Homes are complicated assets. When a homeowner dies, this becomes obvious. When loved ones are experiencing grief and loss, the real estate details can border on overwhelming.
If someone in your life died holding an interest in real estate, here is some general guidance. You might have some actions to take, depending on the situation.
How Does Home Ownership Transfer on Death? Four Common Situations
How a home transfers after death varies, depending on the circumstances of ownership. We’ll start with a simple—and very common—scenario.
1. When a Co-Owner Has Right of Survivorship
If the person who passed co-owned the home, the owners might have held equal shares with a right of survivorship. A right of survivorship overrides any contrary directions in someone’s will. The home automatically transfers to the surviving co-owner, as follows:
- The surviving joint owner with rights of survivorship continues to own the property, with the right to sell. (If there are multiple surviving co-owners, they all get these rights, in equal shares.)
- In some states, couples hold property as tenants by the entirety. This gives each marriage partner some protection against a spouse’s creditors. Yet after the death of an owner, this type of vesting is treated as a joint ownership with rights of survivorship.
If you hold rights of survivorship, bring a certified copy of the late co-owner’s death certificate to the county. You’ll submit an affidavit of survivorship to the county recorder of deeds, who will effect the transfer and remove the late owner from the title.
If there’s a mortgage, speak to your loan servicer about continuing to pay it. Some surviving spouses pay off the mortgage to downsize at this point. If you decide to sell, the title company should be able to help you obtain a payoff letter and close on your home sale.
2. When the Property Was Held by Tenants in Common
Your title might be vested as a tenancy in common. Or, if you’re a surviving owner and your title doesn’t say joint tenancy, by default, under state law, you likely owned the home as tenants in common. This is another common type of vesting, chosen by unrelated co-owners, or remarried owners wanting to leave their portion to adult children from an earlier marriage. The deed may attribute different percentages of interest to each owner.
The interest must go into probate so the personal representative can distribute it—not to other co-owner(s), but to the person named in the will (or an heir as directed by state law if no will exists). The new beneficiary then enters a tenancy in common with the existing co-owner(s).
Whether the surviving owner keeps the interest in the house or sells it (see When Should You Think About Selling the Home, below), the probate process takes the late owner’s name off the title.
3. When a Sole Owner Dies
Of course, many a deed names just one owner. This can be the case even if the homeowner has married. When the sole legal owner dies, the home typically goes into probate.
If there is a will, the personal representative for the late homeowner is the executor named in the will. At the close of probate, the executor conveys the property from the estate to the new property owner. The executor, following state law, might need to formally request that the probate court issue an order approving the home transfer to the person named in the will.
Here again, the process takes the late owner’s name off the title.
4. When a Marriage Partner Dies in a Community Property State
What about a home bought in marriage in a community property state? These states are:
- New Mexico
In Alaska, too, couples can opt into community property. Much like joint tenancy, community property belongs to both spouses in equal shares. But unless they’re identified as owners of community property with rights of survivorship, the deceased spouse’s interest won’t automatically vest in the surviving partner.
The deceased partner could have willed the interest to somebody else—who will now co-own with the surviving partner as tenants in common. If the deceased partner did not leave their share to anyone else, the surviving marriage partner does receive the additional interest. Yet before selling or refinancing, the surviving spouse must clear the title. If the spouses drew up a proper community property agreement to avoid probate, the surviving co-owner may simply record it. Otherwise, probate is needed to legally transfer the title to the surviving life partner.
The Trust Scenario: When a Special Legal Vehicle Exists to Convey the Home
If the will does not pass the house along, and the title vesting doesn’t automatically pass the interest, there might be other documents. Did the person create a living trust to avoid probate? If so, property passes as stated in the trust, but any debts stay with the house.
Some states allow owners to record their home properties on revocable transfer on death deeds in the home’s county, naming an intended beneficiary. If that beneficiary is you, work with your county to file the documentation, execute the deed, and transfer the title.
Note: Transfer on death deeds offer no warranty against title defects. Before accepting one, find out if the title company will cover a home conveyed by transfer on death.
When Should You Think About Selling the Home?
You might be inclined sell the home for various reasons. If you have a willing buyer, ask the executor to petition for a court-ordered sale. Check for any mortgages or reverse mortgages, or other debt, that the executor must pay off before distributing the sale proceeds.
Sometimes, the adult children are named in the will and find themselves co-owning with a surviving spouse or life partner, or each other. If a new property-sharing dynamic means you’d like to sell your part, an executor’s deed can transfer your share. All co-owners and the executor should sign the deed, and have it properly witnessed, notarized, and recorded with the property’s county.
