) - [![Realized on YouTube](https://www.realized1031.com/hs-fs/hubfs/Images/UI/Social/Icons/Mix/social-youtube-whiterev.png?width=60&height=60&name=social-youtube-whiterev.png)](https://www.youtube.com/c/Realized1031?sub_confirmation=1) - [![Realized Holdings, Inc. BBB Business Review](https://www.realized1031.com/hs-fs/hubfs/Images/professional-assoc/bbb/RZH2-bbb-seal.png?width=40&height=65&name=RZH2-bbb-seal.png)](http://www.bbb.org/central-texas/business-reviews/real-estate-investors/realized-holdings-llc-in-austin-tx-1000112948/#bbbonlineclick) - [![FEA Logo](https://www.realized1031.com/hs-fs/hubfs/Images/professional-assoc/fea/RZH2-fea-logo.png?width=82&height=65&name=RZH2-fea-logo.png "FEA Logo")](https://www.1031.org) SECURITIES DISCLOSURE Realized1031.com is a website operated by Realized Technologies, LLC, a wholly owned subsidiary of Realized Holdings, Inc. (“Realized Holdings”). Securities and/or Investment Advisory Services may be offered through Registered Representatives or Investment Advisor Representatives of Realized Financial, Inc. ("Realized"), a broker/dealer, member [FINRA](https://www.finra.org)/[SIPC](https://www.sipc.org/), and registered investment adviser. Realized is a subsidiary of Realized Holdings, Inc. ("Realized Holdings"). Check the background of this firm on [FINRA's BrokerCheck](https://brokercheck.finra.org/firm/summary/22333). Hypothetical example(s) are for illustrative purposes only and are not intended to represent the past or future performance of any specific investment. Investing in alternative assets involves higher risks than traditional investments and is suitable only for sophisticated investors. Alternative investments are often sold by prospectus that discloses all risks, fees, and expenses. They are not tax efficient and an investor should consult with his/her tax advisor prior to investing. Alternative investments have higher fees than traditional investments and they may also be highly leveraged and engage in speculative investment techniques, which can magnify the potential for investment loss or gain and should not be deemed a complete investment program. The value of the investment may fall as well as rise and investors may get back less than they invested. This site is published for residents of the United States who are accredited investors only. Registered Representatives and Investment Advisor Representatives may only conduct business with residents of the states and jurisdictions in which they are properly registered. Therefore, a response to a request for information may be delayed until appropriate registration is obtained or exemption from registration is determined. Not all of services referenced on this site are available in every state and through every representative listed. For additional information, please contact the Realized Compliance department at 512-472-7171 or info@realized1031.com. - [Terms & Conditions](https://www.realized1031.com/terms-and-conditions) - [Privacy Policy](https://www.realized1031.com/privacy-policy) - [Form CRS](https://www.realized1031.com/hubfs/common-files/disclosures/FormCRS.pdf) - [ADV 2A](https://www.realized1031.com/hubfs/common-files/disclosures/ADV2A.pdf) - [Reg BI Disclosures](https://www.realized1031.com/hubfs/common-files/disclosures/RegBI.pdf) -   © 2026 Realized Holdings, Inc. ```json { "@context" : "http://schema.org/", "@type" : "BlogPosting", "articleBody" : "For someone new to property investment, the occasion of an inheritance may be the start of a significant opportunity. If you have just inherited property and want to ensure that you lay the foundation to grow your wealth from the beginning, it’s a good idea to seek out trustworthy advisors to guide you. In this situation, step one is probably to determine your tax situation. If you directly inherit property from someone, the tax situation is reasonably straightforward. There is no income tax on inherited assets, and for most people, the inheritance tax does not apply. The Tax Cuts and Jobs Act increased the tax-exempt gifts to heirs to up to $11.18 million per person or $22.36 million for a married couple. (Note that the maximum is reduced by amounts you give while living, so if you take advantage of the annual $15,000 tax-free limit in gifts to your future heirs, that decreases the total you can bequeath at your death.) The more commonly applicable tax is capital gains, which would be assessed when the heir sells the inherited property. Keep in mind that the property's tax basis is the fair market value at the time the grantor died. Any appreciation in value accumulated by the giver is erased from a tax perspective. For example: if you buy an investment property for $10,000 and during your lifetime it increases in value to $100,000, and in your will, you leave it to your daughter, her tax basis is $100,000. If she sells it for $100,000, she does not pay a tax on the capital gain that you earned and passed along to her. However, suppose she waits, and the property continues to appreciate before she sells it. In that case, she will owe capital gains taxes on the increase in value that occurs after she assumes ownership. If the inheritance is in the form of a trust, the tax status is more complicated. The heirs pay taxes on the income the trust has earned if the trust you establish is revocable. While the trust grantor is living, the taxes on any earnings are that person’s responsibility, but that obligation shifts to the heirs after the grantor’s death, at which time the trust will be assigned a separate tax identification number and file an annual tax return. If you inherit from an irrevocable trust, the grantor may have established it to provide income to you and other heirs in advance of their death and transfer the assets to the legal entity of the trust to avoid inheritance taxes. The irrevocable trust has a special legal status that allows the settlor to relinquish control of and benefit from the assets placed in the trust. Whatever the origin of your inheritance, once you can manage your asset, you can use the tools available to you to seek to minimize the recognition of taxable gains. Delaying or avoiding capital gains taxes through the use of strategies like 1031 exchanges and other tax-deferred investments may be one component in building your sound financial future. This material is for general information and educational purposes only. Information is based on data gathered from what we believe are reliable sources. It is not guaranteed as to accuracy, does not purport to be complete and is not intended to be used as a primary basis for investment decisions.", "articleSection" : [ "Capital Gains" ], "author" : { "@type" : "Person", "email" : "marketing@realized1031.com", "image" : "", "name" : "The Realized Team", "url" : "https://www.realized1031.com/blog/author/the-realized-team" }, "dateModified" : "2021-01-21T16:00:00+0000", "datePublished" : "2021-01-21T16:00:00+0000", "description" : "For someone new to property investment, the occasion of an inheritance may be the start of a significant opportunity.", "headline" : "Making the Most of Inherited Property", "image" : { "@type" : "ImageObject", "height" : 500, "url" : "https://f.hubspotusercontent10.net/hubfs/733513/Images/photo/abstract/inherited-property-key-IS-1257354272.jpg", "width" : 753 }, "mainEntityOfPage" : "https://www.realized1031.com/blog/making-the-most-of-inherited-property", "name" : "Making the Most of Inherited Property", "publisher" : { "@type" : "Organization", "address" : { "@type" : "PostalAddress", "addressCountry" : "USA", "addressLocality" : "Austin", "addressRegion" : "TX", "postalCode" : "78701", "streetAddress" : "500 W 13th Street " }, "logo" : { "@type" : "ImageObject", "height" : 60, "url" : "http://www.realized1031.com/hubfs/Images/Brand/Logo/Realized/Realized-Logo-Black-No-Margin-296x60-AMP.png", "width" : 296 }, "name" : "Realized" }, "thumbnailUrl" : "https://f.hubspotusercontent10.net/hubfs/733513/Images/photo/abstract/inherited-property-key-IS-1257354272.jpg" } ```