DEATH, PROPERTY & PROBATE
This blog attempts to summarize basic estate planning documents and the probate process. Nothing in this blog should be used in place of actual legal advice. Please contact an attorney if you need help with planning your estate.
The first thing I’m always asked is “Do I need to do anything when someone passes away?” and the answer is yes, you always need to do something. It may not always be a full-blown probate of a will or an estate, but you always need to do something with your property.
Probate comes from the original Latin term probatum, meaning “to test or prove.” Attorneys use it as both a noun and a verb (to probate something vs. to file something in probate). When we file in probate we are testing a will and proving a will in a probate process so that we can, with legal authority, say who is supposed to be next in line to inherit property. The probate court records in general support that process; this includes all the real estate records that prove who owns what, as well as death certificates, marriage certificates, judgements, liens, and anything else that helps show who owns property.
GENERAL ESTATE PLANNING
I always recommend that everyone have the following documents as part of their estate, especially if you have children:
- Last Will & Testament – Details who will inherit what you own when you pass away
- Power of Attorney – We recommend all spouses have one for each other, and if you don’t have a spouse then we recommend giving one to a parent or other trusted person
- Living Will / Advanced Directive – Put out by each state, offered for free
Other estate planning tools you’ll see used are:
- Trusts – We don’t use trusts as often in Alabama unless there is a definite need for it because there is less of a tax incentive here by state law. We do see them in the case of special needs trusts or medical trusts.
- Deeds with Survivorship Clauses – These property deeds allow the living spouse to automatically gain sole ownership over their property after their spouse passes away.
- Beneficiary Clauses – In estate terms, this defines whether something passes through your estate or outside of your estate. The will doesn’t control everything after you die, so the deed and beneficiary clauses will go outside of the estate. A beneficiary clause can be added to things like bank accounts, retirement accounts, investment portfolios, etc. A beneficiary clause will generally preempt the estate; sometimes they will be to the benefit of an estate, in which case the will will regain control of that asset once it comes back to the estate, but anything with a beneficiary clause will pass automatically and will not be controlled by your will.
Click the image to download our Estate Planning Checklist. This fillable form will help you detail everything in your estate and important details about the items.
POA vs. ESTATE REPRESENTATIVE
This is commonly confusing and an easy way to remember it is to know that a Power of Attorney is only useful to you when the person is alive — what you can do, your POA can do for you. Once you die, no one can act on your behalf because you can’t legally do anything. This is a moment of transition where the personal representative then takes over the powers of the Power of Attorney.
WAYS TO CONTROL WHAT HAPPENS AFTER DEATH
- Will: You record what you want to happen and it gets probated. I will always advise that you go to an attorney for your will rather than downloading one online to save some money; wills aren’t very expensive and we have self-proving wills which have some terms you will definitely want in your will because they help you a lot during the probate process. If the will isn’t self-proving then it will take extra steps in the probate process.
- No will: The state decides for you. There are statutory rules for who gets to inherit and in what order they inherit.
- Generally: Spouse and kids, spouse and parents, spouse, kids (issue), parents, siblings and their lines, grandparents and more, and then the state. This means that if you pass without a will, your property would go to both your living spouse and your children together, meaning the children will now own their parents’ house too. In this case we often have to have the kids quitclaim the property back to the living parent. If you don’t have children then the property would go to your spouse and your parents, which means your parents would also own your home with your living spouse. This could all be avoided if a will existed.
- Deed – Tenants in Common: You both own property equally and when you pass your line will receive it. If you have a will it can control this, and if you don’t it will go through intestate.
- Deed – Joint Tenants with Rights of Survivorship: As soon as you pass, the property will go to whoever is still surviving (usually your spouse). Once that person also passes, then the property will go through probate to figure out who would inherit it next.
We recommend that you update your estate planning documents at least every 5-7 years because estate laws change and you may even have life changes occur that warrant an update. For example, your kids grow up so you no longer need trust provisions where someone else will handle the property for them until they’re of a certain age.
COMMON ACTIONS TAKEN IN PROBATE
- Testate Estate: Probate of estate with a will. This is always the preference because having a will makes everything streamlined.
- Intestate Estate: Probate of estate without a will. This requires a lot of court permissions and will delay the process.
- File Death Affidavit in Probate: Used with survivorship deeds. If a spouse dies and they had a lot of beneficiary clauses — a survivorship deed, beneficiary clauses on bank accounts, etc. — then there is no need to probate the estate right then because the living spouse already has access and legal authority over everything in the estate. Instead of going through the entire estate process, we will just file an affidavit with the death certificate to show a change of ownership and clean up the probate records.
