Selling an inherited apartment, how to organize the whole process so as not to lose either on nerves or on money

Selling an inherited apartment, how to organize the whole process so as not to lose either on nerves or on money

Selling an apartment we have inherited from a loved one is one of the most special transactions that can be carried out on the real estate market. Emotions associated with loss, often complicated relationships between heirs, legal formalities, tax obligations and practical sale challenges all come together in one package that is easy to plan poorly. Then the consequences are both emotional and financial. In this text we will try to go through the entire process step by step, so that people facing such a challenge have a clear guide.

Stage one, the inheritance matter. Without legally binding confirmation that we are an heir, we can neither manage the apartment nor of course sell it. In Poland there are two main paths. The first is confirmation of inheritance in court. The procedure usually takes 3 to 6 months, faster in smaller cities, longer in bigger ones. It requires a court case with the participation of all heirs. The second path, much faster, is a deed of confirmation of inheritance drawn up by a notary. Here all heirs must appear before the notary in person and agree on the fact of inheritance. The deed is issued the same day. The notarial cost is usually 500 to 2000 zlotys depending on the value of the inheritance. The choice of path depends on the relationships between heirs and the complexity of the inheritance.

Stage two, inheritance and gift tax. This is one of the most often overlooked duties whose consequences are painful. Polish law divides heirs into three tax groups. The first group, meaning spouse, children, grandchildren, parents, grandparents, siblings, stepfather, stepmother, stepson, son in law, daughter in law, mother in law, father in law, benefits from a tax exemption, but only on condition of reporting the inheritance to the tax office within 6 months of confirmation of inheritance. The report is made on form SD Z2. Missing this deadline means losing the exemption and moving to a tax scale where the tax can reach 12 to 20 percent of the inheritance value depending on the amount. For an apartment worth 800 thousand zlotys this is potentially 100 thousand of tax that could have been avoided by submitting one form on time. The second and third tax groups, meaning more distant family and unrelated persons, have no exemption and must pay tax on the inheritance value.

Stage three, division of inheritance if there are several heirs. This is the moment when it is determined who actually becomes the owner of the apartment. Various solutions are possible. The first, awarding the apartment to one heir with payments to the others. The second, selling the apartment and dividing the funds proportionally to shares. The third, renting the apartment and dividing the income. The fourth, retaining co ownership, although this solution is temporary because co ownership easily leads to conflicts. The division of inheritance can be carried out before a notary if all heirs agree or in court if agreement is lacking. Court division of inheritance usually takes 6 to 18 months.

Stage four, the key tax trap. Polish law provides for a 19 percent income tax on the sale of real estate, but only if the sale takes place before 5 years have passed from the end of the year in which the property was acquired. In the case of inheritance the heir inherits the term from the deceased. This is a very important rule. If the deceased owned the apartment for more than 5 years, we can sell it without income tax immediately after acquiring the inheritance. If they owned it for less than 5 years, the sale before this term involves a 19 percent tax on income, meaning the difference between the sale price and the value of the property on the day of acquiring the inheritance plus recognized costs. There are two ways to avoid this tax. The first, sale after 5 years from acquisition by the deceased. The second, using the housing relief, meaning allocating funds from the sale to own housing purposes within 3 years. This can be the purchase of another apartment, building a house, renovation, repayment of a mortgage on own apartment. Each of these options requires documentation and correct settlement on PIT 39.

Stage five, the practice of selling. Here all the rules of classic apartment sale apply but with additional specific elements. First, the apartment often requires emptying and refreshing. Memorabilia, furniture, clothes, documents, all this needs to be appropriately divided among heirs or arranged for removal. Second, an apartment inherited from an older person often requires thorough cleaning, minor repairs and neutral arrangement to effectively present itself on the market. Third, valuation. Heirs tend to overestimate the emotional value of the apartment, leading to starting prices inadequate to the market. Professional valuation based on real transaction prices helps avoid this trap. Fourth, timing strategy. It is best to start with an offer in the season of high market activity, meaning early spring or early autumn.

Specific inheritance challenges. First, the deceased’s debts. If the deceased had debts, the heir inherits them along with the assets, unless they reject the inheritance within 6 months or accept it with the benefit of inventory. The decision must be made consciously, preferably with the help of a lawyer. Second, unrelated heirs. If an apartment was inherited by someone unrelated to the previous owner, the inheritance tax can be significant and the sale itself requires more legal care. Third, apartments in old tenement houses with unregulated legal status. Sometimes an inherited apartment turns out to be in a more complicated legal situation than it seemed, for example with an unregulated mortgage status or incomplete ownership documentation. Fourth, family conflicts. Several heirs with different priorities are a classic source of problems. One wants to sell quickly, another to keep, a third to rent. Mediation and transparent decision processes help avoid escalation.

At Eternel for years we have been helping clients carry out the sale of an inherited apartment in a way that protects both their financial interests and emotional comfort. We work with lawyers and notaries specializing in inheritance law, tax advisors and companies dealing with tidying up apartments after the deceased. To clients we offer not only sale but also support in navigating the entire process, which for many is a one off difficult experience. If you are facing such a challenge in Kraków, we will gladly arrange a calm conversation about your specific situation.