As we have seen over the past few months, life can change on a dime. One day we are thinking about our summer vacation plans and the next planning when it is safe for our kids to return to the classroom. If you have inherited a property over this time or preparing, you may be dealing with an extra layer of stress you do not want or need in your life.
Knowing the most common, reliable, and powerful ways to transfer or receive a piece of inherited property is hugely important when it comes to expediting the process when the time comes. Below are two of the more common estate planning tools, along with what may need to happen if these preparations are not made ahead of a decedent’s passing.
Wills
One of the more common ways a property is transferred from one party to another is through a Will. Every adult should have a Will, regardless of assets. The absence of a well-defined Will may require bringing the courts into play to facilitate the “fair” distribution of the decedent’s assets. Dealing with the courts can be time consuming, expensive, and potentially stressful on family relationships.
If, however, a Will is written and setup correctly it leaves no doubt as to what is wanted and where assets are allocated. The person named as the recipient of property through a Will is often called a beneficiary. If you have been named as a beneficiary of a property, you may be left liable for the mortgage payments, taxes, and any outstanding liens on title. The first thing to do as a beneficiary is reach out to a local real estate or probate attorney as there are several legal items that likely need to be done prior to even thinking about renting the property or putting the home on the market.
Trusts
Another common vehicle used for transferring title to a surviving family member is called a Trust. While a Will is a legal document in which a person’s assets are distributed among legal heirs, a Trust is an entity that bestows a legal obligation upon a third party (called a Trustee) to hold assets for the benefit of another person, also called a beneficiary. A person can sign an agreement to put property into a Trust at any time, which can become active upon their passing. The Trustor, the person who originates the Trust and has control, directs the passing of assets to the Trustee per the instructions outlined in the Trust.
If you have inherited a piece of real estate via a Trust, you may need to work with the Trustee to get it sold. All things considered, there are many advantages that come with Trusts as well as many challenges that can arise when selling an inherited property.
While Wills and Trusts are just two common vehicles for estate planning, they are not necessarily the only ones. There are other tools that guide how property can be distributed among family members including joint ownership, tenants in common or a transfer on death deed just to name a few. If any of these options were not setup in advance, the property will likely go to Probate Court.
Probate
Probate is the process by which local courts step in to help distribute property of someone who has passed. If no estate planning instrument is in place to guide the distribution of assets, the property in question may be subject to Probate. Probate is often seen as the least ideal of all scenarios as it can add additional cost and time, in addition to loss of privacy.
- Time: anyone who has tried to have a lien removed or dealt with the court in any fashion knows that they can often move at a less than ideal pace. This is only magnified when it comes to appointing ownership in real estate. The process can take several months to several years to sort out depending on the estate and family. It is important to note that the probate process can vary by state and is subject to the laws and guidelines of the state the property is located in.
- Money: in addition to time, you also must factor in cost with a probate property. With no Will or Trust to guide them, the court must figure out who is the rightful descendant and beneficiary to the property being passed. To do so, they need to expend resources. To name a few, there are personal representative’s fees, attorney fees, court fees and potentially fees for an appraiser and accountant. These costs add up quickly!
- Privacy: in addition to time and cost, probate also may come at the expense of you and your family’s privacy. While Trusts keep information about beneficiaries and family members private and off public record, probate involves the recording of court documents for public record. This can be especially important for those who want to keep extremely sensitive and private information private, such as who is involved, how much money is in the estate, what types of property are in question.
Inheriting a property from a spouse, parent or distant relative is challenging for many reasons, some of which have been outline above. It requires a lot of planning ahead of time in addition to more time, money, and communication to prepare an inherited property for rent or to be listed. We can help streamline the process of selling your property that puts you and your family in a better position to sell the property quickly with less stress.
When the time is right, feel free to contact us to discuss your options.