- File Heirship Affidavit in Probate: Used when an estate wasn’t filed and it has been 2-5 years after the death. Once we pass a certain time threshold, it may not be necessary to probate an estate, but you then need an heirship affidavit to clean up the records and show who owns the property. We also use heirship affidavits when we have intestate estates of record. An intestate estate doesn’t have a will, so we aren’t hearing from the person who passed regarding who their family was and who should inherit things, we’re hearing from someone else who may have a self-interest in not being completely honest. For example, siblings may have bad blood and when one of them dies the remaining siblings may choose to cut out the deceased sibling’s children out of spite. This usually requires an heirship affidavit to be filed later in order to confirm who should have inherited and owned the property.
TYPES OF ESTATES
This includes Letters of Testamentary, which are issued from the probate court judge and give a person the authority to act on behalf of the estate. It’s an important part of the process because it sets a date as to when the estate was opened. Generally, the authorities granted in the will are above and beyond standard statutory authorities for people when they’re handling an estate. We typically waive inventory requirements and bond requirements, and make it very streamlined and easy. You already have the authority to sell real estate, so once you get those letters we can move very fast.
In an intestate estate, you instead receive Letters of Administration. These require permission from the court to handle any real estate transactions. We will also have to follow up with the court at different times for inventory to report what we’ve collected for the estate, what we’ve paid out for the estate, what bills we’ve incurred during that period, etc. You then have to present an insurance bond to the court that details the value of the estate. Because this person wasn’t elected by the estate, they now have to provide the court with insurance that would allow the heirs to collect what was due to them if the estate is mishandled. You can’t get Letters of Administration without having that insurance, and that can really delay the process.
WHEN DO HEIRS RECEIVE THEIR MONEY?
With an estate, heirs receive their inheritance 6 months from when the Letters are issued (not from when the person dies), but sometimes it can be longer. The estate attorney or the real estate attorney is required to hold the money.
If there is not an estate and you’re just filing an affidavit to update probate records, then the money is received at closing.
If you as a Realtor know that someone selling their house has lost a spouse in recent years, please notify us as soon as you can. This helps us know to ask for a death certificate early in the process so we can handle things quicker. We sometimes see situations where an heir is living in an inherited property, but nothing has ever been filed in probate. When it comes to closing, this can complicate things because it’s likely that the heir isn’t on title, which means that title will need to be cleared up before the property can be sold to someone else.
I am an only child. When my remaining parent passes away, is it a given that I would inherit everything, or should my living parent still have a will done?
I would still recommend a will even though you would most likely be the person to inherit the property as it will be much easier for you to probate the property if you have a will. A will is fairly inexpensive and it’s well worth your money because the probate process is much more expensive if you don’t have a will. There are also a lot more requirements for you — you would likely be the one probating the estate, so you would have to be the one to report inventory, do the bond for the insurance, and all these things cost extra money. If you have a will it’s a much more streamlined process. You get your Letters of Testamentary, collect assets, wait your 6 months, and then disburse to yourself, close the estate, and you’re done.
What should I think about when choosing my estate representative?
The person you choose as your personal representative has a fiduciary responsibility to the estate. This means they are financially responsible for what they do with the estate. Even if you have a will and you elect one of your children to be your personal representative, it needs to be a responsible person because if they mishandle it then the other heirs can sue them personally for that mishandled money. This is why it’s important to have a responsible party as your personal representative and not just your favorite person. I also always recommend that you choose someone who is local — if you live in Huntsville, it isn’t a great idea to choose a personal representative who lives in Ohio because they’ll have to go through long-term communications with an out-of-state attorney to try to get everything signed and completed.
If someone has signed a POA giving another person the right to make financial decisions on their behalf and the person who signed the POA is the legal owner of the home, does the other person have to sign an agreement to sell the property?
There’s a lot here, but what I believe this question is asking is the following: If I own a home and give a Power of Attorney to someone else and then for whatever reason I’m incapacitated or am out of the country or otherwise unavailable but I need my house to be sold to take care of me, can my POA sign all those documents on my behalf? The answer to this would be yes, as long as it is a general durable Power of Attorney. Not all POAs are created equal and there are different POAs for different things. How old your POA is will also affect how your real estate attorney views it. If the principal (the person who gave someone the Power of Attorney) has any ability to sign documents, your real estate attorney is going to ask them to sign at least one or two things; they may not have to show up to closing or sign the closing documents, but we always prefer that they sign the deed and we like them to acknowledge the sale in some way. Even if someone has a Power of Attorney, I’m always going to ask if the principal can sign the deed either by us mailing it to them or by sending a runner. Having them sign the deed validates the sale and shows that the agent was using the authority properly, and it prevents us from having to file the Power of Attorney in probate, which is a cost savings. Generally the Power of Attorney is very helpful for those moments when you need it, but don’t be surprised if the real estate attorney still asks you if the principal is available to sign at least one document.
My spouse and I have a will leaving everything to the survivor. Does that cover all the issues?
