Q: My mom died several years ago. Do I need to pay her past due real estate property tax bills? Also, do I need to pay her income tax bills as well? Her accountant filed her income taxes after her death, and now I have a bill for $200. Am I now liable for the debts of her estate? We are in the process of selling her home. Thank you in advance.
A: The quick answer is that you will need to settle up with the local taxing authority for any real estate taxes that may be owed on your mom’s home. Any buyer looking to purchase the home will want to make sure that any bills associated with the home are current and paid.
While you could wait to pay the real estate taxes at the time you actually close on the sale of the home, you should know that the local municipality may charge you a penalty, late fees and interest on any unpaid real estate tax bills. We’d suggest you find out what taxes are due on your mother’s home and make sure you understand what it’s going to cost you by holding off paying those taxes until the sale.
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One more important thing about real estate taxes: If those taxes have not been paid for some time, you risk losing the house to a tax buyer. If that happens, you could lose the entire value of the home as a result of the unpaid taxes.
Recently, the Supreme Court ruled that a local municipality can’t sell off a home to satisfy a debt to the municipality and also keep money above and beyond what was owed. But it doesn’t work that same way when it comes to unpaid real estate taxes. The local municipality may sell the home for the amount of the unpaid real estate taxes, and the tax buyer who eventually gets the house could then sell the home and keep all profit. The original owner would get nothing.
So please be careful and make sure the real estate taxes are paid now, or soon.
On the question of the income taxes owed on your mom’s estate, we’d suggest you talk to the estate’s tax preparer to know exactly what is owed to the Internal Revenue Service. While we don’t know the particulars about the sale of the home, the settlement agent may want to know that all debts of the estate have been paid off before allowing the sale to close. Again, funds from the sale of the home, may be used to pay off the debt owed to the IRS as well and any other debts that your mom may have had.
We don’t think you have any personal obligation to repay your mom’s debts. But if you are inheriting property from your mom, your mom’s estate’s representative may have the obligation to settle those debts before giving any remaining funds to you. In the end, it may be the same result — you inherit her assets but the debts get paid off.
(Ilyce Glink is the author of “100 Questions Every First-Time Home Buyer Should Ask” (4th Edition). She is also the CEO of Best Money Moves, a financial wellness technology company. Samuel J. Tamkin is a Chicago-based real estate attorney. Contact Ilyce and Sam through her website, ThinkGlink.com.)
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