How Does Probate of Real Estate Work?

Probate is the legal process that ensures your debts are paid and legal title of your assets is transferred to the appropriate heirs and beneficiaries. If you have a will, the probate process will determine whether the will is authentic and valid. 

The last will and testament of the person who created it, who also is known as the testator, names the executor who will administer the estate, subject to approval by a probate court. 

Frequently, real estate is a significant component of a deceased’s estate. The term “probate real estate” refers to any real estate that goes through the probate process. The probate of real estate can involve more steps than other property. 

Real estate goes through probate in the city or county in which the real estate is located. Most of a person’s estate goes through probate in the city or county which was his or her principal residence at the time of death. Thus, it is possible that when someone owned real estate in a city or county other than the one of his principal residence, parts of the estate will be probated in different localities.

The probate process can differ depending on factors such as whether a last will and testament was left by the deceased, the real estate’s disposition was accounted for specifically in the document, and the real estate needs to be sold to settle the estate. Usually, when the deceased died without a last will and testament, or intestate, probate is more complicated.

The process of real estate probate can be very detailed, and this article will explain in general each of the stages of the process below. When the more detailed or complicated aspects arise, it might be best to consult or hire a probate lawyer.

File the petition to start probate

As with other probate matters, the real estate probate process starts with the filing of initial probate forms and required documents with the probate court. It might be useful to hire or consult a lawyer during this stage to ensure the correct actions are taken.

If a last will and testament is available, the executor will also need to present the testator’s last will and testament to the probate court for verification of its validity. Instructions in the last will and testament serve as the instructions for the real estate probate process, but if it is not available, then the court would provide instructions for the administrator.

Determine the executor or the administrator of the estate

When there is a last will and testament, the executor is usually named by the testator in the document. The appointed executor will only have to petition the probate court and become officially appointed executor of the estate. The executor takes the real estate property through the probate process, whether it is to be sold or not.

When there is no last will and testament, the probate court appoints an administrator of the estate, often an immediate family member of the deceased. The administrator essentially performs the same roles and tasks as the executor. 

Prepare an inventory and appraise the real estate 

The executor needs to locate and prepare an inventory of the real estate as well as the other property of the deceased. All of the testator’s assets have to be assigned values. With some assets, such as real estate, a professional appraisal might be required. The valuation is extremely important when the real estate is meant to be sold during real estate probate.

Conduct a probate sale of the real estate, if necessary

If the last will and testament does not specifically bequeath the real estate to one or more beneficiaries, then the best action might be for the estate to sell the property and distribute cash to the beneficiaries. Similarly, when there was no will the real estate might need to be sold so cash can be distributed among the beneficiaries designed by state law. 

For a real estate probate sale, the executor or administrator of the estate lists the property, evaluates the offers received, accepts an offer, and closes the sale. Depending on the state and locality, the sale might have to be approved by the probate judge before it can be closed. Beneficiaries of the estate might have a 15-day period to object to the sale of real estate before the sale can be closed. 

These are the main steps, but the details can vary around the country.

Notify the creditors and pay off any debt and taxes owed

Before the assets of the estate can be distributed to beneficiaries, debts and bills of the deceased and the estate must be paid. Creditors and potential creditors of the deceased must be notified as directed in state and local law. After their claims are received, the executor evaluates them and determines which are to be paid. 

Debts and liabilities must be paid before assets are distributed to beneficiaries. If any legitimate creditors aren’t paid and the estate is distributed, the creditors might be able to claim payments from either the executor or the beneficiaries. The executor also must determine any tax liabilities of the deceased and the estate. All required tax returns must be filed and all taxes paid. 

Distribute the remaining estate

After all the above steps are taken, the executor distributes the estate according to the terms of the last will and testament. If the real estate was specifically bequeathed to a beneficiary, then title to the property will be transferred to the beneficiary’s name.

How Can Probate Real Estate Be Avoided?

The probate process for real estate can be avoided several different ways if an individual acts during his or her lifetime.

• Put the real estate property in a living trust. Any property, including real estate, held in a living trust doesn’t go through probate.
• Own the property in joint tenancy with the intended beneficiary. Upon the death of one tenant, the property’s ownership will automatically go to the surviving joint tenant without passing through probate.
• Have a transfer on death (TOD) deed for the real estate. Upon death, the property’s ownership will be directly transferred to the listed beneficiary without probate.
• Consider a life estate deed. You have the deed redrafted so that you own what’s called a life estate and your intended beneficiary has a remainder estate. That gives you the right to use and enjoy the property for the rest of your life. After you pass away, the remainder beneficiary takes full legal title to the property without probate. However, you won’t be able to sell, mortgage, or otherwise transfer the property without the permission of the remainder beneficiary.

Valuable contributions to this summary of “How Does Real Estate Probate Work?” were made by Bob Carlson, editor of the Retirement Watch financial advisory service and chairman of the Board of Trustees of Virginia’s Fairfax County Employees’ Retirement System with more than $4 billion in assets.

Katie Kao is an editorial intern with Eagle Financial Publications.