REAL ESTATE NEWS (Los Angeles, CA) — We’ve seen a small rise in total deaths over the last couple years, probably more from the hysteria and over-reaction than from the virus itself. The good news is that even big tragedies can come with their own proportionate silver linings: Today, there are more than 100 probate sale property listings in the Greater L.A. Area, offering good deals to home buyers and investors with a little patience.
The loss of a loved one can be an incredibly difficult time, especially if there are legal and financial matters that must be dealt with. One such matter is the sale of property that is subject to probate. Probate is the legal process of distributing a deceased person’s assets according to their will or, if there is no will, according to state law. This process can be complicated and time-consuming, and it is important to understand how it works, especially when it comes to selling real estate.
It often saves the heirs around $20,000 and 4+ months of time when the homeowner gets a trust and a will ahead of time. When heirs inherit a home without a trust, they have to pay for an attorney and wait for court cases, which can sometimes take more than a year. In this article, we will provide an overview of the probate process in Los Angeles, California, including the role of trustees, successor trustees, and conservators, as well as the different types of authority that may be granted to personal representatives. We will also discuss the various types of property ownership and how they can impact inheritance and taxes, and provide tips on how to navigate the probate process successfully.
Trustees, Successor Trustees, and Conservators
A trustee is the person who creates a trust, which is a legal arrangement in which assets are held and managed on behalf of a beneficiary. A successor trustee is the person who inherits the trust after the death of the original trustee. In the case of a probate sale, the successor trustee is responsible for selling the property and distributing the proceeds to the beneficiaries of the trust.
It is important for the trustee to choose a successor trustee to avoid conflicts among the beneficiaries. This can be especially important when there are multiple beneficiaries who may not agree on how to proceed with the sale of the property. It is not uncommon for families to argue over trivial matters, such as where to get dinner. In more extreme cases, heir hunters may be hired to find beneficiaries who may not be aware of their inheritance, but this can come at a steep price, often taking 45% of the inheritance.
In cases where there is no will or trust, the property must go through probate. A grant deed and probate may be necessary to transfer ownership of the property to the rightful beneficiaries. It is worth noting that only property held in trust can escape the probate process.
Types of Authority
There are two types of authority that can be granted to a personal representative during the probate process: full authority and limited authority. Full authority is the most prevalent, with approximately 90% of probate cases falling under this category. Full authority allows the personal representative to sell the property without the need for judicial approval. This can expedite the sale process, with escrow closing in as little as 2.5 months instead of the usual 9.5 months. In contrast, limited authority requires court approval for the sale and is typically used in cases where there is disagreement among the heirs or beneficiaries.
The estate planning package can help dictate how authority is granted in the case of incapacity, where the trustee is unable to make decisions for themselves. A living trust may provide a judge with clear intent on who should be appointed as conservator. Without a trust or estate planning package, a family member may need to go to court to request to be conservator and the judge will have a hearing to determine capacity and who to give conservatorship to.
Trust Documents
A complete estate planning package includes five essential documents: the trust, durable power of attorney, advance healthcare directive, pour over will, and trust transfer deed. The trust can either be revocable or irrevocable, but most trusts are revocable as they allow for changes to be made over time. The durable power of attorney allows someone trustworthy to act on the trustee’s behalf if they become incapacitated. The advance healthcare directive allows authorized persons to access medical records and deal with doctors. The pour over will eliminates the need for clear intent to put items in the trust. Finally, the trust transfer deed is used to transfer property into the trust.
Taking Title Types
The type of title that is used to hold the property can have a significant impact on inheritance and taxes. Joint tenancy is the most popular type of title and allows the surviving spouse to inherit the entire property without any tax implications. In contrast, tenants in common divide ownership of the property between multiple individuals, and each individual can leave their share of the property to whomever they choose. Community property, with or without right of survivorship, is a type of ownership that allows the surviving spouse to inherit the entire property without any tax implications. Sole ownership splits the inheritance between the surviving spouse and children. Other types of ownership include LLCs, corporations, partnerships, trusts, and revocable transfer on death.
Father and Son Buy House Together
If a father and son buy a house together, the property should not be given to the child while the father is alive, as the child will pay capital gain taxes. Instead, it is usually recommended to put the property in a trust, so the child will inherit it after the father’s death. This allows the child to avoid capital gain taxes if they sell the property, and if they choose to live in the property, they will have to pay full property tax. To pay less tax, they can file a claim for reassessment exclusion for transfer between parent and child, which allows them to avoid the reassessment of property taxes.
Inheriting a House
When a child inherits a house after the death of a parent, their name should be on the trust, not on the grant deed. It is important to obtain a licensed appraiser or broker price opinion to determine the value of the property. The trust can take on the mortgage and distribute money to other beneficiaries, and this can be used to counter the assessor’s determination of who takes the most money. Non-pro rata distribution should be in the trust, which allows inheritors to pick and choose assets as long as they receive at least 50%.
Probate Sale Process
To begin the probate process, a petition must be filed with the court, which includes the attorney’s contact information, the name of the deceased’s estate, and the name of the petitioner, who is usually the child of the deceased. The petitioner becomes the personal representative of the estate and can sell the property with full authority or limited authority. If there is a will, the child becomes the executor, and if there is no will, the child becomes the administrator.
Full authority allows for the easiest sale of the property, as the personal representative can sell the property at any price without the need for an auction. Multiple offers can be considered, and any deposit can be accepted. If limited authority is granted, the selling price must be within 90% of the probate referee’s appraised value, and a customary court deposit of 10% is required. If the deposit is made through an FHA loan, judge permission is required to take a 3% deposit, and the sale must comply with FHA guidelines.
The Notice of Oppose Action must be mailed to all heirs, who have 15 days to object, or escrow will close. If there are multiple offers, the client with full authority can make a decision on which offer to accept. If limited authority is granted, the court must confirm the sale through an auction process, where the overbidding formula is used to determine the highest bidder. The court must issue an order to close escrow with limited authority.
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Copyright © This free information provided courtesy L.A. Loft Blog with information provided by Corey Chambers, Broker CalDRE 01889449. We are not associated with the seller, homeowner’s association or developer. This article does not constitute legal advice. For legal advice, talk to an attorney. For more information, contact 213-880-9910 or visit LALoftBlog.com Licensed in California. All information provided is deemed reliable but is not guaranteed and should be independently verified. Properties subject to prior sale or rental. This is not a solicitation if buyer or seller is already under contract with another broker.