How Are Real Estate Properties Handled in Probate?
After people pass away, their assets, including real estate properties, sometimes go through a legal process called probate. Part of this court-supervised procedure includes distributing real property to their rightful beneficiaries.
Understanding how probate works and the steps you must take is necessary when inheriting real property in probate.
This week, our estate planning attorneys answer your questions so you can make informed decisions after a loved one passes away.
What is Probate, and Why Does it Matter?
Probate is a civil process that involves proving the validity of wills (when they exist), identifying and inventorying estate property, paying debts and taxes, and distributing remaining assets to heirs and designated beneficiaries.
The probate court oversees the distribution of assets to ensure they get distributed according to the will or state law when no will exists.
There are two kinds of real estate assets in Florida:
Probate Assets
Property solely owned by the deceased person that does not have a does not pass by operation of law to someone is a probate asset. These assets must go through probate before being distributed to heirs.
Non-Probate Assets
Real property jointly owned with the right of survivorship, or titled with an enhanced life estate deed or lady bird deed, and property held in a trust. These assets transfer automatically to beneficiaries, bypassing the need for a probate administration.
Probate in Real Estate: What You Need to Know
Probate real estate refers to any real property, such as a house or land, that must pass through the probate process in order to pass from the deceased person’s estate to the ultimate heir or beneficiary.
Several factors determine whether a property must pass through probate, including:
Type of ownership (sole ownership, joint tenancy, tenancy in common, etc.).
Presence of a trust.
Florida codes governing probate.
If the deceased person were the sole owner of the property and did not have a living trust or other estate planning tools in place, the property would likely need to pass through probate.
Step-by-Step Guide for Processing Probate Real Estate Property
Processing probate real estate is complex and time-consuming. However, understanding the steps involved can help you approach the proceedings more effectively.
Below is a general overview of what to expect.
Filing a petition
The executor of the estate or personal representative files a petition with the probate court to start the probate process.
Appointing an executor
If the deceased person left a will, it typically names an executor, also known as a personal representative. If there is no will or the named executor is unable or unwilling to serve, the court will appoint an administrator to oversee estate administration.
Inventory and appraisal
The executor creates an inventory of the estate's assets, including any real estate property. Depending on circumstances, it may be necessary for the executor to obtain appraisals to determine the real property value.
Payment of debts and taxes
The executor must notify creditors of the death, pay any outstanding debts, and file tax returns for the estate.
Distribution of assets
After paying all debts, fees, and taxes, the executor distributes the remaining assets, including real property (or proceeds from real property sold in estate), to the beneficiaries according to the will or state intestacy law.
The timeline for probate varies depending on the complexity of the estate and court calendars. The probate process usually takes several months to a year or more to complete.
How Executors Manage a House in Probate
Executors or personal representatives hold high fiduciary duties to manage probate real estate zealously, competently, and without self-dealings or conflicts of interest.
Some of their key responsibilities include:
Securing and maintaining the property.
Paying mortgages, utilities, and other expenses related to the property.
Deciding whether to sell the property or distribute it to the beneficiaries.
Hiring professionals, such as assessors, accountants, probate attorneys, and real estate agents, to assist with the process.
The executor must make decisions in the best interest of the heirs and the beneficiaries. Working closely with a probate attorney and real estate agent with experience handling the sale of probate properties can help ensure the process goes as smoothly as possible.
Probate Sales of Property
Sometimes, selling a house during probate may be necessary to pay off debts, distribute assets to multiple beneficiaries, or comply with the deceased person's wishes.
Probate property sales involve several unique challenges and considerations.
Obtaining court approval
Executors must petition the court for permission to sell real estate in probate and demonstrate that the sale is in the best interests of the estate and the beneficiaries. This includes providing an appraisal or comparable sales report provided by a real estate agent to show that the property is being sold for fair market value.
Hiring a specialized real estate agent
Real estate agents with probate sale experience can help streamline the process and ensure compliance with legal requirements.
Navigating the closing process
Probate sales often involve additional paperwork and court oversight, complicating the closing process.
Distributing Probate Real Estate to Beneficiaries and Heirs
If the deceased person's will specifies that the courts should distribute real estate property to one or more beneficiaries, or if the executor decides not to sell the property, there are several options for transferring ownership:
Selling the property and dividing the proceeds among the beneficiaries.
Transferring ownership to one or more beneficiaries through a deed.
Establishing a trust or LLC to manage the property on behalf of the beneficiaries.
Each of the above options would require consent from the heirs/beneficiaries, or, when consent is not possible, proof that the heir/beneficiary received proper notice of the action taken. When multiple heirs are involved, conflicts can arise regarding the distribution of the property. Working with a probate law firm to find fair and equitable solutions for all parties involved is essential in these cases.
Planning Ahead to Bypass Probate for Real Estate
One of the best ways to simplify the handling of real estate after a person's death is for the real property owner to take steps to avoid probate altogether.
Below are some common strategies for transferring real estate outside of probate.
Joint ownership with right of survivorship
When two or more people own a property as joint tenants with the right of survivorship, the deceased person's share automatically passes to the surviving owner(s) without going through probate.
Revocable living trusts
Placing real estate in a revocable living trust can transfer the property to the named beneficiaries upon the owner's death without probate.
Transfer-on-death deeds
Florida allows property owners to use transfer-on-death deeds to designate a beneficiary who will inherit the property upon the owner's death, bypassing probate.
Each method has pros and cons. The best approach depends on your circumstances and estate planning goals. Consulting with an experienced estate planning lawyer can help you determine the most appropriate strategy for your situation.
What You Need to Know About Probate Property Transfers
Florida has its own set of probate laws and procedures that govern handling probate real estate.
Let’s recap some key points:
Florida has two types of probate administration - formal and summary. The type of administration required depends on the estate's value and other factors.
A probate lawyer licensed to practice in the state must represent the personal representative (executor) during the process.
State law requires that personal representatives obtain court approval before selling or distributing any real estate part of the probate estate.
Working with a Florida probate attorney with experience handling real estate matters can help ensure you comply with all relevant codes and regulations throughout the process.
Professional Guidance Helps Transfer Probate Real Estate with Confidence
Don't wait until it's too late to start planning for the future. Taking proactive steps to organize your estate and communicate your wishes can help minimize the burden on your loved ones and ensure the law distributes your real estate assets according to your desires.
Ready to take control of your probate real estate situation? Contact Alexander Gil, PLLC in Florida for a case evaluation. Our probate attorneys can guide you through the process, answer your questions, and help you find the best solution for your unique circumstances.