Nuts, Bolts, and Locks: Safeguarding and Selling the House
Set on selling? Review the IRS guidelines on estate sales, to plan for taxes and lien removals. The estate will address the home’s financial obligations before you, as beneficiary, receive the title. Stay alert, and insure your asset with care. A personal representative deed gives you no warranty for the title’s history before probate.
And during the process, keep the home safe. Change the locks. Redirect the mail. Be sure the personal representative keeps up with insurance, maintenance, utility, and landscaping bills, and handles the mortgage (or reverse mortgage) until you acquire or close on the home. Do not start paying bills yourself. State law outlines a debt priority order that the estate must follow.
There are estate sale companies that can help you empty the home of furniture and keepsakes if you plan to sell. A real estate professional can tell you what renovations are necessary, and should be able to guide you in ways that fit the circumstances. For example, did the late owner pass away at home? In Alaska, California, or South Dakota, your realtor must disclose this to potential buyers who wouldn’t know.
The Key Documents in the Home Transfer
Generally, the surviving family member or friend must know about a few key documents. Your county public law library supplies the necessary forms:
- Affidavit of Death: A person who was close to the homeowner signs a document called the affidavit of death, which includes a property description and affirms that the late resident was, in fact, the legal owner of the home. This notarized document applies for property held in joint tenancy, as community property with the right of survivorship, a living trust, or a transfer on death deed. It’s recorded, together with a certified copy of a death certificate, to consummate the home sale and change the title. Your county may accept in-person recordings or accept mailed forms. Check with the clerk or recorder’s office. Be sure to enclose the required recording fee for the affidavit plus the death certificate.
- Preliminary Change of Ownership Report (PCOR): Among the closing documents is the PCOR, which sets forth state tax for the home. The form asks for the names of the former and new owner, the home’s value, any homeowner’s exemption that applies, and if there’s a reason why the existing property tax should be retained. Speak carefully with the escrow agent and be sure the PCOR is attached to the executor’s deed. This will avert extra forms, fees, and penalties from the county and state.
- Lack of Probate Affidavit: This is needed if the home is conveyed outside the court-supervised probate process. While this document enables you to insure the title and sell or refinance the home, it does notremove a deceased owner from the title.
When the paperwork is complete, the county records the transfer, accepts its fees, and issues a new title deed.
After a homeowner dies, surviving loved ones can face a range of challenges, but estate tax is probably not one of them. Estates valued under $11.58 million are exempt from 2020 estate tax. A surviving spouse—including in a same-sex marriage—is exempt from federal estate tax on assets in any case. But call the state revenue department and find out if state estate taxes apply. And ask if you need a state Real Estate Excise Tax Affidavit to report the transfer as a non-taxable event. Land passing to the surviving spouse is exempt from transfer and inheritance taxes. It is vital to speak with your accountant or tax professional to understand applicable federal taxes.
Here are some additional issues that could arise:
Nobody Has Survivorship Rights and There’s No Will
Have you searched exhaustively and found no will? Petition the probate court to deem the estate intestate. Without a will, there is no executor, so the court appoints an administrator as the personal representative of the deceased. Then, the court seeks heirs under your state’s order of succession to find the relative next in line to inherit the property.
The Deceased Homeowner Was a Same-Sex Partner
Past legal exclusions, now considered unconstitutional, denied same-sex partners the ability to inherit under intestate succession and other state laws. Consult with a family lawyer to seek fairness under common-law marriage and other provisions.
You’d Rather Not Have This Home
If the risks, costs, or adjustments of owning a new home are unwanted, and buying title insurance would not solve the issues, you may refuse the deed. Move quickly, as the Internal Revenue Service requires you to do this within nine months. Check your state’s rules for disclaiming your interest, too.
You Reasonably Believed You’d Get the House—But Didn’t
In some cases, it might seem obvious that something isn’t fair. You may approach the court, if your state permits, to argue that the deceased person meant for you, or another specific person, to receive the title. If you decide to contest the will, the court will look at whether actions of the deceased person while alive showed a desire to give to the party who is now receiving the home.
The intent of the deceased person is important to the court. An attorney who works with wills and estates in your state can explain evidence of intent, the probate code, and rights of beneficiaries. If you need to take legal action, choose an estate litigator who knows the local court procedures.
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Finally, note that this guide is a general reference, not legal advice. We understand that homes are complicated, especially where loss and grief are present. For decision-making guidance based on an examination of your own situation, facts, needs, and expectations, the counsel of an experienced attorney is necessary.