When someone dies owning real estate, problems can occur. This article addresses some of the issues that arise.
A person can leave real property specifically to someone in a will or trust, or leave it as part of their residuary estate. The residuary estate is the portion of an individual’s estate that remains after all specific gifts and bequests have been made and all claims of the estate are satisfied.
If someone dies without a Will, the real property passes by “operation of law,” to the next of kin pursuant to the intestate statute of the state (the law governing how property is distributed when someone dies without a will). Operation of law means that nothing has to be put in writing to cause the heirs to inherit the property.
When filing a petition for probate or estate administration, the court will want to know the value of the property and whether or not it is an income producing property (e.g., a rental property). Depending on the value of the property and who is handling the estate, and who will inherit the property, the court will determine whether to restrict the sale of the property without court approval; and also will want the personal representative to account for the rental income of the property if a rental property.
Difficulty usually arises immediately after death if there are bills to pay or rent to collect. It may take a few weeks before someone is appointed as the personal representative. Or, no one decides to petition the court. Some heirs take it upon themselves to pay bills or collect rent. These heirs must keep a strict accounting of the finances as later they may be accused of malfeasance. Unfortunately, some people fail to petition the court for years to come. This only results in potential wrongdoing.
Further, it is always in the best interest of the Estate to distribute or sell the property in a timely manner. The longer the property stays in the Estate, the more likely the handling of the sale or distribution to heirs or the collection of rent or the payment of expenses will be challenged.
Unfortunately, a common occurrence is for one sibling believing for one reason or another that they are entitled to more than what is permitted by law. This occurs especially if one sibling was living with the decedent and others live out of the state; and especially if it is rental property.
If the personal representative refuses to distribute the property to the heirs, the heirs would have to petition the court for an accounting and removal of the representative for breach of fiduciary duty. The representative would have to have a justifiable reason why the property has not been distributed.
If upon distribution there is disagreement on what to do with the property, one of the heirs can petition for a partition and sale of the property, i.e., force the sale of the property to a third party, or have an heir “buy out” the other heir(s).
Overall, keeping real property in the estate for an extend period of time is not looked favorably upon by the Court. Speak to your attorney about how to handle these issues so the issues do not get out of hand.