How Probate Works. A Guide for Executors, Heirs, and Families.

E311 The Latest Probate Tax Delay is 1040 Verification

E311 The Latest Probate Tax Delay is 1040 Verification


Tax clearance is taking even longer lately because of a new twist: 1040 verification. Everyone agrees it’s important to keep the tax bogeyman satisfied, but all these layers of delays are frustrating our clients and us. Below we’ll explain what’s happening here.

What is tax clearance and why does it take so long?

What is tax clearance and why does it take so long?

The executor needs to make sure that the IRS agrees no more taxes are due. This is important because the executor is personally liable for unpaid taxes. If the executor makes distributions to the heirs and the heirs sign indemnity agreements, then the heirs will be liable for taxes.

Maybe you’re thinking that your loved one’s estate was so small that there’s no estate tax. We’re not just talking about estate tax, but final 1040s, payroll, small business, retirement payouts, and just about everything else. Still don’t think it applies? You’d be surprised how complex someone’s tax situation can be. The IRS is pretty good at combing through the past six years to make sure they get everything owed to them (it’s the IRS’s last chance to be paid).

Why does it take so long, generally? As with any bureaucracy, it takes the executor a while to gather all information and past returns. (Try getting a tax transcript quickly from the IRS!). The IRS will also take their time since this is their last bite at the apple. And lately, everything related to the IRS takes way longer due to unprecedented delays and backlog. As you recall, the lock-downs were in 2020. It’s mind boggling how the IRS is so backed up three years later.

Now the IRS wants verification

Now the IRS wants verification

If the estate is owed a refund on any of its final returns, the IRS now requires identify verification of the decedent. It’s understandable that the IRS is taking these measures, since scammers posing as IRS agents have become ubiquitous. But the result is that estates are getting stuck for more weeks or months because of $10 refund.

Why does IRS verification cause longer delays?

Why does IRS verification cause longer delays?

It’s because all bureaucracies are slow, and are even slower if your situation is not on their main “script.” For example, if you go to the bank to open a personal checking account, it’s easy for the tellers who open checking accounts several times a day. But if you have a non-traditional request, such as closing a decedent’s account, the teller probably has to go ask a manager for help. When you go off-script from procedures that an employee is used to, then things can go haywire.

Whether it’s multinational banks or the largest government in the world (US), these bureaucracies struggle with edge case situations. It’s very hard to find a competent banker, branch manager, or IRS agent who understands what an executor is, let alone the correct procedure for dealing with a deceased customer or taxpayer. You’re pretty lucky if you speak to a knowledgeable agent on your first call, if you get to speak to anyone at all.

Can’t we just forego the $10 refund? Ah, nice try. The IRS will not process the return (not just the refund check) until they verify the decedent’s identity. When a return is not processed, you can’t get confirmation of the final balance and therefore the final release from liability.

For example, when you call the IRS to verify, they ask if you are the decedent. Once you tell them you are the executor, it heads downhill from there. It sounds absurd, but it happens.

The 1040 verification is a new procedure, so this is a heads up for those facing a new estate. For those who have been working on an estate for a while, this could be a reason why the estate is now dragging on. When we say that we’re waiting along with you, we mean it. It’s an uphill backwards in the snow with no shoes kind of battle.

Probate

Check out my book, “How Probate Works,” and when you get to the chapter on delays, just add on more time. Unfortunately, that’s the way things are right now.

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E305 Get Your Inheritance Faster

E305 Get Your Inheritance Faster


Heirs often want to know if there is any way to get their inheritance faster.

Probate can take a long time, for various reasons, and lately it has been taking even longer because IRS delays are making tax clearance even slower. So, here are some options for heirs in a cash crunch.

Expense reimbursements

Expense reimbursements

First, the executor can pay expense reimbursements as soon as possible. This includes reimbursing heirs who paid the funeral bill, court or lawyer fees, clean out or move out costs, co-op fees, mortgage payments, and property repairs. Heirs who fronted these funds are entitled to be reimbursed from the estate.

