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If you have inherited a house, you may have several questions about selling the home. Do you need probate? Can you sell the home without probate or court approval? This article answers these and other common questions surrounding selling a house during probate you have inherited.
What is probate?
First, it’s essential to understand what probate is and when it’s required. As part of estate planning, many people create wills specifying what they want to happen to their estate when they die. Probate is the process of “proving the will” through legal court proceedings. However, probate applies to estates both with and without a will.
The proving of the will involves the court verifying that the decedent’s wishes are fulfilled and that the estate is protected. Probate requires the distribution of assets be reviewed by a judge. However, there are many ways to distribute property after death without formal probate in the modern legal system. For example, you can distribute property without probate using joint tenancy, trusts, and other specific types of deeds.
How much does an estate have to be worth to require probate?
In California, the gross value of the decedent’s personal and real property is the determining factor. If the gross value is less than $166,250, probate is not required. However, if you desire to take ownership of the home, you will need to petition the court to be named the successor to take title the property.
The bad news is there are very few homes valued under this dollar amount in California. The good news is the amount is adjusted for inflation every three years. The next inflation adjustment is scheduled for April of 2022.
Letters of Testamentary and Administration
If there is a will, the estate will need an executor. An executor is the person responsible for administering and following the terms outlined in the will. (If the person is a woman, they’re called an executrix.) Most wills identify who the decedent wishes to be the executor of their estate. However, simply being named in the will is not sufficient. The person named in the will must be presented to the court for verification of the executor. Then, the person named in the will must obtain a Letter of Testamentary from the court for authorization. This “letter” is not really a “letter” but a form the judge will sign authorizing the person to be the executor.
If there is no will or living trust, the estate is considered “intestate”. An administrator rather than an executor oversees the estate when properties are intestate. The administrator will need Letters of Administration from the court to administer the estate. Like the executor’s letter, the administrator’s Letter of Administration is not a letter but a standardized form. You can see an example here in this California form, the check box for “Testamentary” and “of Administration” (see image below).
Responsibilities of the executor/administrator
Anyone applying for the role of administrator or executor must provide a list of all heirs and beneficiaries as part of their request. If approved to be the executor, the executor must document any debtors, mortgage companies, insurance policies, and assets the estate has. The executor will be responsible for paying any bills during the probate process. Payment for utilities and mortgages are all paid from the decedent’s assets in most cases. If in doubt, you should contact your attorney.
Executors of the estate should also obtain a copies of any deeds to any real estate. Depending upon how the deeds are vested, the probate may not be needed. (see next section).
The executor should collect a list of all debts and obligations that were unpaid at the date of death.
Here’s a quick list of debts to look for:
- Property taxes
- State and Federal income taxes
- Federal estate taxes – Note, effective 2022, estates under $12.06 million are exempt from federal estate taxes. The amount is slightly less for earlier years.
- Funeral expenses
- Medical bills
- Any other unpaid bills
Additional reading: What to do if you have inherited a house
How long does the probate process take?
According to the California Courts’ website, “The entire case can take between 9 months to 1 ½ years, maybe even longer.” However, estates with multiple business interests, copyrights, royalties, and contested wills take substantially longer. In addition, the process will take more time if the decedent’s intent is unclear in the will.
Is probate required when a spouse or partner dies?
The answer to this question depends upon how the property was held or vested. Vesting is just another way of saying whose names are on the deed.
Joint tenancy includes the right of survivorship. For example, when you buy your home, the title company will ask you how you want title vested. Typically, the home would titled in both of your names as “joint tenants”. For example, “Joe and Wilma Smith, as join tenants”. When property is titled as joint tenants, the property passes automatically to the surviving spouse. No probate is needed. You may need to file an affidavit of death with the county records. However, your title company or attorney will do that for you if you’re selling the property.
Tenants in common
However, probate may be necessary if the surviving spouse or partner holds title as tenants in common. Tenants in common vesting does not include a right of survivorship. Tenants in common is similar to a business partnership. If one partner dies, the decedent’s heirs not the surviving partner, inherits the decedent’s portion of the business. In the case of real estate, the decedent’s heirs (children, siblings, etc.) receive the inheritance if there is no will. Even if there is a will transferring ownership to the surviving spouse, probate will be needed to verify the executor.
