Selling Inherited Property in Illinois

Overview

Inheriting real estate in Illinois can be both a financial opportunity and a logistical challenge. Whether you've inherited a Chicago condo, a suburban home, or vacant land downstate, the process of selling that property involves legal, tax, and practical steps that are different from a typical home sale.

This guide covers the key steps, from determining whether probate is required to understanding your tax obligations when you sell.

Step 1: Determine If Probate Is Required

Before any inherited property can be sold, you must establish legal authority to sell it. That authority depends on how the property was titled:

• Solely in the deceased's name: Probate is almost certainly required. The estate must go through the probate process before the executor has legal authority to sell.
• Joint tenancy with right of survivorship: The surviving co-owner automatically inherits the property. No probate needed — file an Affidavit of Surviving Joint Tenant with the county recorder.
• Transfer-on-Death (TOD) deed: Illinois allows TOD deeds that transfer real estate directly to named beneficiaries without probate. If the deceased recorded a TOD deed, the beneficiary can sell after recording an Affidavit of Survivorship.
• In a living trust: Property held in a revocable living trust avoids probate. The successor trustee can sell immediately per the trust terms.

Step 2: Get the Property Into Your Name (or the Estate's Name)

If probate is required, the court will issue Letters of Office (also called Letters Testamentary or Letters of Administration), which give the executor legal authority to manage and sell estate property.

The executor does not necessarily need to transfer the deed into their own name — they can sell directly from the estate. However, the court may need to approve the sale if the will requires it or if heirs object.

Step 3: Understand the Stepped-Up Cost Basis

One of the most important tax advantages of inheriting property is the stepped-up cost basis. When you inherit real estate, your tax basis is generally reset to the fair market value of the property on the date of the deceased's death — not what they originally paid for it.

Example: Your parent bought a home in Oak Park in 1985 for $80,000. At the time of their death, it's worth $450,000. Your stepped-up basis is $450,000. If you sell it quickly for $450,000, you owe zero capital gains tax on the appreciation that occurred during your parent's lifetime.

Capital gains tax only applies to appreciation that occurs after you inherit the property. This makes selling inherited property shortly after inheriting it often the most tax-efficient option.

Step 4: Consider Illinois-Specific Tax Issues

Step 5: Prepare the Property for Sale

Inherited properties are often sold "as-is" — especially when the estate lacks funds for repairs or when multiple heirs want a quick resolution. Options include:

• Traditional MLS listing: Best for maximizing price if the property is in good condition or heirs have time.
• As-is sale to a cash buyer: Faster closing, no repairs required. Common when the property needs significant work.
• Auction: Can be efficient for estates with multiple heirs who need a clear, objective sale process.

Illinois law requires sellers to disclose known material defects. Even in an estate sale, executors must comply with disclosure requirements to the extent they have knowledge of the property's condition.

When Multiple Heirs Are Involved

If multiple heirs inherit a property together and disagree on whether to sell (or for how much), any co-owner can file a partition actionin Illinois court. A partition action forces the sale of the property and division of proceeds — but it's costly and time-consuming. Mediation and early legal counsel can help resolve disagreements before they escalate.

The Role of a Probate Attorney in the Sale

A probate attorney can:

• Obtain Letters of Office authorizing the executor to sell
• Draft or review the real estate sale contract
• Coordinate with the title company on probate-related title issues
• Handle creditor claims that affect proceeds from the sale
• Advise on tax filings required after the sale
• Represent the estate if other heirs challenge the sale