My adult children inherited a house. What taxes are due?

Q. My sister is deceased. Her only possession was her house which still has a mortgage and she bequeathed it to my son and daughter, her niece and nephew. What will the inheritance tax be?

– Mom

A. We are sorry to hear of the death of your sister.

The first question to be resolved is whether the will deals with how inheritance tax will be paid. It may say that the estate itself will pay it off before anything goes to the beneficiaries, or it may not fix the problem.

Nieces and nephews are considered Class D beneficiaries, said Nancy Heslin Reading, an estate planning lawyer at Reading law firm in Newton.

The rate of inheritance tax is between 15 and 16%, depending on the amount transferred.

You may face challenges if there is not enough cash in the estate, separate from the house. For example, you said there was a mortgage, but you didn’t say how it would be handled.

If the beneficiaries plan to keep the house, they would have to take out an additional mortgage, Reading said, and they should also find enough money to pay the inheritance tax owed.

“If the deed is passed on to the niece and nephew, the executor should hire a chartered real estate appraiser – not a real estate agency – and pay a death appraisal date on the property, ”she said. “This valuation will determine how much capital gains were wiped out upon your sister’s death and establish a new basis for capital gains for the niece and nephew.”

Some people may ask what happens if nothing is done and someone has just moved into the house.

“The inheritance tax will be payable eight months from the date of death and if not paid, liability for unpaid tax will attach to the executor personally, often in the form of a debt certificate attached to property owned by the executor, such as his home Reading said.

To make sure this is handled properly, consider speaking to an estate planning attorney who can walk you through the process.

Email your questions to [email protected].

Karin Price Mueller writes on Bamboo column for NJ Advance Media and is the founder of Follow NJMoneyHelp on Twitter @NJMoneyHelp. Find NJMoneyHelp on Facebook. Register for‘s weekly electronic newsletter.

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