For most people, the idea of probate real estate makes them shudder in fear. If this sounds like you, then you’re not alone; many people think of probate in real estate as a process that’s slow and painful to go through. However, it doesn’t have to be that way! Let’s take a look at what exactly probate real estate is and how it works, so you can go through the process with ease.
What Is Probate In Real Estate?
The probate process involves reviewing the assets and will of an individual who has died, also known as a decedent, and determining how those assets will be distributed. Probate courts are responsible for protecting those assets. When there is a valid, free, and authentic will left by the decedent, the deceased’s assets will be passed to the beneficiaries. If anyone contests the will, the probate court will settle the dispute.
It’s more likely that many people die without leaving a will, which results in the legal state of intestacy. If a will doesn’t exist and there is no way to figure out what the deceased wanted, courts distribute estates according to the probate laws. In general, the order of inheritance would be from spouses and children to parents, then to other relatives, but the order varies depending on what country the decedent lived in.
Generally, in an intestacy situation, the main asset to be handled is the house that the decedent owned. If the decedent’s spouse is still alive, then a joint tenancy policy continues to apply to the house. When a child wants to keep the home, they may be able to do so if it is owned outright. If there is a mortgage on the property, a child would typically have to repay it independently or by applying for a new mortgage.
When there are multiple children, or stepchildren and half-children, the situation becomes more complicated. The home will be sold and the proceeds divided.
The Probate Process
If a valid will is provided, then the estate becomes the responsibility of the will-maker. The will specifies how their estate is to be distributed. Persons who pass away without a will are called intestate, meaning that their estate is distributed according to the state’s intestate succession laws.
Every state requires the estate of a deceased person to be dealt with and dispersed. Though there are variations depending on the state, this process typically includes the following steps:
- After the decedent’s death, a Petition for Probate is filed with the local probate court.
- You can swear in a personal representative. Personal representatives are in charge of the estate and its dispersal. Before distributing any assets, the executor/administrator will be given the responsibility to swear under oath to follow the law of the state with regard to asset distribution.
This might mean swearing under oath in a court of law or swearing to follow the guidelines stipulated in the will. If an executor/administrator is named in the will, they are sometimes referred to as an executor or administrator and empowered by either “Letters Testamentary” or the “Letters of Administration.”
- The intent of notice is to allow individuals with a legitimate interest in the estate to take action before it is distributed. One way to alert creditors and anyone who may inherit when there is no will is through a notice in the newspaper.
- Prior to the distribution of the estate, an inventory and appraisal is required. An inventory may be one of the most time-consuming responsibilities of a personal representative. A personal representative needs to catalog the estate’s belongings, including real estate, personal property, bank accounts, etc.
- Repayment of Debts and Taxes. An Estate of a deceased person must take care of their debts. In some cases, even large estates may be subject to the federal estate tax, as well as a few state-level estate taxes.
- Upon the payment of debts and taxes, the remaining property can be distributed, either according to the deceased’s will, if he or she made one, or according to the state’s laws of intestacy, if they didn’t.
Avoiding Probate In Real Estate: The Why & How
Probate is used to ensure that the desires of the deceased are met, to determine if they were liable for any debts, and to distribute their property in an orderly fashion in the absence of a will. It is often erroneously seen as an excessively expensive and drawn-out process that should be avoided. It is not always true.
If you plan to put your property into probate, it could cost you a considerable amount of money. You may have to pay fees for executors, attorneys, and appraisers, in addition to the fees to file in court. Most often these tasks, like a number of legal proceedings, take time, especially if there is a dispute and some of the estate needs to be liquidated in order to pay off debt.
Depending on the size of the estate, a smaller one may have less need for a lengthy probate process. The more valuable the estate, the more expensive and time-consuming the probate process. But if the estate is complicated, hiring an estate planning or probate attorney can help save you both time and money.
The public court process of probate might be something that some people will avoid altogether. There are some ways to avoid real estate probate. I’d like to learn more about your options.
Another way to avoid the hassle of going through probate with real estate is through joint tenancy. You can simply add a joint tenant on your property’s deed, as you are the sole owner. Once you pass away, ownership of the property automatically transfers to the joint tenant and bypasses the probate process.
Revocable Living Trust
One way to avoid probate for real estate is to use a living trust. In this case, the creator of the trust would be the trustee and would only serve until their death. The person named as successor trustee, as well as the grantor’s beneficiaries, will take control of the grantor’s estate and distribute the grantor’s property at his or her death. No changes can be made to the grantor’s estate after he or she passes. Owners are able to use the property or sell it, but it’s still in trust and does not belong to them.
It is possible for some assets to transfer directly to a named beneficiary without going through probate. When you name beneficiaries in advance of your passing, you can ensure that your beneficiaries are able to benefit from life insurance policies, retirement accounts, payable-on-death accounts, transfer-on-death deeds, and other assets without having to go through probate.
If you give something away while still alive, it is removed from your estate, so no probate is required. Make sure, however, to consider federal and state gift taxes and exemptions when using this method to avoid probate. Connecticut imposes its own gift tax, which is in addition to the federal one. No other state has it.
Transfer On Death Deed
Using a Transfer On Death (TOD) deed can help you avoid probate by naming a beneficiary to inherit your real estate property at your death. While you remain in control of your property during your lifetime, you can revoke the TOD deed if you choose.
Life Estate Deed
Life estate deeds give you the power to use your property during your lifetime and transfer it to another individual at the moment of your death. Life estate deeds avoid probate, but they also limit your ability to sell, mortgage, or handle other property-related decisions without the other beneficiaries’ permission. Life estate deeds can be classified into two types based on their purpose.
Do You Need A Will?
A short answer is yes to this question. Last wills and testaments make decisions about how to handle one’s property and responsibilities after one’s death. Do not forget to think about these matters before the inevitable event.
If you don’t write instructions as to how your estate should be divided in your will, your wealth will be dispersed according to the laws of intestate succession. This may or may not please you in life. Additionally, a well-drawn will goes a long way in providing you and your loved ones with a measure of peace of mind, as well as making the probate process smoother.
Most people don’t know that you can draft a simple will without the help of an attorney, so they spend lots of time and money consulting with them. But with Findlaw’s DIY estate planning tools, that isn’t the case.
Consider Hiring An Estate Planning Lawyer
If you are starting the process of probate, you may want to consider hiring an estate planning lawyer. Here are a few reasons why:
- An estate planning lawyer can help you understand the process and what to expect.
- They can help you determine if probate is necessary.
- If probate is necessary, they can help you navigate the process and paperwork.
- They can also help you determine how to distribute your assets.
- Estate planning lawyers can also help you plan for the future and avoid probate in the future.
- Finally, they can provide peace of mind during a difficult time.
Final Remarks: Probate In Real Estate
Probate is the legal process of transferring ownership of property from a deceased person to their heirs. In order to start the probate process, you must first file a petition with the court. Once the petition is filed, the court will appoint a personal representative to oversee the estate. The personal representative will then be responsible for identifying and inventorying the deceased person’s assets, paying debts and taxes, and distributing the remaining assets to the heirs.