60% of Americans lack a will or estate planning. While 81% of those aged 72 or older have a will or living trust in place, only 58% of those between the ages of 53 and 72 do. 64% of Generation X’ers and 78% of Millennials do not have an estate plan in place. So what happens to a house when its owner passed away without a will?
When someone passes away without a will, the court will have to get involved in approving heirs. If you are a close relative, you will likely have to wait before receiving an inheritance.
What happens to the home and property of someone who has passed away? Let’s take a look.
1. When Someone Has Passed Away Intestate
When someone dies without a will, it is known as “intestate.” Intestacy laws are different from state to state, but they generally follow the same guidelines.
If a person who died intestate did not own property or had assets of less than $100,000, no formal court proceeding is required. Family members can file a Declaration of Small Estate through a bank, or even through the DMV. They can then collect and split the deceased’s assets.
If more property gets involved, the estate becomes more complicated. It will need to go into probate or get court approval before assets can get distributed.
The court will provide a list of people who can act as the estate’s executor, or person in charge overseeing the distribution of assets. In most cases, they will choose the spouse or domestic partner. The next choice would be adult children.
If the deceased was single and childless, the executor may be a parent, sibling, or another living relative.
The executor has no power to act until the estate goes through probate and the court grants them official authority.
If the person was not married, the estate usually goes to the child or gets split between multiple children. If the person was married, the estate can get split between the spouse and multiple children, with children receiving up to 2/3 of the inheritance. Property held by joint tenants with rights of survivorship can bypass probate.
If the deceased was not married and had no children, their parents and siblings will split their estate. If they had no living relatives, the state will inherit the property.
2. What Happens To The House?
The executor has no power to transfer ownership of the house until they are granted authority by the court. The executor can then begin the process of selling the house.
The executor has a right to determine a fair selling price, which must get approved by the court. When a buyer comes forward, the executor must notify beneficiaries that a sale is coming. The court must then approve it.
In cases where the size of the estate is greater than $5 million, you should contact a tax advisor. You can figure out how to minimize the estate’s tax consequences, as the impact of selling the home will impact the estate in a number of ways.
Some title companies may permit a sale to proceed without probate approval. A title is the ownership of a property that allows you to use it. Contact your title company directly for more information.
You should also contact an attorney to advise you regarding your state’s laws, as some states do not require probate approval.
3. What To Do Before Selling
It is important to gather all important documents before selling the property of someone who has passed away. This includes titles and deeds for the property, the homeowner’s policy, bank documents, receipts from bills, and employment information. You may also wish to empty the home of any photos and paperwork that you want to keep for sentimental reasons.
You will want to continue paying bills on the property before the house is sold. These may include mortgage, taxes, and utilities.
If the person who passed away had more debts than assets, it gets known as financial insolvency. In these cases, you will need to contact the state.
They can give you a list of debts and the order in which they should get paid. Make sure you know what needs to get paid off before selling the house.
Identity theft often occurs right after someone has died. You will want to close out all accounts and notify credit companies to avoid this pitfall.
Be sure to change all locks on the home, and redirect all mail, to avoid a break-in. You do not know who the deceased trusted with their keys before their passing.
4. Preparing The Home
If the person who passed away was older, the home may be in need of some repair. You will need to repair any leaks, damaged floorboards, or other obvious problems in order to get the best price.
You may also wish to remove any outdated carpeting or flooring. It will help your sale if you refinish hardwood floors.
Pull down any old wallpaper or furniture coverings, apply a fresh coat of paint, and install new light fixtures. Clean the home thoroughly and replace things like old toilet seats and shower curtains. You may wish to splurge on professional cleaning.
If you have the means, you can get the home professionally staged before selling. This requires removing old furniture and replacing it with rented pieces. Prospective buyers will be able to envision themselves living in a fresh, modern property, and you will get more offers.
After the estate has gone through probate, the executor can begin the process of selling the home of someone who has died without a will. With the right attention to paperwork and home details, the home will get sold in no time.
For more information on selling real estate, contact us today.