If you inherit a home, what deed will you get? It all depends on the estate planning done by the late homeowner.
If you’re willed the home, it’s likely an executor’s deed. If the late homeowner died without a will, you’ll likely get an administrator’s deed. If you’re receiving your interest from another heir, it might even be a quitclaim deed.
Here are some special considerations for each kind of deed.
You May Be Inheriting…
By Executor’s Deed
If the late homeowner left enough funds to pay off all debts without selling the home, then the home could be passed on to a beneficiary through an executor’s deed. The executor’s deed exists because the late homeowner took the time to write a will. The will named the estate’s executor — a person the homeowner trusted to distribute property. The executor might have been a friend, relative, spouse, or attorney of the late homeowner. Often, the executor is the one who is getting the home. (That’s OK. There’s no legal conflict of interest there.)
Can the named executor say no and walk away from the duty, leaving it in the probate court’s hands? Yes. But the executor does get one key advantage. If the estate has more debt than assets, the executor and the probate lawyer get their fees before creditors get their payouts. So, being an executor can be helpful, financially. Some people who decline that fee if there aren’t other heirs, because it’s subject to income tax. And some people share the fee with others who helped in the process, when all is said and done.
Acting as an estate’s executor? You aren’t responsible for the debts of the estate. Do keep the estate’s account separate from your personal accounts. Hold onto the receipts for all expenditures you handle for the estate.
The executor produces a new deed through the probate court to transfer the property’s title into the name of the new owner. The deed, which identifies itself as an executor’s deed, is witnessed and notarized, and finally recorded.
But if the late owner didn’t leave funds, the executor will typically sell the house, and pay off the mortgage and taxes and the fees incurred in probate — and any other debts. Only then could an executor distribute the home sale proceeds (if any are left) to people named in the will.
Expect probate and its distribution process to run at least a year and a half. The fees can be quite high. But the process does result in an official deed with the weight of the probate court behind it.
Are you inheriting a house you’d like to sell? See our 6 tips for selling a property from probate.
By Administrator’s Deed
For those who die with no will to indicate who should get their assets, the probate court steps up and appoints someone to act as the administrator.
Once appointed, the administrator has the legal authority to distribute whatever valuables are left in the estate after the debts of the deceased are properly paid. The home state’s intestacy code guides the administrator in going down the priority list of relatives, so the assets can be conveyed to the right recipients under the law.
An administrator’s deed identifies itself as such. The administrator has the deed witnessed and notarized, and recorded. Most states have published guidance online, showing how a will is administered.
Speaking of online research, county records offices in many states make property titles available to browse through their websites. So, potential heirs can review the last home deed, and any creditors’ liens. Deeds are public records. In most locations, deeds can be searched online for free, and copies obtained for a nominal administrative fee.
Here’s how various liens impact the title and the home’s value.
A real estate agent can help guide you through the needed actions, starting with getting an updated appraisal of the property’s market value. You’ll need that as a cost basis for taxation whenever you decide to sell the home.
By Quitclaim Deed
Many heirs have no desire to live in the home they receive. But if there’s equity in the home, they can sell it for cash (after a statutory waiting period). If you’re considering this path forward, hire a pro with experience in probate homes.
Granted, some people just opt out of their real estate inheritances. If the heir to the home will be impacted by state inheritance taxes, or doesn’t want to go through the effort of taking on the home only to sell it later, they might be looking for an easy way to come off the title. In short, sometimes a person inherits property but doesn’t want to keep it. Yet that heir might want to decide where it will go. Heirs certainly have that prerogative. A person can accept the inheritance — and then quitclaim it to convey it to someone else.
Deeds.com offers quitclaim deed forms. Select your state to find deed types, and county-specific forms. Our forms meet the legal standards of your location.
A quitclaim is passes the home along without warranties. Before transferring or accepting the home, consult an attorney to avert unexpected challenges — like gift tax issues, or the end of title insurance policy.
OK on the Deed Information…But Does the Heir Get the Mortgage, Too?
What if there’s a mortgage still on the home? If it’s a government-backed loan, the mortgage is assumable by a new owner.
What if it’s a conventional loan? The Garn-St. Germain Depository Institutions Regulation Act states that the mortgage company is not allowed to demand an immediate payoff, as long as:
- It’s a surviving joint owner who takes title.
- The home is going to a surviving spouse, or to a relative who already lives in the home.
- The home’s title is going to the child of the divorced co-owner.
- The title is being passed through a revocable family trust.
In these situations, the beneficiary gets the home — and the ability to take over the mortgage intact.
On the other hand, the homeowner’s or condo owner’s insurance will need to be replaced. The new owner needs to be named as the policy holder.
Would you like to explore this topic further? We invite you to read: After You’re Gone, Does Your Mortgage Live On?
You know it’s coming…our final word to the wise. Estates cover attorney and funeral costs, so consult a lawyer before taking any actions. An attorney, admitted to the Bar in the state where the home exists, can advise you on tax and title issues, and help you prepare for the unknowns. If the estate is not solvent, check state law to understand how costs must be funded before you take on an administrative role. If you’ll be expected to cover costs from your own pocket, don’t let that come as a surprise.
Supporting References
Cameron Huddleston for AOL, reposted by the Kiser Group (Chicago) via KiserGroup.com: AOL – What to Do When You Inherit Real Estate That You Don’t Want (Feb. 28, 2019).
And as linked.
Photo credits: Nick Youngson CC BY-SA 3.0 via Pix4free; and cottonbro studio via Pexels.