Everyone who owns any type of property should have a will, not because they need it but because people you leave would need it. Once you pass away, you must give legal ownership of your belongings to anyone. Your real estate needs to divide between the inheritors of your will.
Probate is a procedure that ensures that the will of the deceased person is followed as outlined. It involves the courts and assures that everything goes as the deceased wanted it. Probate of real estate is a part of this process, but it involves more complicated details than other personal assets.
Here’s everything you need to know about the probate of real estate. What is it? How does it work? How do you buy or sell real estate through probate? We’ll answer these today.
How Does Probate of Real Estate Work?
As mentioned, probate is a special procedure ensuring a will is executed fully. Probate of real estate is a more intensive procedure, where a decedent’s property is sold off for several reasons. Depending on the situation, this can be rather simple or complicated.
When a property is in probate, it can be either the inheritors of the estate are looking to sell it, or the decedent’s debts need to be paid off. Regardless of the intent, the entire process stays the same. If there is an inheritor, the process can be simple.
An estate’s legal representative, the executor, handles what the will asks, including the valuation of the decedent’s belongings. Even with inheritors, real estate can become a more complicated without proper legal representation.
The problem comes from having multiple heirs; without a unified stance, the court would need to decide. Some heirs want to keep their share of the real estate, while others want to sell theirs. Some inheritors don’t want to share the property with other heirs.
When this happens, the courts step in, and the decision may lead to a sale of the said property. If they are willing to, some heirs can buy off the property shares from other heirs. The likely result in most situations is the court selling off the property and dividing it across the remaining heirs.
Without an heir, the courts would need to appoint their own executor to liquidate their assets and even perform probate sales. Assets gathered this way will undergo several processes, depending on the state.
Understanding the Role of the Executor
Details of probate vary from state to state, but some areas remain the same. The executor will handle settling the estate, managing finances, and identifying legit creditors to pay them off. Real estate that undergoes liquidation will likely hire a real estate agent to list the home for sale.
The executor will go through the courts to request an appraisal, set a listing price, and petition to sell the home. Once they receive approval through the proper channels, they will notify any potential heirs or benefactors of the process. Heirs are open to objecting to the process. Otherwise, the sale will continue without a hitch.
In these situations, the usual process is to have all potential buyers appear in court and submit their bid(s). The one with the highest bid usually wins, and at least 10% of the estate’s value should be provided to the executor.
Skipping Probate on Your Property
In several states, there are several details that you need to consider when it comes to the probate of real estate. For example, the best way to avoid probate in New York is to use a living trust and transfer all your assets to them. New York also allows direct passing of assets to joint owner(s) or beneficiaries(s) for homes and other real estate properties.
For homes, the property should have more than one owner, with the remaining owner needing to prove they have the “right to survivorship.” If joint ownership exists and every beneficiary agrees that they have an equal share of the property, probate is unnecessary.
You can have your LLC or corporation control your assets and act as a real estate custodian for real estate properties beyond your residency. The same can be said with your IRA trust company.
The Benefits of Probate For Real Estate Properties
In real estate email marketing, probate real estate is among the most advantageous properties to buy. The major advantage comes through the pricing of probate real estate, which is normally lower than usual. Whether you plan to buy it for yourself or as a qualified investment, probate properties can give you significant discounts.
Probate real estate also allows for the ability to close out potential creditors and challenge the validity of their claims. As probate comes with liquidating assets, you get a shorter 90-day window to close out creditors. You can also question in court if a creditor is correctly collecting on the decedent’s debts.
Another advantage comes from the ability to settle the estate, as there’s a likely chance that the heirs want to get their share as soon as possible. There will be disagreements about details of the will itself, and probate helps heirs settle these in court.
Estate issues are sensitive matters that can cause a lifetime of problems between loved ones. A neutral body, like a judge, should best settle the situation before the dispute worsens.
Why You May Not Want Probate
Probate of real estate has its disadvantages, too, especially if you’re in states with more complicated laws. These can include a long settlement period for complex cases, which can run anywhere between 6 to 12 months. If you want to move on from the estate quickly, probate is likely not something you want.
There’s also the matter of cost, as fees can vary depending on the nature of the case. A good lawyer will likely offer a flat fee for straightforward cases that don’t need extra hours of legal work. More complex cases will either cost an hourly rate or equal to a percentage of the estate’s value, usually around 3 to 5%.
You would need an experienced probate attorney to speed up the process and untangle more complex situations. Even then, there are instances where you want probate, and you don’t want probate.
Probate of real estate is a vital process allowing the decedent’s will to be fully executed. Whether you’d want it or not depends on different types of situations. To prevent more complicated matters, it’s best to consult with a legal expert to give you their opinion and guide you on the best move you can make for your property.