Inheriting Property in Delaware: Taxes, Laws & Options
Navigating inherited property in Delaware requires understanding the state’s unique tax landscape, including the 2018 repeal of the estate tax and specific county-level assessment practices. While Delaware offers significant tax advantages for heirs, the absence of transfer-on-death deeds means most real estate must pass through formal probate or established trusts.
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Delaware-Specific Quick Facts
These facts are specific to Delaware and may differ from the general process described below. Always verify with your local court.
Last verified: 6/30/2026
Delaware Inheriting a property — whether a family home, investment property, or land — comes with legal, financial, and emotional decisions. This guide walks you through the process of handling an inherited property, from securing it and understanding title issues to choosing whether to sell, keep, or rent it.
While the federal framework for inherited property is consistent nationwide, important details — property tax reassessment rules, state estate and inheritance taxes, and probate requirements — vary by state. This guide covers the general process and highlights state-specific differences.
How It Works in Delaware
Delaware Estate and Inheritance Tax
As of January 1, 2018, Delaware officially repealed its state estate tax. This means that for any decedent passing away after that date, there is no state-level tax levied on the value of the estate, regardless of the size. Furthermore, Delaware does not impose an inheritance tax on the beneficiaries. Heirs only need to concern themselves with federal estate tax thresholds, which currently sit significantly higher than most average estates. However, it is important to confirm with a tax professional if the decedent passed away prior to 2018, as older tax laws may still apply.
Real Estate Transfer Tax Exemptions
In Delaware, the standard real estate transfer tax is typically 4% of the property value (split between the state and local municipality). However, Delaware Code Title 30, Section 5401 provides critical exemptions for inherited property. Transfers of real estate between family members—such as parents and children, siblings, or spouses—resulting from the death of a property owner are generally exempt from this transfer tax. This can save heirs thousands of dollars when formalizing the deed in their name.
Property Tax Reassessment Rules
Unlike states like California that trigger a 'reset' to market value upon transfer, Delaware's property tax system is historically based on older assessment years (e.g., New Castle County was recently using 1983 values). While all three Delaware counties (New Castle, Kent, and Sussex) have recently undergone or are undergoing court-ordered reassessments to bring values closer to current market standards, the act of inheriting a property does not itself trigger an immediate, individual reassessment to current market value. The property will remain at the current county-wide assessment level.
Transfer-on-Death (TOD) Deeds
Prospective heirs should be aware that Delaware is one of the states that does not recognize Transfer-on-Death (TOD) deeds for real property. To transfer real estate outside of probate, Delaware residents typically utilize Revocable Living Trusts or hold property in Joint Tenancy with Right of Survivorship. If the deceased owned property solely in their name without a trust, the property must pass through the Delaware Office of the Register of Wills in the county where the property is located.
Homestead Protections and Senior Credits
Delaware offers a modest homestead exemption of up to $125,000, but this is primarily applicable in bankruptcy proceedings rather than as a broad protection against all creditors for heirs. However, if an heir is over the age of 65 and intends to live in the inherited property as their primary residence, they may be eligible for the Delaware Senior School Property Tax Credit, which can reduce the school district portion of their property tax bill by up to $400 (confirm current limits with the local county tax office).
Inheriting a Property: First Steps
Inheriting a home or real estate brings both emotional and practical challenges. Whether you've inherited a house from a parent, grandparent, or other relative, understanding your options and obligations will help you make informed decisions during a difficult time.
The first priority is securing the property — changing locks, maintaining insurance, and ensuring the home is safe. Then you'll need to determine how the property was titled, whether it needs to go through probate, and what your options are for keeping, selling, or renting it.
How Title Affects What Happens Next
How the deceased held title to the property determines whether probate is needed and how the transfer occurs:
- •Sole ownership: The property typically goes through probate. The executor transfers it to the beneficiary named in the will (or per state intestacy law).
- •Joint tenancy with rights of survivorship: The surviving owner automatically inherits the deceased's share. A death certificate and simple recording usually complete the transfer — no probate needed.
- •Tenancy by the entirety: Available to married couples in some states. The surviving spouse automatically inherits.
- •Living trust: If the property was transferred to a trust during the owner's lifetime, the successor trustee manages and transfers it according to the trust terms — no probate needed.
- •Transfer-on-death (TOD) deed: Available in some states, this allows the owner to name a beneficiary who inherits the property directly upon death, bypassing probate.
Your Options for an Inherited Property
Once you've determined that you're inheriting the property, you generally have four options:
- •Move in: You can take possession and make the home your primary residence. Consider property tax implications — some states reassess inherited property, significantly changing the tax basis.