Absolutely. Many times with regards to spouses you’ll have a survivorship deed, you have joint bank accounts, and everything else has beneficiaries on it. Often we will see a spouse pass away and we actually won’t probate after the first spouse dies; we only probate after the second spouse dies because at that point the beneficiary clauses have changed or the real estate is no longer a survivorship and we need to correct the probate records so the heirs can properly take title. We call them Standard Simple Wills, which have two spouses who grant everything to each other so that when one passes the other receives everything, and then once they’ve both passed the children will inherit it all. It is always my recommendation that we start with this type of will — they’re simple, they’re straightforward, and they really help the probate process if we need to probate. In the case of this original question, this is a great example of where we would use a death affidavit — it avoids spending $1,000 to probate the estate when you can instead just file the death certificate with the affidavit in probate to clear up title.
After someone passes and the estate has been probated, who actually becomes in charge of selling the property?
Once the estate has been probated, the Letters Testamentary or the Letters of Administration put someone who we call the personal representative in charge of the estate. There are many other titles for this position but this is the standard, modern one. This personal rep is the one who will sign off on any real estate sales. There is a caveat for real estate, though: even though there is a personal rep for the estate, we will often also ask that the other heirs to the property also sign the deed. This all comes down to having confirmation that no one is going to challenge the sale later and helps with a clean chain of title. If you probate a will, typically the attorney will be very happy because it should be an easy, streamlined process, and then the attorney will ask for all the heirs’ names and addresses. The personal rep will then take care of everything, and the heirs will only have to sign the deed. If you probate an intestate estate where you don’t have a will, we have to go to court to ask the judge for permission to sell the property and the judge will give explicit permission to one person to sell it on behalf of the estate. During this time in court the heirs will have their chance to challenge anything, and if they don’t then we can just have the personal rep sign anything and the heirs aren’t needed.
Why do estate funds need to be held for 6 months?
There is a 6-month creditor claims period when you go through an estate. The default rule for creditors claiming anything against a deceased person is 2 years, so by probating the estate you’re reducing that time period to 6 months. When the process starts, the court puts out a general notice to the public stating that the estate exists and they can file a claim against it now if they have one, but it has to be done within the next 6 months or they forfeit their claim to the estate. There are known creditors and also unknown creditors. If there are known creditors then they have different rules, but this is to get the unknown creditors in the case where your loved one had a credit card you didn’t know about. The probate process is designed to protect you from this. The 6-month holding period applies specifically to real estate because the claims filed by these unknown creditors can attach to property. If you sell a house within a 3-month period and distribute the funds to the heirs, and then a creditor files a claim against the property within the next 3 months, it creates a very complicated situation. Sometimes we even see what is called an insolvent estate where there are so many claims against it that the estate doesn’t have enough money to pay them all off. There are actions you can take in court in this case to get those liens removed because the estate is insolvent and there is no money to be had. It is very important to manage your clients’ expectations when it comes to an estate and to make sure they understand that they won’t receive their funds immediately at closing.
If a mechanics lien comes up after the property is sold, is the new owner responsible for it or is the estate responsible?
Mechanics liens are a unique beast. Just because a mechanics lien is filed doesn’t mean it’s actually going to be proven or taken to court and receive a judgement. A mechanics lien is just a reservation of a right, and they usually try to file it prior to closing so they can make it known that they are reserving their right to receive money from you if they performed a task for you and weren’t paid or if the contractor didn’t pay them. If the mechanics lien is filed after the property is sold, you may be able to challenge it or just let it play out and have it fall off anyway. Each of them is so different that you really just have to deal with it as it comes, and typically this is something your attorney can speak to their insurance underwriter about if you think a mechanics lien may come up.
What is a living will?
A living will, also called an advanced directive, is different than a last will and testament. A living will requires you to speak to your loved one about what they want to happen if they are incapacitated, can’t speak for themselves, and are on a feeding tube. Do they want to stay on the feeding tube forever or would they choose an end point? There is no pleasant way to have this conversation and fill out this form, but it isn’t for you. A living will is for your loved ones who will have to make difficult decisions for you if the time ever comes that you can’t make them for yourself. Having a living will gives so much relief to those making the decisions because they know this is what you would’ve wanted and they’re following your wishes in a difficult situation. We always recommend having a living will/advanced directive regardless of how old a person is because, unfortunately, you never know what’s going to happen. You can pre-file a living will with your physician or with the hospital you think you would be attending so they have it in your medical file should the case arise. This document can work with a Healthcare Power of Attorney but the Healthcare POA cannot replace a living will.
If you have a will done and name your child as your heir, but then you have another child later on, do you need to redo your will?
I would recommend that you update your will, but you don’t have to. Usually a will will have what is called an After-Born Child Provision, particularly when we know someone is young and is still capable of having kids or even of adopting children, and this basically states that even though you listed your existing children as beneficiaries after your spouse, you intend for any children you have after the date of your will to also benefit in the same way.
If you need help with estate planning, feel free to call our office at 256-533-5252 and make an appointment for a consultation.
By: Geoffrey K. Middleton
Attorney at Law
Written in Dec 2021