In past articles we have covered the pros and cons of avoiding probate. As a brief refresher, probate is not always a terrible process but in some cases, it can be long, complicated, and expensive. If you want to avoid probate, you need to title your property in a way that it will be transferred without the court’s assistance. For real property, this can be achieved by using a transfer on death deed, a revocable trust, joint tenancy, or an entity such as a partnership or LLC. The correct choice for a non-probate transfer depends upon each person’s situation. Keep in mind that thoughtful planning is essential when there are multiple beneficiaries who will inherit the real property.
Real estate transfers in probate
A probate transfer of real property can be simple, but often times real property issues in probate are the most difficult to resolve. These issues are more common in recent years because the current housing market creates an additional opportunity for conflict. If property isn’t marketable or it is insufficient to pay estate debts, the personal representative may face some tough decisions regarding what to do with the real estate.
Assuming that property is not needed to pay valid debts, the personal representative has two options; to sell or to distribute. If the beneficiaries want to own the property together or hold onto it until the market recovers, then a distribution may be a good option. However, if there is no use for the property, or disagreement between beneficiaries is likely to occur regarding when and how it should eventually be sold, the personal representative will likely want to sell it out of the estate and avoid conflicts that may occur down the road.
Timing is another consideration for the personal representative. A distribution of real property out of an estate in Minnesota can be made seventy (70) days after notice is given to creditors, whereas a sale can be made earlier in the probate process. The reason that a sale may occur sooner is because the sale proceeds remain in the estate and are available to pay creditors claims. Because the personal representative may not be familiar with the real property, the personal representative should work with an attorney and a real estate professional who have experience with the probate process. These professionals can help the personal representative make the proper decision regarding sale or distribution of real property in a probate.
As a side note: Neither a Quitclaim Deed nor a Warranty Deed can be used to transfer the probate property. Instead, the personal representative must use a Personal Representatives Deed that does not make any particular warranties as to the condition of the property. Also, the Purchase Agreement should always reference the Personal Representatives Deed.
In conclusion, careful consideration must be given to the process of transferring real property. Creating a comprehensive estate plan is one way to ensure that real estate is transferred properly. In addition to meeting with an attorney, each and every individual should communicate his or her intentions to beneficiaries in order to avoid confusion, conflict, and unnecessary delay.
