Inherited Property in Alabama: What to Do, Your Options & Taxes

Inheriting property in Alabama is one of those situations where grief and legal complexity arrive at the same time. Whether it is a family home, a piece of land, or a rental property, what you do next — and how quickly you do it — has real legal and financial consequences. This guide walks you through the key steps, your options, and the tax considerations you need to understand.

At Colvin & Sawyer Law Offices, we help families across Birmingham, Mountain Brook, Hoover, Vestavia Hills, and throughout Alabama navigate inherited property from the first question to the final transfer.

Quick answer: If you inherit property in Alabama, first determine how the title was held, because that decides whether probate is required. Then keep the taxes and insurance current, get the title cleared into the right names, and decide whether to keep, rent, or sell. Alabama has no inheritance tax, and the federal step-up in basis means selling near the date-of-death value usually produces little or no capital gains tax. Resolve co-owner questions before anyone attempts a sale or refinance.

Step 1: Determine How the Property Was Owned

The first thing to determine is how the deceased held title to the property. This controls everything that happens next:

• Solely in their name — the property must generally go through Alabama probate before title can transfer to heirs
• Joint tenancy with right of survivorship — the surviving joint owner inherits automatically; no probate required. File an affidavit of survivorship with the county probate court to clear the title.
• In a revocable living trust — the successor trustee transfers the property per the trust terms; no probate required
• Transfer-on-death deed — a common surprise: Alabama does not recognize TOD deeds for real estate. About two-thirds of states allow them; Alabama never adopted that law, and a recorded TOD deed has no legal effect on an Alabama house or land. TOD registration works here only for securities, and payable-on-death designations for bank accounts. If you found a TOD deed in your loved one's papers, the real estate still goes through probate.

If you are not sure how the property was titled, a copy of the deed from the county probate court records will tell you.

Step 2: Open the Estate if Probate Is Required

If the property was owned solely in the deceased's name, you will need to open an estate in Alabama probate court before the title can be transferred. The personal representative — named in the will or appointed by the court — handles this process. See: Alabama Probate Process Explained and How to Become Executor of an Estate in Alabama. If you need help administering an estate, this is the stage where counsel matters most.

Once the estate is fully administered, the personal representative can deed the property to the heirs through a personal representative's deed recorded in the county where the property is located. Need the step-by-step deed and title mechanics? Read our companion guide: How Property Transfers After a Death in Alabama.

Step 3: Decide What to Do With It: Keep, Rent, or Sell

Keep the Property

If you want to keep the property, make sure the title is properly transferred into your name through the probate process. Update homeowner's insurance (vacant or estate-owned homes often need a different policy), and confirm property taxes are current. If you move in as a primary residence, you may qualify for Alabama's homestead exemption.

Rent the Property

Renting can make sense when heirs want to keep a family home or the market timing is wrong for a sale. Before listing it: the title and authority question still has to be answered (the estate, or the heirs after transfer, is the landlord), the insurance must be converted to a landlord policy, and co-owners should agree in writing on how income and expenses are split. Rental income to an estate also has its own tax filing consequences, which is worth a conversation with an accountant.

Sell the Property

You generally cannot complete a normal sale with marketable title until the person signing the deed has legal authority and the title has been resolved, through probate, the trust, or the survivorship process. In some estates, the personal representative can sell real estate during administration with proper authority under the will or a court order. Once title is clear, you can list and sell, and thanks to the stepped-up basis, your capital gains exposure is limited to appreciation after the date of death.

What If Multiple Siblings Inherit Together?

When multiple heirs inherit a property together, they hold it as tenants in common. Each owner has the right to use the property, and no one can be forced off by the others. This situation calls for a family conversation and often a written agreement, on occupancy, expenses, and what happens if someone wants out, before disagreements harden. See: My Parent Died Without a Will in Alabama.

Can One Sibling Force the Sale of Inherited Property in Alabama?

A co-owner can file a partition action asking the court to divide or sell the property. But for inherited family property, Alabama law adds real protections most people have never heard of. Under the Alabama Uniform Partition of Heirs Property Act (Alabama Code Sections 35-6A-1 through 35-6A-14), when the property qualifies as heirs property, the court must obtain an independent appraisal, the other co-owners get a right to buy out the share of the person seeking the sale at the appraised value, and the court must prefer physically dividing the land over selling it where that is practical. If a sale does happen, it is conducted as an open-market sale rather than a courthouse-steps auction. In short: one sibling can start the process, but the family has meaningful tools to keep the property, and speculators who buy a small inherited share to force a cheap sale no longer hold all the cards.

Understand the Tax Picture

This is where most families are pleasantly surprised:

• No Alabama inheritance tax — Alabama imposes no state inheritance tax or estate tax
• Stepped-up cost basis — for federal tax purposes, inherited property generally receives a cost basis equal to its fair market value at the date of death (subject to limited exceptions and estate-tax valuation rules). If you sell shortly after inheriting for close to that value, you may owe little or no capital gains tax. If you keep it and sell years later, you owe capital gains only on the appreciation above that stepped-up basis.
• Property tax — the property continues to be assessed for annual Alabama property taxes regardless of who owns it, and the bill does not pause for probate. During administration these are typically paid by the estate; after transfer, by the new owners. Make sure they stay current.

See: Does Alabama Have an Estate Tax or Inheritance Tax?