Inheriting a House in Alabama: Probate, Taxes, and Selling

You inherited a house in Alabama - here’s what actually happens

First, take a breath. Nothing about the house has to be decided this week. The property does not vanish, the state does not seize it, and the mortgage company generally cannot demand immediate payoff just because the owner died.

Alabama keeps the money side simple - there is no state inheritance tax and no state estate tax. The process side is more traditional: Alabama has no transfer on death deed, its small estate shortcut cannot move real estate, and probate runs through the county Probate Court, historically staying open the better part of a year because of the claim period.

One helpful structural point: Alabama real estate passes to the heirs or will beneficiaries at death, subject to the estate’s debts and administration - the house is not ownerless while probate runs. If you live out of state, which is common with inherited Alabama property, all of this can be handled remotely.

Does it go through probate?

Usually, for a house. The off-ramps first:

• Living trust. A house held in a revocable living trust passes outside probate. The successor trustee transfers or sells it directly.
• Joint tenancy with right of survivorship. A surviving joint tenant - commonly a spouse - takes full title automatically once the death is documented in the county land records. In Alabama the deed must actually say “with right of survivorship”; plain co-ownership does not pass automatically.
• No transfer on death deed. Alabama has not adopted TOD or beneficiary deeds for real estate. A TOD deed recorded in Alabama has no effect - the house still goes through probate. If you have seen those deeds mentioned in national articles, they do not apply here.
• Summary distribution. Alabama’s Small Estates Act shortcut covers modest estates of personal property only - the ceiling is adjusted annually for inflation (in the high $30,000s for early 2025, with 2025 legislation tying it to the family allowances, roughly the mid $40,000s). Whatever the current figure, it excludes real estate, so it will not move a house.

So a solely owned Alabama house generally goes through the Probate Court of the county where the person lived. With a will, the named executor is appointed; without one, an administrator (out-of-state relatives face restrictions on serving as administrators of intestate estates, so an in-state administrator or attorney arrangement is common - your lawyer will structure it). One deadline worth knowing: a will generally must be offered for probate within five years of death.

The Alabama probate timeline

A typical uncontested estate:

1. Opening the estate (weeks 1-6). The will is filed with the county Probate Court, the executor or administrator is appointed, and letters are issued - the document banks and title companies want.
2. Notice to creditors (months 1-2). Notice is published and mailed to known creditors.
3. The claim period (months 2-8). Creditors generally have six months from the grant of letters to present claims. This window is the main reason Alabama estates stay open most of a year.
4. Inventory, debts, and sale (months 2-10). Assets are handled, debts and expenses paid, and the house can be sold during this period with proper authority.
5. Settlement (months 8-14). The personal representative settles the estate and distributes what remains.

A straightforward estate commonly runs eight months to a year. Contested estates take longer. Some Alabama counties allow the estate to be moved (“removed”) to circuit court for equity administration - a routine tactic in some situations your attorney may recommend.

Taxes when you inherit

The headline: Alabama has no state inheritance tax and no state estate tax. You owe Alabama nothing for inheriting.

Federal estate tax only applies to estates above $15 million per person (2026), so the overwhelming majority of families never touch it.

The fact that actually saves people money is the stepped-up basis. When you inherit, the house’s cost basis for capital gains resets to its fair market value on the date of death. If your parents paid $50,000 for a house now worth $240,000, your basis becomes $240,000. Sell it soon after for about that amount and there is little or no capital gains tax - decades of appreciation are never taxed. This is federal law and applies everywhere.

One practical note: Alabama’s property taxes are among the lowest in the country, but the homestead exemption (and the over-65 exemptions many Alabama owners carry) belongs to an owner-occupant. Once the home stops being a primary residence, the exemptions fall away and the bill rises - still modest by national standards, but budget for it if the house sits vacant.

Can you sell during probate in Alabama?

Yes, with the right authority:

• With a power of sale in the will. Most Alabama wills grant the executor authority to sell real estate. With it, the executor can list and sell the house during administration, signing the deed as executor.
• Without a power of sale. Because title vested in the heirs at death, the heirs can generally join together and sell (all signing the deed), or the personal representative petitions the Probate Court for authority to sell - commonly where a sale is needed to pay debts or divide the estate. Court-ordered sales are routine but add time.
• The claim window. Sales commonly close while the six-month creditor period is still running; the proceeds stay with the estate until claims are resolved. Title companies will want the letters and any court order in the file.
• Sold outside probate. If the house passed by survivorship or a trust, the new owners of record sell like any other sellers.

If you live out of state

A large share of inherited Alabama homes belong to heirs elsewhere. It works fine:

• A named out-of-state executor can generally serve, and filings can usually be handled through an Alabama probate attorney with minimal or no travel. Intestate estates need the in-state administrator arrangement mentioned above - a solved problem, not a roadblock.
• The physical side - securing the property, insurance on a vacant house, humidity and mold prevention, storm season, yard overgrowth, clearing out belongings - needs boots on the ground.
• A local agent experienced with inherited and probate sales becomes your proxy: checking on the house, lining up cleanout and contractors, advising on as-is versus fix-first, and running the sale while you manage things from home.

You do not need to relocate to Alabama for months. You need one trustworthy local professional and a real number on the house.

What’s the house worth?

Every path - keep, rent, or sell - starts with an accurate value. Online estimates are least reliable exactly where inherited houses live: original-condition properties in small towns and rural areas with few comparable sales, which describes a lot of inherited Alabama property.

You will want two numbers: the fair market value at the date of death (that sets your stepped-up basis, so document it) and today’s as-is value versus its fixed-up value. The spread between those last two tells you whether repairs are worth it. A local agent can pull all of this for free.

Frequently asked questions

How long does probate take in Alabama? Commonly eight months to a year, since creditors have six months from the grant of letters to file claims and estates generally stay open through that window. Contested estates take longer.

Do I pay taxes on a house I inherit in Alabama? No Alabama inheritance or estate tax exists, and federal estate tax only reaches estates over $15 million (2026). With the stepped-up basis, capital gains tax generally applies only to appreciation after the date of death.

Does Alabama allow a transfer on death deed? No. Alabama has not adopted TOD or beneficiary deeds, and one recorded here has no legal effect. A solely owned house without survivorship wording on the deed or a trust goes through probate.

Can the small estate process transfer the house? No. Alabama’s summary distribution covers personal property only, under an inflation-adjusted ceiling (roughly the high $30,000s to mid $40,000s depending on the date). Houses pass by will, intestacy, survivorship, or trust.

What happens to the mortgage? It stays attached to the house. Inheriting relatives can generally keep paying it (federal rules block the lender from calling the loan due in most family transfers), or the loan is simply paid off from the sale proceeds at closing.