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Selling Inherited Property in Alabama
Support GuideAlabama14 min read

Selling Inherited Property in Alabama

Yes, you can sell an inherited Alabama home. First pass title to the heirs or estate, use the date-of-death step-up in basis, then close the sale.

By Settled Editorial

Here is the short answer. Yes, you can sell an inherited home in Alabama, but the property must first pass to the people or the estate that will sign the deed. Under Ala. Code 43-2-830, a decedent's real property devolves directly to the devisees under the will, or to the heirs when there is no will, subject to administration when the estate needs it. So the new owners already hold title, yet a buyer's title company still needs the public record to show clearly how the property passed from the decedent to the current sellers before a sale can close.

Two facts often decide whether a sale is simple. First, Alabama has no state estate tax and no inheritance tax for deaths after December 31, 2004, and no value-based probate tax, so the state does not tax the property you receive (Alabama Department of Revenue). Second, an inherited home usually gets a stepped-up cost basis to its value on the date of death under federal rules, which can shrink or erase the capital gains tax when you sell (IRS).

This guide explains how title passes before a sale, when the personal representative sells instead of the heirs, how the step-up in basis works, how Alabama taxes any gain, and how co-owners sell together. Pair it with the Alabama probate guide for the full court process and the Alabama step-up in basis guide for how the date-of-death basis lowers your capital gains tax.

First, Title Passes to the Heirs or the Estate

Selling starts with a clear chain of title. A title company will not insure the sale, and a buyer's lender will not fund a mortgage, unless the record shows the property legally reached the current sellers. How you get there depends on the estate.

Through full probate. When the estate is administered, the county Probate Court issues letters testamentary to the executor named in a will, or letters of administration when there is no will (Ala. Code 43-2-20). Banks, buyers, and title companies ask for these letters as proof of authority. Once the estate is settled and the property vests cleanly in the heirs or devisees, they can sell it.

By devolution to the heirs. Because real property devolves at death under Ala. Code 43-2-830, the heirs or devisees own it from day one, subject to administration if the estate needs the property to pay debts. A title examiner still wants the record to reflect who inherited and why, so the probate file and the recorded documents matter at closing.

Watch the five-year window. A will is not effective in Alabama unless it is filed for probate within five years of the death (Ala. Code 43-8-161). Do not let an original will sit in a drawer while a family debates a sale. If that window closes, the property may pass as if there were no will, which changes who signs the deed.

One important limit: Alabama's small-estate summary distribution does not cover real property. The summary distribution shortcut under Ala. Code 43-2-692 covers personal property only and is unavailable if the decedent owned real property at death. So a house almost always routes through administration rather than the shortcut. The Alabama small estate guide explains that path.

When the Personal Representative Sells the Home

Sometimes the heirs cannot simply sell on their own, because the home must come back into the estate.

Alabama real property stays reachable for the decedent's debts. If the estate's personal property is not enough to pay valid claims, the personal representative can bring the real estate into the administration and sell it, then use the proceeds to pay creditors. In that situation the personal representative, not the heirs, controls the sale and signs the deed. This is why you resolve the estate's debts before you close. Creditors must present claims within six months after the grant of letters, or five months from first publication of notice, whichever is later, and a buyer's title company will look for open claims (Ala. Code 43-2-350).

A sale also gets more complex when:

  • The will gives the executor an express power of sale over the real estate
  • An heir is a minor or cannot consent
  • The heirs cannot agree, so a court must order the sale

The scenarios above involve legal complexity. Talk to an Alabama attorney before you list the property in any of them.

The Step-Up in Basis: Why You Usually Owe Little

This is where many Alabama families save money, so it is worth getting right.

Capital gains tax applies to the gain on a sale, which is the sale price minus your cost basis. For property you buy, the basis is what you paid. For inherited property, federal rules under IRC Section 1014 reset the basis to the asset's fair market value on the date of death. The decades of appreciation during the decedent's life are erased for capital gains purposes.

Here is what the step-up does. Say a parent bought a home in Huntsville in 1988 for $70,000, and it is worth $320,000 on the date of death. The heir's basis steps up to $320,000. Sell soon after for $320,000 and the taxable gain is near zero. Without the step-up, the gain would have been about $250,000. The step-up can shrink or erase the capital gains tax on a quick sale.

A few points keep the number right:

  • The new basis is the date-of-death value, so get a defensible figure, such as a date-of-death appraisal. The estate may already have one from the probate inventory.
  • Gain is measured from that stepped-up basis, not from what the decedent originally paid.
  • Selling costs, such as agent commissions and closing costs, and any capital improvements you make, reduce the taxable gain.
  • Inherited property counts as long-term under IRC Section 1223(9), so a sale soon after death still gets the lower long-term federal rates.

Because Alabama is a separate-property (common-law) state, only the decedent's share of jointly owned property steps up. If spouses held the home as joint tenants, only half steps up at the first death, and the survivor keeps their original basis on the other half. The Alabama step-up in basis guide works through this with more examples.

Basis rules are federal and fact-specific, and some assets, such as retirement accounts, do not get a step-up. Confirm your basis and any gain with a tax professional or the IRS before you file.

Alabama Taxes on the Sale

Alabama does not tax the value of what you inherit. The old state estate tax under Ala. Code 40-15-2 was a "pickup" tax tied to a federal credit that Congress phased out, so estates of decedents dying after December 31, 2004 do not file an Alabama estate tax return. Alabama also imposes no inheritance tax and no value-based probate tax. So selling an inherited Alabama home does not trigger a state estate, inheritance, or probate tax.

