A home is often one of the largest assets in a person’s estate, and when that person dies, the property can become the greatest hurdle in executing the distribution of the estate. Not every beneficiary wants to own the home of their deceased loved one. Whether the heir can’t afford the mortgage or taxes, they don’t have a desire to move in, or they don’t find it necessary to own another property, many recipients of homes of the recently departed are looking to sell.
This is what they need to know
Who’s In Charge?
First you must find out who has the authority to sell the property which can be found within the estate plan. If the real estate is in a trust the designated trustee is responsible for distributing the home. If the home is listed in a will then the appointed executor given authority over the real estate is in charge. If the will’s executor does not have authority, then the direct beneficiaries may be responsible for selling the property. If the deceased did not have a will and died intestate, someone must volunteer to act as the administrator, open up estate probate and get authority from the court to handle the affairs of the estate.
Debts Get Paid First
Before beneficiaries can receive any property or liquidated assets from the estate, all unpaid debts must be settled with creditors. Real estate left by the deceased party may need to be used to pay down remaining personal debts if there isn’t enough cash from other assets or insurance policies.
If the property still has a mortgage, that will need to be settled as well. Since a mortgage is a personal debt, it is not forgiven due to the death of the owner. If the estate is cash rich, these funds can be used to cover the remainder of the mortgage and other estate debts. For estates that are cash poor, the estate typically won’t have enough reserves to cover the mortgage. This leaves the beneficiary with two options–essentially buy the home by paying off the loan with their own cash or through their own mortgage, or allowing the executor to sell the property to pay off the debts and distribute any remaining assets from the sale.
Selling The Property
If the real estate was owned by a trust and the beneficiaries are able to act in concert, the sale of the property can be left up to the beneficiaries and will not need to go through probate. If the home wasn’t included in a trust and was documented by a will or the owner died intestate then an executor or administrator will need to manage the sale of the property by filing a petition with the court and getting approval to sell. As the executor manages the sale of the property, the beneficiary’s only role will be to approve the terms of the sale.
There are many nuances to selling the home of the recently departed. With estates large and small, the sale of a home is often the greatest obstacle, and beneficiaries and executors alike should be aware of what it takes to sell their inherited real estate. Consult with an attorney to understand all the terms and make sure the estate is being handled properly and fairly.