Of course, reimbursements are not actually your inheritance, but repayment of money owed back to you. But if you need liquidity NOW, this can usually come out of the estate quickly with minimal delays. For example, court fees are unequivocal, so those can be reimbursed immediately once the estate has funds available.

Requesting a reimbursement from the estate is a quick way to get cash back into your pocket. Some heirs pull thousands of dollars from their personal bank accounts to cover the estate expenses and can’t afford to wait a year or longer to replenish their accounts.

Intermediate accounting

Intermediate accounting

Another alternative it to do an intermediate accounting. One of the main steps to close an estate is to do an accounting of the full books and ledgers of the executor’s tenure (every dollar that came in and out of the estate). The accounting is usually done at the end of the estate process because it is time-consuming and costly. It’s difficult to track down every transaction over the span of several years, even though the executor keeps track as they go along.

An intermediate accounting takes place in the middle of the probate process, so that the executor is approved to distribute a portion of the funds to the heirs. The problem with an intermediate accounting that the executor is duplicating work that they have to do all over again at the end of the estate.

An intermediate accounting doubles the cost but may be worth it if heirs need cash and the delays are really long. This may frustrate other heirs who do not see a need for an intermediate accounting, and they may demand that the duplicate costs be paid for by the heir who wants the accounting. Most people don’t like paying for something twice if they don’t have to!

Inheritance advance loan

Inheritance advance loan

There is another option, but I highly discourage it: the inheritance advance loan. It is BAD idea, because it is a loan that takes advantage of an heir’s need for money.

With an inheritance advance loan, you can pay 50-100% interest/fees! If your share of the estate will be $50,000 and you need $10,000 now, the loan company will give you $10,000 now. But, at the end of the estate, the executor will give you $30,000 because for the $10,000 that you borrowed, you owe the lending company $20,000. If for some reason your share of the estate becomes less than you thought it would be or if you need to spend more money on litigation, repayment may be a problem.

In the narrowest of circumstances, this option may be worth it. Please explore the other options of expense reimbursements and intermediate accounting first. Talk to your executor or attorney to make sure all other options are exhausted before perusing an inheritance advance loan. This option exists for worst case nuclear emergencies.

Probate

Check out by book, “How Probate Works,” so you can understand the probate process and have reasonable expectations up front about getting your money. We try to make it clear to our clients that this process could take months or even years. Some clients may decide to go to other more optimistic attorneys, but I don’t like to over-promise and under-deliver.

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E301 How the Recession Affects Probate

E301 How the Recession Affects Probate


Economic recession affects probate, just as much as wages, gas, and your grocery bill. We’ll share a few ways we’ve seen how it’s been impacting probates.

Takes longer to collect probate assets

Takes longer to collect probate assets

First, there are major delays in collecting assets. Banks, brokerages, unclaimed funds, etc. are taking way longer than usual to process claims and release funds. They are asking for more documents and are stricter in their requirements. In the past, these financial institutions let some things slide, but now they want all the T’s crossed and I’s dotted. They may just be rigorous in their requirements now. But another interpretation is that they want to keep the money in their accounts as long as possible.

This results in delays for the executor and heirs. The key takeaway is to start the process now!

Creditors will not settle

Creditors will not settle

Historically, regarding an estate debt (exs. credit card or medical bills), creditors were willing to negotiate the bill down. It used to just take a phone call to get even 50% off easily.

Now creditors want full payment. Some will even wait as long as it takes or even sue the estate. The notion of debts getting discharged or reduced isn’t happening. The takeaway: don’t count on getting the debt reduced to increase the amount the heirs will receive. Just assume that debts will be paid in full.

This seems odd, considering we’ve been through recessions before. Even then, creditors were willing to settle estate debts to guarantee cash in hand. It is unclear what makes creditors so aggressive now.

Heirs need cash

Heirs need cash

Heirs need and want their cash as soon as possible. If you’ve listened to any of our prior podcasts, you know that paying heirs quickly is unrealistic. Estates take a long time to settle, but there are some solutions to make payments to the heirs sooner rather than later.

One way is to pay reimbursements immediately. Sometimes heirs front money to pay for court filing fees, house clean-out, or the attorney’s retainer. Normally, when the matter isn’t urgent, the heirs get reimbursed at the end of the probate process. Why have multiple rounds of checks mailed out if it’s not urgent? But, if you are an heir who has fronted money, just ask the executor for it. The executor should have no problem repaying you.

We are also seeing heirs and executors making concessions during the accounting phase to get it done faster. In the past, parties might dispute how much money was spent on certain tasks (house clean-outs, for example). Now all sides just want to get the accounting done.

Another option is to prepare an intermediate accounting. Instead of waiting until the end for the full accounting to distribute the inheritance, the executor can do a partial accounting to pay out a portion of the shares to the heirs. The problem is that the same level of work is required to produce an intermediate accounting as it is for a full accounting. Basically, the heirs pay for the accounting to be done twice, whether by the executor or an accountant. We may start seeing a trend where the heirs don’t mind paying twice just so they can get some cash now.

I hesitate to even mention the last option, since it is a bad idea. Inheritance funding companies can give cash to the heirs in exchange for a legal right to their share of the estate. For example, if your inheritance share is $50,000, the inheritance funding company will give you less than $20,000 now and they’ll keep the rest when the accounting is done. These are horrible terms, so try to avoid this option!

Probate

If you want to learn more about probate, check out my book on Amazon, “How Probate Works.” If you fill out the form below, we will give you a free chapter. As always, send us comments or questions by email. We will do our best to answer them either directly or as the subject of a podcast.

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E298 Is a Cash Buyer Better for Probate Real Estate

E298 Is a Cash Buyer Better for Probate Real Estate?


Which offer for probate real estate is better: an experienced investor cash buyer, or an individual financed offer that’s supposedly $80,000 more?

In a recent case, turns out the individual offer was actually more like $30,000 (~3.5%) higher, plus tons of headaches and delays.

Nitpicked during buyer’s inspection

Nitpicked during buyer’s inspection

Individual buyers heavily nitpick during inspections. Unlike an investor, the individual buyer is the one who will live in the house. He has a vision of how everything should be for his new home.

This inspection showed some problems, some legitimate and some were very cosmetic. Note that this sale was an as-is contract. It’s an estate sale; take it or leave it!

At the end of the day, the buyer demanded about $20,000 worth of repairs and buyer credits. For some items, he wanted a credit so he could pay to fix it himself. The repairs that he demanded from us added months of delay to the process.

Months equals money out of the estate. Not to mention all the problems that can arise from leaving a home vacant for months. If the roof leaks or a pipe bursts during that time, it is still our problem since the house hasn’t officially been transferred.

Cash buyers will inherit problems

Cash buyers will inherit problems

Cash buyers only care about big problems, except ones that affect title (such as boundary line issues or environmental problems).

But cash buyers are willing to deal with cosmetic problems. Why? Because they usually tear down and rebuild, meaning they will end up fixing those problems anyway. What about large cosmetic problems? Cash buyers have experience and teams that can easily fix cosmetic items. Since they deal with this often, cash buyers are very efficient, and their repair estimates are much lower than an individual buyer who may have to negotiate with a contractor.

Cash buyers close quickly

Cash buyers close quickly

It’s a big deal how long the probate property sits. The longer it sits, the more risk the estate bears. Even if someone trips and falls on our sidewalk while we’re waiting for a buyer, that’s our problem.

In probate real estate, we don’t have weeks of open houses, marketing, etc. In fact, we may not even use a broker, which will save another 6% in broker’s commission (in this case, about $35,000!).

As discussed above, there is no negotiation for repairs with a cash buyer. Similarly, there is less likelihood that we will need to spend months making repairs. The cash buyer just wants to get the deal done, fix the real estate, flip it, and move on to their next investment.

Compare this with choosing an individual buyer. The legal bill will be higher, because you will spend months working on a deal that could have been completed in a couple of weeks with a cash buyer. Instead of spending $1,000 or $2,000 for closing, it could be $5,000 or even $7,000.

In conclusion: the cash buyer is still net less than the individual offer (in our case, about $30,000, or 3.5% of our deal). This estate had 4 heirs, so that comes to $7,500 each.

Was it worth it the months of delays and stress to all involved in the estate? Executors in these situations have to weigh the facts and decide for themselves.

Probate

Real estate can be messy. To learn more about selling probate real estate, check out my book, “How Probate Works,” available on Amazon.

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E291 What is a Strong Offer on Probate Real Estate

E291 What is a Strong Offer on Probate Real Estate?

Is the highest offer the strongest offer? Not necessarily, especially in probate. Sometimes an heir or a co-executor believes they can get a higher offer. Then, all things being equal, we should take that offer. However, it’s unusual that two offers are identical. There are other factors to take into account besides the price.

3 Fs of probate homebuyers

3 Fs of probate homebuyers

We use the 3 Fs to make sure the buyer is a good fit for a probate real estate sale.

  1. Financials

An all-cash offer is the best offer. There is always the risk of a mortgage getting denied. However, some probate properties are well-suited for a traditional mortgage situation.

We also want to see a good, healthy down payment, as well as substantial post-closing funds. In other words, the buyer should have uber financial strength.

  1. Fast

We need to sell fast in probate, but we won’t acquiesce to a bad offer just for speed.

A normal seller who doesn’t like a deal can reject an offer and continue to live in the home. But for an estate, the property is vacant. So, the estate is bleeding cash every month to pay maintenance, utilities, and existing mortgage.

Also, any vacant property will fall into greater disrepair, especially over the winter. One bad winter can lead to much wear and tear. If the owner is alive and living in the home, they would know about a problem and take care of it. Whereas, in a probate property, the executor will have to keep checking in and find time to deal with issues that arise. Long-sitting vacant properties will have less value due to less upkeep.

  1. Flexible

An executor cannot afford the time to handhold a first-time home buyer. The buyer needs to know what they are doing throughout the process. We’re busy working on the estate side of things. For example, we need to get additional court orders if the executor is bonded. We have to get special approval to sell the property, get tax waivers, get approval from the IRS to close the sale, and all sorts of other issues.

Now that the buyer has met the 3 Fs, in what circumstance might we accept the lower offer?

Is this probate homebuyer credible?

We often get investors as buyers for probate properties. Usually, it’s too much of a mess for first time home buyers or first-time renovators. We want to weed out those buyers who just watched a YouTube video on how to flip a house and are looking for a probate steal.

But on the flipside, experienced investors can be a little sneaky trying to get the best deal. There are savvy investors who come in at a pretty aggressive/high offer with the goal of clearing out all the other offers. Then the savvy investor becomes the focus of the negotiation. Once they are the only ones left at the table, they start nickel and diming you down to the price of the next best offer.

Will the probate home sale actually close?

Even if the buyer comes in 15% higher than the next best offer, will their mortgage actually get approved at that amount? Will the co-op or HOA approve the buyer? If we are selling an artist’s loft in Soho, and the buyer is completely unrelated to the fit and culture, they could get rejected. In New York, you can be rejected from buying a co-op for almost any reason except being a protected class under anti-discrimination laws.

Again, savvy investors may make the highest offer, but when they can’t get it negotiated down to their liking, they will bail. This does not mean that you will get to keep their down payment; they will just litigate. It’s not like a traditional buyer whose eggs are all in that basket. These investors have money to let things sit for a few months while they sue you. We avoid those buyers like the plague, because we do not need probate held up and the property still sitting vacant.

Sometimes, an offer is too good to be true. We know enough to see the red flags. Naturally, clients want to know why we may not accept the highest offer. We have to explain carefully to our clients that these types of deals will not close at that offer number.

If you want to learn more about how probate works in general, check out my book, “How Probate Works,” available on Amazon.

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E288 There’s No Such Thing as a Perfect Estate Plan

E288 There’s No Such Thing as a Perfect Estate Plan


“There’s no such thing as a perfect estate plan,” Sherlock Holmes would probably say if he did probate. What we mean is that things may not work out the way you plan, no matter how hard you try.

We’ll review an anonymous probate case study, where even in an ideal planning scenario (knowing the time of death to the minute, and plenty of time to plan ahead), there were all sorts of probate problems.

Solo Ager, Linda, was terminally ill, and had a planned end of life. This means she knew, to the minute, when she would pass, and she had months to plan in advance. Here’s how her probate unfurled. This is not a criticism of Linda; rather an acknowledgement that it is difficult to plan a perfect estate.

What part of her estate plan worked?

First, Linda hired us as her professional executor. This acted as a safety net because we are experienced to look for problems (and she let us know that there would be problems).

Linda also had pre-planned funeral arrangements, which allowed her remains to be treated exactly how she wanted.

She made sure to arrange for the care of her dog. This helped to avoid the panic of a dog in the apartment with no caregiver.

Lastly, she did a good job of canceling her utility services. Usually, we have to determine what services the decedent utilized, so this saved lots of time.

What part of her estate plan didn’t work?

First, Linda did a good job of preparing her will and naming a professional executor. However, she kept her original will in her apartment, instead of storing it with her attorney or somewhere else. This caused problems for several reasons.

If your original will gets lost, it is presumed that you intentionally destroyed it, thereby revoking it. If your attorney, CPA, or trusted advisor loses it, then they can petition the court to rely on a copy. The professional has no right to revoke your will, so it can be assumed that they just lost the original. While a professional losing a will is not good, at least it doesn’t negate the whole thing.

Storing the original will in your apartment requires another layer of the court process. The executor needs the will to get letters of testamentary in order to enter the apartment. This doesn’t work when the will is in the apartment to begin with. It’s quite the conundrum. It’s not the end of the world if this happens; there is a special procedure in place so the executor can enter the apartment to look for the will. This procedure just adds more time and money to the process.

Second, Linda relied too much on her cell phone. She had a lot of information on her phone, and she referenced that information in her instructions to us. She even gave us the password to her phone. Unfortunately, her phone was stuck overseas. We learned the hard way that you can’t just mail a phone. The battery causes issues in shipping, and the phone may be dismantled by the custom agents. There is a lot of red tape in mailing a phone. Now, either I or another authorized person will need to transport the phone to the United States.

Lastly, Linda arranged for her keys to be mailed to us, but we have not received them. Once we get appointed by the court, we will work it out with her apartment building.

What were some unexpected probate problems?

First, Linda assumed that her friends and heirs would work harmoniously with her professional executor (me). So far this has not worked out. One family member thinks I am a fraud because Linda didn’t tell her family about her plan. Another heir is not happy about how this is working out, so the heir hired her own attorney.

Linda assumed that I would be able to call her family and friends to get information that I need. But that didn’t happen. I doubt Linda expected this from her loved ones – no one usually does.

Of course, we will work around all of these issues; it’s what we do! From a planning perspective, her plan was a very good best-case scenario. There was no time variables and she had plenty of time to plan. But, even in the best situation, nothing is perfect.

To learn more about probate, check out my book, “How Probate Works,” available on Amazon. The best way to plan is to look at how it may all unfurl in the end.

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E284 Tips for Cleaning Out Deceased’s Home

E284 Tips for Cleaning Out Deceased’s Home


Here are our tips for cleaning out the decedent’s home and getting it presentable for sale.

Identify the estate clean-out problems

Identify the estate cleanout problems

For example, did the decedent die recently, or has some time passed? Sometimes folks become ill and move into a facility, leaving their home behind. We often see these homes in disrepair (leaks, mold, gas shut-off, rotting food, etc.). Alternatively, if the decedent was living at home and died suddenly, then there may not be so many issues. Remember, in New York, you won’t be able to get into the house right away after someone passes. You will need to get permission, and that process should be built into your timeline.

Next is the amount of clutter. This depends on the square footage of the home. Was the decedent a hoarder? How much are the heirs taking with them? Whatever the heirs take will reduce the amount you have to clear out.

Lastly, are there property-specific issues? We’ve discussed in the past how New York co-ops are a very unique animal! Lofts can present specific issues, as well. Make sure you take into account elevator access, permission from the Board, etc. when you develop your clean-out plan.

Find the best clean out service for your estate

Find the best clean out service for your estate

There are two types of services: clean-out and cleaning.

Clean-out service means the big, burly dudes who carry out the furniture, etc. A cleaning service provides vacuuming, wiping, dusting, etc.

The best service for an estate situation does it in one shot. Work with a team who is experienced in sizing and estimating the deal and is big enough to provide crew and trucks to handle it in one day. There’s no apartment in New York that can’t be handled in one day with the right team.

We had a recent bad example: GotJunk sent 1 truck and 2 small guys for a 2,500 square foot loft! There was a lot of stuff, and we had to do the clean-out over two days. That’s two days of cost, as well as inconveniencing the other neighbors in the building.

Second, make sure the service is reputable and insured. Buildings will require a COI (Certificate of Insurance); they won’t let anyone in to do the job. Co-ops and neighbors also appreciate well-manned crew. They don’t want bubble wrap and tape littering the halls and elevators. Keeping the common areas clean goes a long way in maintaining the relationship with the neighbors and co-op board.

Lastly, a good clean-out service will get the home broom clean. They not only clear out the junk but actually bring in the broom to clean. We’ve dealt with some clean-out companies who left bits of extension cords and zip-ties and tape on the floors. While it may not be a big deal, it does shift the burden and cost on to the next step: the cleaning service.

How to choose a cleaning service

How to choose a cleaning service

The goal is not to clean the home so someone can move in and eat off the floor. You need to have the home presentable for sale. A sell-able condition may mean different things for different situations.

If you are selling to the typical retail buyer, then you should get the home as pristine as possible. However, if you know the home will only attract investors, broom-cleaning is fine.

If the house situation is borderline toxic, you may need a professional crew. For example, there could be bodily fluids from the decedent’s death. Or maybe the level of mold in the bathroom or kitchen is dangerously high. If you encounter these situations, you can search for a local crime-scene cleaner. It might sound extreme, but they can provide a next-level cleaning service.

As we’ve discussed before, there are a lot of moving parts to the probate process. To dig in deeper, check out my book, “How Probate Works.”

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E281 MTA Covid Death Benefit and Beneficiaries

E281 MTA Covid Death Benefit and Beneficiaries


Does the MTA covid death benefit have beneficiaries, and if not, who should inherit? The MTA is paying a pretty generous amount (about $500,000) to the estate of any employee who passed away with or from covid. The requirements seem to be tightening up a bit, but we’ll see what comes of it.

Have your MTA Covid death benefits been paid to the wrong person?

We’ve had a few of these cases. Although well-intentioned and hardworking, the folks at MTA don’t seem to be experienced with estate issues. They are probably also overwhelmed because Covid benefits are a new thing. Because the benefit is significant, MTA is probably getting a different energy from these heirs as opposed to heirs just looking to claim the decedent’s last paycheck.

For example, Mr. S. was confused because MTA told him they would pay benefit to him. Since he was named as beneficiary on son’s pension, Mr. S. was told that the Covid benefit would go to him, too… even though Mr. S.’s son had a surviving wife and kids.

It seems that the son never updated his beneficiary designations when he got married and had kids. We see this happen often, and it is a main reason why we don’t recommend using beneficiary designations.

In another example, the MTA paid the full amount to Mrs. B., but her husband died with no will and with kids from a prior marriage.  When you die with no will, your estate is supposed to go roughly half to your surviving spouse and half to your kids. Should his children from a prior marriage have received part of the benefit? It was actually the kids who called us to ask this, because dad’s second wife (Mrs. B.) got all the MTA Covid death benefit money.

Does the MTA Covid death benefit have named beneficiaries?

Does the MTA Covid death benefit have named beneficiaries

While possible, it is highly unlikely. This emergency benefit only came into existence less than 2 years ago. It’s an automatic benefit, not something employees signed up for, like a pension or life insurance.

If naming a beneficiary is not the case, it’s highly unlikely that Mr. S. being named on the pension carries over to the Covid death benefit in the example above. I can’t think of any other scenario where beneficiary designation from one policy gets automatically transfers to another. That’s like saying, “I named my wife as beneficiary on my life insurance, so she should get my IRA, too.” We ended up confirming that there was miscommunication with the MTA in Mr. S.’s case.

Who is supposed to inherit the MTA Covid Death Benefit?

Who is supposed to inherit the MTA Covid Death Benefit

In the absence of beneficiary designations, death benefits get paid according to the will, or if no will, then according to default inheritance law (intestacy). This has been consistent in our dealing with the MTA. They are requiring proof of a court-appointed executor or administrator before they pay anything to anyone. In our experience, the MTA has been handling this properly, yet sometimes heirs have a misunderstanding.

So in Mrs. B.’s case: If a spouse has received funds and no funds were paid to the kids, either:

  1. There was a will that the kids didn’t know about and they were disinherited under that will; or
  2. Maybe the spouse received funds not as the wife, but as the executor/administrator. If this is the case, the funds may pay out to the kids when estate is closed; or
  3. MTA paid the benefit directly to Mrs. B., even though she is not the executor/administrator; or
  4. B. received the check in her capacity as executor/administrator, and she is not fulfilling her duty as fiduciary.

So, with $500,000 per claim, has the money run out? The program still exists, but the MTA is tightening qualifications for the benefit. When we first worked on these claims, “Covid” just had to be on the death certificate. Now the MTA wants medical records, and Covid needs to be the primary cause of death. They now have departments and committees dedicated to determining whether this benefit will be paid out.

If you have questions about your family’s eligibility or rights, please contact us. We’ve worked on several MTA Covid death benefit claims and have developed relationships with the MTA. We can get this done for you!

If you want to learn more about how probate works in general, don’t forget to check out my book, “How Probate Works,” available on Amazon.

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E279 How to Sell a New York City Loft in Probate

E279 How to Sell a New York City Loft in Probate


We’ll discuss how to sell a loft in probate. This is yet another type of apartment that is unique to New York. We’ve talked about co-ops in the past, which seem mind-boggling to many people (even New Yorkers).

What is an artist-in-residence?

It is too much to cover in depth, so this is a link from Street Easy, a local real estate blog: https://streeteasy.com/blog/sohos-artist-in-residence-law-101/

To live in a loft that has been converted from commercial use, the buyer is supposed to be an artist who lives in their studio. In other words, a work-living space. Not that many people are professional artists, but buyers may be required to be a “certified” artist.

What is an artist-in-residence

This impacts probate by sorting through paperwork to confirm that the decedent was an artist-in-residence. This requirement also limits your pool of buyers.

There’s a process to get certified as an actual artist by the City of New York. As with any bureaucratic process, apparently there are lots of workarounds. And there must be, because I’ve never seen an actual artist living in these multi-million-dollar lofts. Note that there is an income requirement; you can’t just make finger paintings and declare yourself an artist.

It’s a niche issue, so make sure to work brokers who have deep experience. Otherwise, you will end up wasting a lot of time and limiting the number of potential buyers.

Cleanout: the elevator problem

Many of these were warehouses converted into lofts. That means there is not a traditional lobby with an elevator. The elevator goes directly into the living space. There is a key to each floor, so the elevator won’t randomly go to someone else’s loft.

Cleanout- the elevator problem

While this living situation is cool and unique, it leads to some issues from the executor’s perspective.

For example, when you are using the one elevator that leads to all the floors, you are denying the other residents use of the elevator while you are cleaning out the decedent’s loft. This is not unique to probate; it happens when anyone moves in or out. It’s just one more twist for the executor to deal with.

We experienced an odd situation where we didn’t have the key to the door that led from the elevator to the loft. The locksmith drilled, held the elevator door open with one hand, and then had to undo everything to let someone else on. Then he had to start over again to help us.

The positive side is that these elevators are huge, since the lofts used to be warehouses. You can fill it with stuff and might only need two or three runs before giving the elevator back to the rest of the building.

Unique layouts of New York City loft apartments

Unique layouts of New York City loft apartments

There are no rooms; just a huge open space! You can get an architect and a contractor to put up some walls, but in its raw form, it is just a huge open warehouse floor.

Again, this is not unique to probate, but to anyone selling a loft. You’ll have a narrow set of buyers who are interested in living like that. Executors, since you have many other things to worry about, make sure you are working with a broker who is familiar with selling these lofts.

Lofts are very unique, but plenty of buyers love the space and uniqueness. And as a double-whammy, many of these lofts are co-ops, as well! So, you may deal with extra problems and rules.

To read about various probate-related situations, check out my book, “How Probate Works,” available on Amazon.

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E276 Problems Selling Probate Real Estate Septics, Brokers, and Co-op Listing Prices

E276 Problems Selling Probate Real Estate: Septics, Brokers, and Co-op Listing Prices


We’ll share 3 recent problems we encountered while selling probate real estate: a bad septic tank, firing a broker, and co-op listing prices. We’ll share these stories with you and add key takeaways for executors and those facing probate.

Septic tank problems in probate

Septic tank problems in probate

Any leak or other problem involving a septic tank is a huge headache. Septic water leaking into the ground soil is an environmental violation.

In our case, a problem appeared during the septic inspection (thankfully it was not a full-blown leak). It required our whole team (me, the other attorney, and the real estate broker) to work together quickly to save the deal by replacing the tank. As we’ve mentioned several times before, selling probate real estate quickly is key. Otherwise, the estate bleeds money while the property sits on the market (not to mention impatient heirs and looming IRS deadlines).

Takeaways:

  1. You need a great team (broker, executor, attorney) who understand probate, the need for speed, and the risks to the executor. These are tough situations that require competent professionals. The team must be able to communicate well and do it quickly.
  2. It is best to have a local executor: someone who understands local laws and customs.

How to fire a real estate agent

How to fire a real estate agent

This situation is never easy, but being an executor is not for someone who avoids conflicts. Speed and risk assessment are two things that are important during probate.

So, if you have a broker that is taking too long to sell, it will anger the heirs. Taking too long to sell also puts the executor at personal risk for the loss of property value. The executor can’t just let it sit and let the bills accumulate.

A real estate agent who is not a good fit may make poor pricing decisions on your behalf. Perhaps the agent is a slow communicator or a poor evaluator of buyers. You don’t want to waste time on buyers who cannot close.

Takeaways:

  1. Take time to choose the broker carefully.
  2. Make sure they understand probate’s unique risks and priorities.
  3. You should try to hire an executor with a trusted network of reliable, experienced agents.
  4. If the executor doesn’t have a specific real estate agent to work with, a savvy executor knows to sign a limited listing agreement so he can get out of it quickly if needed.

Co-op pricing strategy

Co-op pricing strategy

This is kind of NY-centric, since there aren’t a whole lot of co-ops elsewhere.

We’ve talked about why co-ops are a pain for probate, and pricing is one of those reasons. In probate, you want to price aggressively (low) to sell with speed. You wouldn’t want the neighboring unit to sell faster than yours because you wouldn’t come down $10,000. But you don’t want to list too low, because you must get a good value for the heirs.

On top of this balancing act, the co-op adds more complexity: the co-op board must be satisfied with the price, so it can’t be too low. The co-op has the right to reject deals that don’t preserve the value of the building as a whole.

Because of this, co-ops listings can:

  1. Make the price too high for the market but make the co-op happy. Then it sits for months.
  2. Make the price lower and get buyers, only to have them frustratingly rejected by the board over and over. This ends up being a waste of time, and the co-op goes back on the market.

Takeaways:

  1. You need savvy executor who can set realistic expectations for heirs and explain to them that co-ops are just difficult to deal with. In this situation, an executor outside of NY with no knowledge of co-ops would be a huge disadvantage.

We hope these anecdotes were helpful to you. To learn more about how probate works, check out my book, “How Probate Works,” available on Amazon.

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