Additionally, in California, vesting as Community Property with the right of survivorship is like joint tenancy. Real property passes automatically to the surviving spouse or domestic partner without the need for probate. The exception is properties subject to a life estate or in a trust. Properties in a life estate or trust pass according to the estate or trust documents.
Additional reading: What happens to my mortgage when my spouse dies
Transfer of property after death without a will
Property held in a trust or specific types of deeds can bypass probate entirely.
Bypassing probate with a living trust
The most common type of trust for holding a personal residence is a living trust. When someone wants to transfer ownership without court approval, they often use living trusts.
Let’s use an example. Dick and Jane want their children to inherit their family home and assets. Dick and Jane create a living trust, naming Dick as the trustee and their children as the beneficiaries. As an additional step, Dick and Jane specify a successor trustee who will carry out the trust upon Dick and Jane’s passing.
The trust then specifies how the assets, including the family home, are distributed. Upon Dick and Jane’s death, the successor trustee takes over and begins carrying out the obligations of the trust document. Once the trustee completes all of the trust conditions, the trust ceases.
Revocable Transfer on Death Deeds
“Revocable Transfer on Death Deeds”, are also known as “Beneficiary Deeds”. These deeds name a beneficiary to receive the property on the owner’s death. The property owner records a revocable transfer on death deed in the county’s public records before their death. Then, when the owner passes, the beneficiary files an Affidavit – Death of Transferor in county records. Along with the affidavit, the beneficiary also files a certified copy of the death certificate. Beneficiary deeds are just one more way to transfer a home without the need for probate.
If an owner wants to sell their house but keep the right to live in the house after the sale, they can create a life estate. Life estates transfer ownership prior to death. However, unlike a traditional sale, the seller retains the use of the home, after the sale, for the remainder of their life.
Life estates pass along ownership of property similar to joint tenancy. When the person holding the life estate dies, the successor records an Affidavit – Death of Life Tenant and a certified copy of the death certificate. Again, no probate is needed to convey ownership.
How to sell a house during probate
Properties not held in one of the structures above, may need to be handled through probate.
Usually, the court will order a home appraisal and a Realtor® to sell the home. Then, once the property is listed, the court must approve any accepted offer. The challenge is getting a court appointment for approval. Getting on the court’s calendar can often add 30 days or more to the home’s sale. Fortunately, there is an alternative.
Probate sale of your home without court confirmation
Usually a will conveys authority to the executor to sell the real estate without court approval. Let’s assume for example that the executor named in the will is accepted by the court. If the will specified no court approval is needed, it’s likely the court will grant full authority to the executor.
However, many states have also streamlined the sales process to sell real estate without court confirmation. Several states, including California and Texas, allow you to request authority to administer the estate independently of the court. For example, in California, executors and administrators apply for their letters of administration from the court. When executors and administrators apply for these letters they can request Full Authority (see image below). If granted, then they can sell the decedent’s real estate without court approval and save valuable time.
Can a house be foreclosed on in probate?
The simple answer to this question is “yes”. Just because the borrower passes does not mean the mortgage ends. If there is a mortgage, there is probably a deed of trust recorded in public records. If the mortgage is not paid, the deed of trust allows the bank to sell the property at a foreclosure auction. Therefore, it’s extremely important that the executor look for any loan documents for loans that need paid.
In the case of multiple loans are found, the executor should look for any reconveyances. A reconveyance document is sent by the lender to signify a loan is paid in full. You can match the reconveyance to any loans to know which loans no longer need paid.
The probate process can be daunting, but selling a home during probate does not need to be. If the surviving spouse or partner is on title as a joint tenant, the house does not need to go through probate. The same is true for living trusts and revocable transfer on death deeds. Additionally, a will may state that the named executor should have the authority to sell the real estate without court oversight. If this is not the case, many states allow the executor or administrator to request full authority for the estate. If the court and heirs do not contest the full authority, the executor can proceed with selling the home. However, if the court has not given the executor this authority, they must obtain court approval for the sale of the home.
Note: This article is not intended for legal counsel. For legal questions and opinions, consult with your attorney.