By Laura White Brandow
Though probate is not a subject people
like to discuss, it is a subject to consider no matter what your age or health
condition. For purposes of this article, our
What we don’t want is for your
investments to end up costing money and frustration for heirs and loved ones.
The best way to accomplish this is to avoid probate altogether.
When you purchase real estate you need
to specify how you will be holding title to the property. Married couples can
elect two types of tenancy: tenants by the entirety or joint tenants. As
tenants by the entirety both spouses own an indivisible whole interest in the
property, and if one spouse were to pass away, the deceased spouse’s interest
in real estate automatically passes to the surviving spouse with no necessity
of probate. As joint tenants, each spouse owns a 50% interest in the property
that they can individually sell or finance. However, if they still own the 50%
interest at time of death, their interest automatically passes to the surviving
spouse outside of probate. Unmarried couples can also obtain the benefits of
joint tenancy. Whichever tenancy is chosen, it has to be stated on the face of
the recorded deed in order to be effective.
What you want to see on the deed is:
John W. Doe and Mary W. Doe, husband and wife as tenants by the entirety; or
John W. Doe and Mary W. Doe as joint tenants. Failure to list a tenancy renders
the owners as tenants in common – each would own their 50% interest, but the
deceased owner’s interest passes to their heirs upon death and must go thru
Probate for the interest to be conveyed.
As we baby boomers age, we are losing
co-owners to death and divorce. When married owners divorce, the tenancy by the
entirety is severed, so upon divorce their tenancy automatically changes to one
of tenants in common. Usually one party receives the real estate in the
divorce, but everyone, including divorce counsel, often forget to have both
parties execute and record a deed into the retaining spouse for secondary
property. This is an issue I often find with time-share owners. John and Mary
Doe purchase a time-share as tenants by the entirety. John and Mary divorce
severing the tenancy by the entirety and they are now tenants in common. Mary
is granted the time-share in the divorce. No deed from John and Mary into Mary
individually is recorded. John passes away. Mary now wants to sell the
time-share. She is unable to as under John’s Will he left any and all real
estate interests to his second wife. So now Mary must obtain cooperation and a
signature from wife number 2. If John died without a Will, then Mary must
obtain cooperation and pay to open a probate proceeding as well in order to
have the time-share administered and John’s ½ interest conveyed to Mary.
For purposes of probate, real estate is
governed by the state in which it is situated, not by the state in which the
owner resided. If you reside in Massachusetts and own a time-share in Florida,
the transfer of the Florida real estate to beneficiaries can only happen upon
order of a Florida Probate Court. Thus your Estate files a probate proceeding
here in Massachusetts and a second probate proceeding, called an ancillary probate,
in Florida. A second probate means additional filing fees, attorney’s fees and
accounting fees and a delay in beneficiaries receiving their inheritance.
Another common issue is when the
surviving co-owner retains title individually and then passes away. The
Personal Representative of the Estate needs to sell the secondary property.
Sounds simple enough, but the problem arises when the deceased owner was a
resident of a state other than the state in which the secondary property is
located. In Massachusetts, a Probate Court order from another state is not
accepted in Massachusetts. If the owner resided in Connecticut and the property
was located in Massachusetts, the Personal Representative would need to file an
ancillary probate here in Massachusetts in the county in which the property is
located to have the property properly administered. Many Estate Representatives
and heirs simply do not wish to undertake the expense of a second probate
especially as the cost to do so may be greater than any sales price the
secondary property would generate. In time-share situations, the Estate stops
paying the yearly maintenance fees and lets the Resort conduct a “friendly”
foreclosure, providing a death certificate and probate information to resort
counsel so the time-share resort can send the required foreclosure sale notices
to all heirs having an interest in the property.
So how to avoid these problems? Here are
a few things to consider.
First, check the laws of both the state
in which you reside and in which you own property. Will the secondary state
accept a Will probated in your residence state, called a “foreign will”. Some
states will accept a Probate Court order from your residence state.
Transfer title to family members. As I
represent several time-share resorts in Massachusetts, I often receive phone
calls from time-share owners who now own individually after death or divorce
and wish to add family members (usually adult children) as owners so that they
can either use the time-share or be able to transfer title upon the original
owner’s death. In such an instance, title of the parties would be held as joint
tenants in order to pass outside of probate.
Transfer on Death Deed or TOD. As of
2017, 27 states allow a property owner to record a TOD to allow real estate to
pass outside of probate, and several more are considering adoption. The
property owner records a TOD that complies with that particular state’s laws
into the beneficiary in the state where the property is located, but the TOD
specifically states that it doesn’t take effect until after the current owner’s
death. The current owner continues to control the property, pay real estate
taxes and can mortgage or sell it. The owner can revoke the TOD or record
another TOD to name a different beneficiary. If the property was still owned at
the time of death, a death certificate would need to be recorded and then the
beneficiary named in the TOD would take title without the need of an ancillary
probate. Unfortunately, Massachusetts is not a state that allows a TOD to
convey real estate after death.
Revocable Trusts – transferring title of
real estate to a trust prior to death achieves a transfer of title upon death
outside of probate court not only in your state of residence but also in the
state the secondary property is located. To be effective a deed must be
recorded transferring the secondary property into the trust, which will include
language as to whom will be the successor trustee. Upon your death, the named
successor can sell or transfer the property to the beneficiaries by recording a
deed into them. Leaving the property to a trust established in your Will
however, will still require your Executor to probate the Will and then record a
deed from the Estate to the named beneficiaries.
No matter which way you decide to
proceed, remember to always discuss transfer of title to secondary property
with your beneficiaries (make sure they actually want it!). Spend the time and
expense now to speak to an estate planning attorney who can best assess your
overall financial portfolio and family dynamics to decide which method is the
best for you. The goal is to ensure that your secondary real estate smoothly
passes to your heirs outside of any probate process.
Should you have any questions regarding
this article, please contact Laura Brandow at 781-817-4900 or via email at
lbrandow@lawmtm.com.
Originally posted October
25, 2018 on tlawmtm.com.
Should you have any
questions regarding this article, please contact Laura Brandow at 781-817-4900 or
via email at lbrandow@lawmtm.com.
