If You Can’t Answer That Question Immediately Then You Must Read On
Please keep in mind I am not an Attorney, Estate Planner or CPA and this is not legal advice. I am writing this to give you a very basic understanding of what Probate is and how to ideally avoid it. Please consult an Attorney, Estate Planner or CPA.
What is Probate?
Probate actually isn’t a bad thing. The premise behind probate court is to make sure the property goes to the right heirs, and if selling, is sold at a reasonable price. Probate also gives others time to come forward that have a claim to the property or need to be paid off from the proceeds at sale. Probate court can take anywhere from a few months to a few years and I would recommend using an attorney.
When is Probate Needed?
If there are 2 people on title and one of them is deceased and the deed does not have rights of survivorship you need probate. Also if there is one person only on title and that person dies, and the home is not inside a trust, then the home needs to go to probate court. Here is an easier example: Your father passed away years ago and your mother just recently passes and the house is still in your parents name and not in a trust, it will need to go to probate.
What if I Have a Will?
A Will cannot transfer ownership of a property. With only the deceased family member on title and the home not inside of a trust the house will need to go to probate. A judge can follow the wishes of the will but he does not have to. The only thing that keeps a house out of probate is a Trust or Rights of Survivorship.
What if I have Power of Attorney Over a Loved One?
Power of Attorney ends with death.
Should I Add Myself to Title of My Elderly Loved Ones Home?
That’s not a great idea. You will be subject to capital gains taxes from the date you are added to title. Through probate or a trust the proceeds from sale can be tax exempt.
What is the Letter of Authority?
This is a letter from the probate judge stating who the Judge assigned as the Personal Representative to handle the affairs of the estate. The Personal Rep is also the person that can pick the Real Estate Agent to sell the house. The letter is required to open up a bank account in the estates name. If the Letter of Authority has a restriction stating “Excludes Sale of Real Estate” then a Judge must approve the sale. If there are no restrictions then you are free to sell the house.
How Are Proceeds Distributed after Sale?
When a home is subject to probate approval and the home sells, the check is made payable to the estate. You will need to open an estate bank account to cash the check from the title company. This requires the Letter of Authority we discussed above.
What is the Best Way For a Couple to Take Title on a Home?
Joint Tenants with Rights of Survivorship. Look for this on the deed before you close on your new home. If one of the two passes at any time and the other decides to sell, a Death certificate with the raised seal will remove the deceased owner from the deed at closing and you will not need probate.
What is the Best Thing to do?
The best thing to do to keep your loved ones home out of probate is to set up a trust and include the home in the trust. Keep in mind, sometimes attorneys set up the deed incorrectly and the house still requires probate. Make sure you hire a Real Estate attorney or Estate Planner who specializes in Trusts to help you through this process.
How Can I Help You?
It’s my hope that this article gave you more knowledge about potential issues to look out for during your home ownership. I am a Realtor with Warrington Group Real Estate at Real Estate One in Southgate and I’m an expert on Trenton and the Downriver Michigan Area. Please feel free to reach out to me with all your Real Estate needs. -Grant Warrington