- •Sell the property: You can list and sell the home, splitting proceeds with co-heirs if applicable. This is the most common choice when multiple beneficiaries are involved or when no one wants to live in the home.
- •Rent it out: You can become a landlord, generating rental income while retaining the property. This requires ongoing management and carries tenant-related responsibilities.
- •Buy out co-heirs: If multiple people inherited the property, one heir can buy out the others' shares to become the sole owner.
Taxes on Inherited Property
Understanding the tax implications of inheriting a property is critical:
- •Stepped-up basis: When you inherit property, the tax basis is generally "stepped up" to the fair market value at the date of death. This means if you sell the property soon after inheriting, you may owe little or no capital gains tax.
- •Estate tax: The federal estate tax exemption is high, so most estates owe no federal estate tax. Some states have their own estate or inheritance taxes with different thresholds.
- •Property tax reassessment: Some states reassess property values on transfer, which can significantly increase property taxes. Other states offer exemptions or protections for inherited primary residences or transfers between family members.
- •Capital gains tax: If you hold the property and it appreciates before you sell, you may owe capital gains tax on the appreciation since the date of death.
Tax rules vary significantly by state. Consult a tax professional or estate attorney to understand the specific implications for your situation.
Dealing with the Contents of an Inherited Home
An inherited home often comes with decades of accumulated belongings — furniture, collectibles, paperwork, household goods, and sentimental items. Sorting through these contents is often the most time-consuming part of settling an estate.
A practical approach:
- •Remove important documents, valuables, and sentimental items first
- •Sort remaining items into categories: keep, sell, donate, discard
- •Consider a professional estate sale for items with resale value
- •Arrange for donations of unsold usable items
- •Schedule a cleanout service for remaining items and debris
An estate sale company can handle the entire process — inventory, pricing, staging, sale execution, and cleanout — which is especially valuable when you live far from the inherited property or when the volume of contents is overwhelming.
Inheriting Property with a Mortgage
If the inherited property has a mortgage, the loan does not automatically disappear. Under federal law (the Garn-St. Germain Act), heirs generally have the right to assume the mortgage and keep making payments, or to sell the property and pay off the loan from the proceeds.
Key considerations:
- •Notify the lender of the owner's death as soon as possible
- •Continue making mortgage payments to avoid default
- •You can typically sell the property without paying off the mortgage first — the loan is paid from sale proceeds at closing
- •If you want to keep the property and refinance, you'll need to qualify for a new loan in your name
- •Reverse mortgages have different rules — the loan typically becomes due when the borrower dies
Official Delaware Resources
Always confirm current forms and fees directly with the court or agency.
Frequently Asked Questions
Delaware-Specific Questions
Does Delaware have a 'Death Tax'?
No. Delaware repealed its state estate tax effective January 1, 2018. There is also no state inheritance tax on beneficiaries.
Can I use a Transfer-on-Death deed for my house in Delaware?
No, Delaware law does not currently recognize TOD deeds for real estate. Property must be transferred via probate, a trust, or joint ownership.
Will my property taxes go up immediately after I inherit a house in Delaware?
No, Delaware does not reassess property to market value simply because it was inherited. However, your taxes may change if the entire county is undergoing a court-ordered general reassessment.
General Questions
Do I pay taxes on an inherited house?
You generally do not pay income tax on the inheritance itself. However, you may face capital gains tax if you sell the property for more than its stepped-up basis (fair market value at date of death). Some states also have estate or inheritance taxes. Property taxes may be reassessed upon transfer.
Can I sell an inherited house without going through probate?
If the property was held in a trust, owned jointly, or had a transfer-on-death deed, you may be able to sell without probate. If the property was solely owned by the deceased, it typically must go through probate before it can be sold, unless your state's small estate procedure applies.
What is a "stepped-up basis" and why does it matter?
When you inherit property, your tax basis is generally reset to the property's fair market value at the date of death. This means if you sell shortly after inheriting, you likely owe little or no capital gains tax, even if the property appreciated significantly during the original owner's lifetime.
What if multiple siblings inherit a house?
Co-heirs must agree on what to do with the property. Options include selling and splitting proceeds, one sibling buying out the others, or renting it out jointly. If siblings disagree, any co-owner can file a "partition" lawsuit to force a sale, though this is a last resort.
Do I need to pay the mortgage on an inherited house?
Yes. The mortgage must continue to be paid to avoid default and foreclosure. Under federal law, you can typically assume the existing loan or sell the property and pay off the mortgage from the proceeds.
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