Sorting through a loved one’s belongings can be overwhelming enough when you’re wondering who might like that tool chest or those Beatles albums—let alone what happens to a house.
Should the property stay in the family? Should you sell it to cover outstanding expenses?
Before you discuss that with other relatives, you’ll need to determine where you stand legally. Even if your loved one left a will, the estate, including the house, still may need to go through probate, depending on factors such as where you live and how much the decedent’s assets are worth.
“As our population ages, I think we’re going to be faced with this more,” said top real estate agent Sue Smith, who serves northern Virginia and recently had three transactions in probate. In California, statistics show that 49,152 new probate cases were filed during the 2016-2017 Fiscal Year, the latest data available representing an increase of 4% increase over the previous fiscal year.
If you sell a house before probate begins—and you don’t have the authority to do so—you could face legal consequences, such as a lawsuit brought by other beneficiaries or even criminal charges, such as larceny and fraud.
Below, we’ll walk you through what the probate process involves so that you can choose your next steps wisely.
What is probate, and how does real estate fit in?
Probate is a formal legal process that recognizes a will’s validity and appoints an executor or representative to distribute assets to the intended beneficiaries.
People often assume that if they have a will, they can avoid probate, but that’s not always the case. Each state has its own probate laws, as well as timelines for paying creditors, taxes, and beneficiaries, said Dennis Brislawn, a probate attorney in Bellevue, Washington, who also is authorized to practice in Oregon and Alaska.
For example, in Washington, even if a person has a will, “there’s a monetary limit that says if you have $100,000 or more of assets, that would be subject to probate,” he said. (You can look up your state’s probate laws here courtesy of FindLaw, an award-winning free online legal portal.)
Filing a will makes it public record, but probate begins the legal process that the court oversees to carry out the will. Assets such as retirement accounts, the proceeds of a life insurance policy, pension plan distributions, wages, commissions, and securities typically don’t need to go through probate, according to the legal website AllLaw.com.
But real estate and other real property does, subject to a person’s estate planning.
When does probate begin?
Some states require filing a will with the probate court within 30 days of death. Other states allow for three months.
However, because probate can take three months to several years, depending on the estate’s value and whether your state has adopted the Uniform Probate Code, you’re better off starting the process as soon as you’re able.
Are there circumstances where you could rightfully and legally sell a house outside of probate?
A living trust, also referred to as a revocable trust, is one way to manage assets without going through probate. A trustee (typically the person who owns the property, as well as a co-trustee in the event of your death) manages the property as you direct for your benefit, or for your beneficiaries. A trust also can provide for the distribution of property upon your death.
“If a trust owns your titled assets, they don’t go through probate,” Brislawn said.
If a house passed into your care through joint tenancy with a right to survivorship, or a transfer-on-death deed, you can legally sell it without going through probate. You also can sell a house if you are a surviving spouse in one of nine community property states: Arizona, California, Idaho, Louisiana, Nevada, New Mexico, Texas, Washington, and Wisconsin.
However, if you’re a child or other relative of a decedent in a community property state, the same rule doesn’t apply. It’s best to let the court sort out the will, or consult with a probate attorney or a real estate agent with probate experience.
Smith, who has 31 years of experience and specializes in probate, said she always ensures the death certificate is registered with the county courthouse and obtains a proper list of heirs, usually based on a will. She also works closely with a title company to investigate any liens, which would interfere with closing.
If I’m the executor of the decedent’s will, can I skip probate?
Even if you’re an executor of a will, you need to file the will with the court so that your actions aren’t interpreted as concealing anything for your own financial gain. A person who fails to file a will in his or her possession can be subject to a lawsuit by someone who claims he or she was hurt financially by the failure to file.
In Washington, a probate court can grant a personal representative of an estate nonintervention powers, meaning that the person can facilitate the settlement of the estate without having to obtain the court’s approval. There are guidelines for this, however, including that the personal representative cannot be a creditor of the testator, or the person who has made the will, at the time of death.
“If you have nonintervention powers, typically you can then go hire somebody to list the property and sell it, but you want to be careful about determining value,” Brislawn adds. “If you’re going to sell it to yourself, that’s a built-in conflict of interest.… Sweetheart deals are potentially a violation of your duty.”
So, what are the basic steps of selling a house during probate?
Regardless of the estate plan, someone must be in charge to communicate to a probate attorney or real estate agent what should happen to the house, such as selling it to convert it to cash, pay expenses, and distribute the remainder, Brislawn said. These professionals will keep track of creditor notices, expenses such as Medicaid reimbursement, and various taxes.
“Washington has a real estate excise tax. We’ve got death taxes,” he said. “There are a lot of moving parts.”
Smith said she checks that the will matches the signatories and that the executor or personal representative has the correct paperwork to be the proper signatory for a listing, a contract and a settlement. Then she talks to everyone who wants to be involved through what’s about to happen.
“I explain what we’re doing, how we’re going to do it, and I make sure that they’re comfortable with that,” she said. “It’s a sad time, and a lot of people don’t even know where to start. I help them start. I give them references to clear out the house, make the home presentable, set a marketing plan, and really help them through the transaction.”
Before settlement, she consults with the heirs to prepare an accounting of where the proceeds of the sale will go so the title company can disburse the funds. All signatories need to be present at settlement; they cannot have a power of attorney represent them, Smith said.
“Whether we need to do it in stages or we all meet at one time, we can handle that as well.”
How can I be sure that I’ve followed all the rules?
Any real estate transaction can be challenging, especially under such emotional circumstances. However, your real estate agent, as well as a probate attorney, have the experience and the resources you need to assist you during this difficult time and be mindful of all the variables.
If you need legal help, lawyer ratings services such as Avvo.com and Martindale-Hubbell have directories searchable by location and practice area. Many attorneys offer free initial consultations to answer your questions before being retained.
Perhaps the best way to avoid second-guessing and worry down the line is to put your affairs in order while you can. The AARP notes that according to one survey, the top two reasons why people failed to tackle or complete an estate plan were they “hadn’t gotten around to it” (47%) and “don’t have enough assets to leave to anyone” (29%).
Smith said she especially sympathizes with families where someone has died suddenly, leaving relatives and an estate in turmoil.
“I encourage all my buyer clients to have their estate planning done when they purchase a house. It’s just a really good thing to do,” she said. “It comes down to being prepared.”