M. Anita Clayton, GRI - NAVIGATING A PROBATE HOME SALE

NAVIGATING A PROBATE HOME SALE

M. Anita Clayton, GRI on, GRI

Table Of Contents

Dealing With Inherited Homes: Best Practices For Families 1

Concepts To Know When Selling An Inherited Home

Distribution Among Family Members

Downsides To Inheriting

How Selling A House In An Estate Differs From Regular Home Sales

Determining The Value Of An Inherited Home 35

Four Ways To Sell Your Inherited House

Inherited Home Sales & Taxes

Prepping An Older Home For Sale

10. Small Improvements Can Gain You Thousands 69

11. Marketing An Inherited Home

12. Using Curb Appeal To Sell Your Inherited Home For More 79

13. The Importance Of Good Pictures

14. The Process Of Selling Inherited Homes

Introduction Hello. First of all please accept my condolences for your loss. Several times in my life I have been in your position where I was the one who had to settle an estate. I can be a challenging and emotional task. I wish I had a book of like this to read so to help me figure how to navigate the process. That is why I decided to become a Real Estate Probate Specialist so, that others would not have to struggle in their duty as an executor. If you’ve received this book, it’s probably because you’re thinking about selling your inherited home. And if you’re like most sellers, you may be dreading the entire process. But that’s why I’m here! My job is to make your job as a seller as easy and seamless as possible. Throughout my years of experience in the real estate industry, I’ve amassed insider knowledge to help home sellers get the most money out of their homes in the least amount of time. And now, you’ve got all of that information at your fingertips.

In this book, you’ll find:

• An overview of the sales process • Secret strategies to sell your home for more money • Common mistakes to avoid • Advice on how to appeal to today’s buyers • Tips for upgrading with the greatest return on investment • A negotiation guide to get more money Sure, you can try to employ these strategies yourself. But I suggest talking to a licensed professional — like myself — to employ them for you. Yes, selling your home can be stressful, but with this book (and my help!), we can make the process as quick and seamless as possible.

About Anita Anita was raised in Tuskegee, Alabama with two siblings. Her father was a professor of Food Science at the nearby college and her mother was a seamstress and secretary at the campus bookstore. The family had also had a working farm of animals and gardens. Everyone had chores to do and higher education was stressed in the family. Anita was taught at a young age that if you want something in life, you must work for it. So that’s what she did. As a child, she aspired of being an Architect. Never in a million years did she think she’d stumble into the real estate industry, but you can’t always predict where or when you’ll discover what you’re meant to do in life. After graduating with a Bachelor of Science in Architectural Sciences and a Master's degree in Architecture, Anita worked her way from being a survey crew member in the foothills of San Bernardino, California mountains with the National Forest Service, to working with the National Park Service in Denver as a design and a historical architect. During her time at the National Park Service, she worked on prominent buildings like Dr. Martin Luther King's birth home in Atlanta, GA, