How Probate Works. A Guide for Executors, Heirs, and Families.
Inheriting someone’s home or property can be a stressful and overwhelming process. If the property is located in the US, and you happen to live outside of the country, it can be even more difficult.
This happens when the buyer agrees to a higher contract price, but the seller also agrees to credit back a set amount to the buyer, so the net purchase price is lower.
Should you look for a broker or lawyer first when selling a probate property? With non-probate home sales, brokers are the first to list, set an open house, and find a great buyer. Lawyers only get involved once a buyer is in place and a deal is struck. The lawyer then drafts the contract and conducts the closing.
But with probate, talking to a lawyer first makes more sense. Here’s why:
It’s important to talk with a probate lawyer, because you need to know who has the authority to sell the home. The lawyer can also tell you whether the estate needs to be probated. Not every estate needs probate: maybe the house is titled a certain way or it is held in a trust. Or, maybe you live in an area where the title company accepts “heirs at law” affidavits. These situations are best analyzed by a probate attorney.
How long will it take to get started? How much will it cost? The answers to these questions will determine what type of broker you will work with.
A probate attorney will walk you through the estate debts, taxes, etc. You may not want to go through the hassle of selling the probate property if there is only a small fraction of the estate left over after debts and taxes.
There are some pre-steps that a probate lawyer (or a good broker) can help with:
Brokers are good at figuring out how much you can reasonably expect to sell the house for. Is there enough value to deal with the mess?
A downside of talking to a broker first is that too often, they are eager to get a new deal but they don’t understand the estate situation. The broker may not realize that the person they are speaking with does not have the legal authority to hire them. At that point, you’ve wasted your time and the broker’s time if you do not have the legal authority to sign a listing agreement, etc.
Sometimes selling probate property does not require a broker. You can avoid the broker’s commission if you sell the home to an heir, a neighbor, or a cash investor. A probate lawyer can advise on this, so it will probably save money to meet with a lawyer first.
We see this happen a lot, so we want to share our tips with anyone who is looking to sell probate property. Meet with a probate lawyer first so that you can get proper guidance. To learn more about probate, check out my book, “How Probate Works,” available on Amazon.
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Sign-up for your free consultation using the form above, and I’ll be happy to email you a free chapter from Anthony’s best-selling book “How Probate Works.”
Why do heirs suddenly need to sell probate real estate? We see cases where years, even generations, have elapsed since the real estate owner has died, and nothing has been done. So why, all of a sudden, do the heirs seek a lawyer or professional executor? Here are the top 5 reasons we’ve seen.
Let’s discuss how, why, and how long it takes to get “fresh” Letters Testamentary in New York. Fresh letters simply means that they are newly dated. Most of the time, probate takes months or even years, and during that time, you may need to get fresh copies of the letters to use.
We get this question quite often – can you sell your inherited property? The answer to this depends on many factors. First, you need to figure out if you can sell an inherited property. Here are a few steps for you to take to answer this, before you can decide if you need a probate lawyer or professional executor.
First, check the deed to see if the decedent actually owned the property. Some people stay in a home long after another relative has passed or they are long-term renters. It’s actually easy these days to get a copy of deed online. One example is ACRIS here in New York. Most other states and counties are similar.
One note – it is a bit harder to obtain documents for co-ops (co-ops always worse during the probate process). You would need to call the management company for the information, which is sometimes like pulling teeth. They will need to check their internal records for the owner, and they may not provide you with the information.
Once you have the deed, you want to clarify the owner. Is it the decedent? Was it in a trust? Is it in some other relative’s name? Let’s say it’s your uncle who passed, but he actually moved into the house after your grandfather passed years before. It could likely still be in your grandfather’s name. That would add a few layers of complexity to ownership. Deeds can also have joint owners, and co-ops can have beneficiaries. If there is a joint owner or beneficiary, and it’s not you, then you don’t own it.
The next step is to see if there is a mortgage. When someone passes, the mortgage has to be paid off. So, it’s important to find out if there is a mortgage and how much it is. It doesn’t mean the heir is immediately on the hook for the mortgage payments, but it does need to be settled before the house is sold. If the mortgage amount balance is really large or underwater, it will definitely affect how you approach the estate. If the estate is close to or completely insolvent it makes the estate very cash poor, which changes how the estate is administered.
Checking for a mortgage is similar to checking for a deed. Except for co-ops, mortgage information may be found online, on the statements that come in the mail, tax assessment offices, or on tax returns.
In addition to searching for mortgages, you also want to look for potential larger debts. If there are tax debts, public assistance or Medicaid debts, second mortgages, etc., these debts must be paid first before anyone can get paid out from the proceeds from the real estate sale.
Lastly, to determine if you can or want to sell the property, you need to figure out if the property is occupied. Did you inherit tenants? Is it vacent? If it’s occupied, it will affect how you approach the estate. For example, if there is another heir living there and won’t leave, that is a whole set of additional problems. If it’s an actual tenant, it’s not as clear cut as one would expect either. More often than not, tenants after the owner pass create problems and lose their moral compass. Evicting or removing tenants is usually a nightmare. It may change your approach to selling the property.
Check out Anthony’s book, “How Probate Works,” which will break down what is involved with administering a decedent’s estate with property.
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Sign-up for your free consultation using the form above, and I’ll be happy to email you a free chapter from Anthony’s best-selling book “How Probate Works.”
As you can imagine, probating a hoarder’s estate adds a few more complications. In this episode, we will talk about how to deal with some of the main challenges.
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.
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.
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.
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.
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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Sign-up for your free consultation using the form above, and I’ll be happy to email you a free chapter from Anthony’s best-selling book “How Probate Works.”
Heirs often want to know if there is any way to get their inheritance faster.
