What Do Heirs Need to Know About Selling an Inherited Home in Minnesota?
Heirs who inherit a home in Minnesota receive a stepped-up tax basis equal to the property's fair market value on the date of death, which can eliminate most or all capital gains tax on a subsequent sale. The property may transfer through one of three paths: a Transfer on Death Deed (TODD) under MN Statute 507.071, joint tenancy with right of survivorship, or formal/informal probate under MN Statute Chapter 524.
Minnesota taxes capital gains as ordinary income at rates up to 9.85%, with no preferential long-term rate, so understanding your basis and choosing the right sale timeline matters. A date-of-death appraisal, proper title clearance, and a disclosure strategy for a home you may never have lived in are the critical steps between inheriting and closing.
By Darin Bjerknes | June 15, 2026
I get calls from heirs in the east metro two or three times a month. Someone's parent passed away in Woodbury or Stillwater, left behind a home worth $450,000 or more, and now the family is trying to figure out what comes next.
The grief is fresh, the paperwork is unfamiliar, and the questions come fast: Do we owe taxes on this? Can we sell it right away? What if one sibling wants to keep it and two want to sell?
The answers depend on how the property transferred to you, how long you hold it before selling, and a few Minnesota-specific rules that work differently here than in other states. Here is what I walk heirs through when they sit down with me, whether they inherited a rambler in Cottage Grove or an acreage property in Afton.
Three Ways You Inherit a Home in Minnesota
Transfer on Death Deed (TODD)
Minnesota adopted the Transfer on Death Deed (TODD) under MN Statute 507.071, allowing homeowners to name a beneficiary who receives the property automatically at death.
When the owner dies, the beneficiary must record three documents in the county where the property is located: an affidavit of identity and survivorship, a certified death certificate, and a Medical Assistance clearance certificate from the county (DHS form 5893).
The TODD avoids probate entirely and still provides a full step-up in basis.
Joint Tenancy with Right of Survivorship
If the deceased co-owned the home as joint tenants with right of survivorship, the property passes automatically to the surviving joint tenant at death. No probate is required.
One critical tax distinction applies here. In Minnesota, only the deceased owner's share of the property receives a step-up in basis.
Probate (Formal or Informal)
When no TODD or joint tenancy arrangement exists, the property passes through the deceased's estate.
Under MN Statute 524.3-711, a personal representative appointed through informal probate cannot sell, encumber, lease, or distribute real estate until 30 days after the issuance of letters.
Minnesota probate typically takes 6 to 18 months.
Step-Up in Basis: The Single Biggest Tax Benefit for Heirs
How It Works
Say your mother bought her Woodbury home in 1992 for $165,000. At her death in 2026, the home is worth $510,000. If you sell it within a few months for $515,000, your taxable gain is only $5,000, not the $350,000 it would have been without the step-up.
The Gift vs. Inheritance Trap
If a parent gifts a home to a child during their lifetime instead of allowing it to transfer at death, the child inherits the parent's original cost basis.
This difference can result in tens of thousands of dollars in additional capital gains taxes.
Getting the Date-of-Death Appraisal
Your stepped-up basis needs documentation.
Order a retrospective date-of-death appraisal from a licensed appraiser as soon as possible after the death.
Minnesota Taxes Capital Gains as Ordinary Income
This is the detail that surprises many heirs.
Minnesota taxes all capital gains as ordinary income under its graduated rate schedule.
The $250,000 / $500,000 Primary Residence Exclusion
Heirs can only claim the federal home sale exclusion if they move into the inherited home and live there as their primary residence for at least two of the five years before the sale.
No Minnesota Inheritance Tax
Minnesota does not impose a separate inheritance tax on heirs.
However, the estate itself may owe Minnesota estate tax if its gross value exceeds $3 million.
Disclosure Challenges: Selling a Home You Never Lived In
Under MN Statute 513.55, a seller must disclose all material facts that could adversely and significantly affect an ordinary buyer's use and enjoyment of the property.
For heirs who never lived in the home, this can create practical challenges.
My recommendation for every heir: order a pre-listing inspection.
The Decision: Sell, Keep, or Rent?
Sell
Selling soon after inheritance is often the cleanest path from a tax perspective.
Keep as a Primary Residence
Living in the inherited home may eventually allow you to qualify for the federal home sale exclusion on future appreciation.
Rent
Renting can generate income but creates landlord responsibilities and additional tax considerations.
When Multiple Heirs Disagree
The simplest solution is usually a buyout, where the heir who wants to keep the property pays the others their proportional share of the fair market value.
If no agreement is reached, any co-owner can file a partition action under MN Statute Chapter 558.
Timeline: What to Expect When Selling an Inherited Home in the East Metro
TODD or Joint Tenancy Transfer
2 to 6 weeks to perfect title and prepare for listing.
Informal Probate
30-day minimum wait after letters of administration are issued before listing.
Formal Probate
Timeline varies and may require court approval.
Closing Costs for Inherited Property
Expect seller closing costs similar to any other home sale, including commissions, deed tax, title fees, and prorated property taxes.
Five Steps to Take Right Now
- Determine the transfer path.
- Order a date-of-death appraisal.
- Get a Medical Assistance clearance if applicable.
- Order a pre-listing inspection.
- Talk to a local agent who handles estate sales.
Navigating an inherited home sale in the east metro while processing a loss can be overwhelming. The legal and tax pieces are manageable with the right guidance and planning.
Reach out at [email protected] or book a call at calendly.com/darintheminnesotan if you have questions about your situation.
Contact a licensed Minnesota real estate attorney or title company for legal questions about your specific transaction. Results may vary.
Darin Bjerknes | Minnesōtan, Brokered by REAL