A few taxes can still touch the sale:

  • Capital gains apply on the gain, measured from the stepped-up basis. Alabama has no separate capital gains rate; it taxes the gain as ordinary income at graduated rates up to 5% under Ala. Code 40-18-5. For a single filer in 2026, the 5% band starts on taxable income over $3,000, so most inherited-property gains fall in that top band. A quick sale near the date-of-death value often leaves little or no gain to tax.
  • Deed recording privilege tax. When estate real property is conveyed by deed, Alabama charges $0.50 per $500 of value (or fraction) before recording under Ala. Code 40-22-1, with exemptions for certain nominal-consideration deeds that only perfect title.
  • Federal estate tax reaches only estates above the federal exclusion, which is $15,000,000 per person for deaths in 2026, so it affects very few families (IRS).
  • Local property taxes and the homestead exemption keep accruing while you hold the home, so keep those bills current and check the exemption status with the county.

If the estate earns income during administration, a separate Alabama fiduciary income tax return may apply alongside federal Form 1041. The Alabama probate costs guide splits these buckets with current figures.

Selling With Multiple Heirs

When more than one person inherits the home, they own it together. Each co-owner holds an undivided share, and a sale needs all of them on board.

The basic rule: all co-owners must agree and sign the deed to a buyer, unless one of them holds a recorded authority to act for the rest. When every heir wants to sell, the process is straightforward. They agree on a price, accept an offer, sign at closing, and split the net proceeds by their ownership shares.

The hard case is disagreement. If one heir refuses to sell, the others cannot force a private sale by a majority vote. A co-owner who wants out can file a partition action in circuit court, which can order the property divided or, more often for a single home, sold with the proceeds split among the owners. Partition is a court process, so it adds time and cost, and most families try to settle the question first. One heir buying out the others at an agreed price, or a mediated agreement, usually beats a forced sale. Bring in an Alabama attorney when heirs cannot agree.

Ways to Sell an Inherited Home

Once title is clear and the heirs agree, you choose how to sell. Two paths cover most situations.

A traditional agent listing. An agent lists the home on the open market, which usually earns the highest price when the property shows well and you have time. An agent who has handled estate sales can navigate a home that needs updating, out-of-state sellers, and co-ownership among heirs. You pay a commission, and the sale takes the normal time to market, negotiate, and close.

A cash or as-is buyer. For a distressed home, an out-of-state heir, or a family that wants a fast, certain close, a cash or as-is buyer can skip repairs, staging, and the wait for a mortgage. You usually accept a lower price in exchange for speed and certainty. Compare more than one offer, read the contract, and confirm the buyer can actually fund the purchase before you commit.

Neither path is right for every family. Weigh the sale price against the time, carrying costs, and effort each one takes, and remember that selling costs reduce your taxable gain either way.

Steps to Sell an Inherited Alabama Home

  1. Pull the recorded deed to confirm how the decedent held title and whether survivorship already moved the property.
  2. Identify the heirs at law or the devisees under the will, and file the will within the five-year limit if there is one.
  3. Open administration with the county Probate Court so the personal representative can act, since a house cannot use summary distribution.
  4. Get a date-of-death valuation, such as an appraisal, to fix your stepped-up cost basis.
  5. Resolve the estate's debts and creditor claims so no open claim clouds the title.
  6. Confirm whether the home must be sold to pay debts, which puts the sale in the personal representative's hands.
  7. Get every co-owner to agree on the sale and the price.
  8. Choose a traditional listing or a cash or as-is buyer, and bring a title company in early.
  9. Sign the deed at closing, and budget the $0.50-per-$500 deed recording tax.
  10. Report the sale on your federal and Alabama returns, measuring gain from the stepped-up basis.

Common Questions

Can I sell an inherited house before probate is finished in Alabama?

Often the heirs can market it, because real property devolves at death under Ala. Code 43-2-830. But a house routes through administration, not the small-estate shortcut, and a buyer's title company needs a clean record of ownership plus resolved creditor claims before it insures the sale. So most inherited homes sell during or after administration, not before it opens.

Do I owe capital gains tax on an inherited Alabama home?

Maybe, but often little. Inherited property usually gets a stepped-up basis to its date-of-death value under IRC Section 1014. Gain is the sale price minus that basis, so a sale near the date-of-death value can leave little or no taxable gain. Alabama taxes any gain as ordinary income up to 5%. Confirm your basis with a tax professional or the IRS.

Does Alabama charge an estate or inheritance tax when I sell?

No. Alabama has no estate tax and no inheritance tax for deaths after December 31, 2004, and no value-based probate tax. Federal and Alabama capital gains can still apply to the sale, measured from the stepped-up basis, and a deed recording privilege tax applies when the property is conveyed.

What if other heirs do not want to sell?

All co-owners must agree and sign the deed to sell privately. If an heir refuses, the others cannot force a sale by a majority vote. A co-owner can file a partition action in circuit court, which can order the property sold and the proceeds split. A buyout or mediation usually beats partition. Talk to an Alabama attorney first.

Should I use an agent or a cash buyer?

It depends on your goal. A traditional agent listing usually earns the most when the home shows well and you have time. A cash or as-is buyer trades a lower price for speed and certainty, which can fit a distressed home or an out-of-state heir. Compare offers and read the contract either way.

A Note on Legal Advice

This guide is general information about Alabama estates, not legal advice. Practice varies by county, and your Probate Court may ask for a local format or extra documentation. Selling inherited real estate can get complex with multiple heirs, a home needed to pay debts, an executor's power of sale, or a contested partition. Confirm the current requirements with the county Probate Court, check your basis with a tax professional, and consult a licensed Alabama attorney for your specific situation. For your full set of tasks, start at the Alabama probate hub.

Sources

This guide is general information about Alabama estates. It is not legal advice.