What Happens to Real Estate Assets in Probate?
Real Estate is the number one asset that triggers probate. Why? Because changing the title to an asset in order to avoid probate requires filing a new deed to transfer the property — not a simple process.
The Probate Process
Probate is the court-supervised process of transferring assets from the deceased to the rightful heirs. Assets can include anything from cash and investment accounts to vehicles and real estate.
The most common probate asset is a house. Homes are typically owned individually, by a single person (called simple fee ownership), or jointly — for instance, by a married couple.
A home that is owned individually must go through the probate process when that individual dies.
Homes that are owned jointly may or may not have to go through probate, depending on the type of ownership. There are two types of joint ownership:
Right of survivorship
When a house’s deed includes a right of survivorship, the deceased owner’s interest will automatically pass to the surviving owners without probate. However once the last Tenant dies, probate will be required.
For instance, if a husband and wife own a house with a right of survivorship and the husband dies, the wife will inherit her husband’s interest in the house automatically without any need for that asset to go through probate. However, because the husband and wife were the only owners, when the wife dies, the house must go through probate.
Tenants In Common
When two (or more) individuals own a house as tenants in common, they each own a specific percentage of the house, designated in the deed. (Note: The word “tenants” here is a legal term of art that is unrelated to the traditional use of the word in rental agreements.)
When a tenant in common dies, the deceased’s share of the property must go through probate.
For instance, consider four siblings who purchased a vacation home to share. Each owns a 25% interest in the home. When one sibling dies, each of the other siblings still owns only 25%. The deceased sibling’s 25% must go through probate.
Leaving Real Estate in a Will
An individual can leave real estate in a will, but unlike leaving a piece of jewelry, the will is not enough to make the transfer valid. Many think that by creating a will, you can simply change the title to a home or other real estate asset. But while a will can be an important document for understanding the wishes of the deceased, it does not have the power on its own to transfer ownership. A will must be “proven” in court — in fact, the word probate means “to prove.”
Imagine walking into a bank with a copy of the will and asking the clerk to give you access to the deceased’s bank account. They wouldn’t do it — the will could be fake or invalid for any number of reasons. They would only provide access after receiving an order from the court. The same is true for real estate.
In order to change the title to a piece of real estate, you must petition the court to start probate and receive the authority from the court to change the title.
Though additional steps will usually be required to officially transfer ownership of a real estate asset, smart estate planning through the use of joint ownership and trusts can help you avoid probate.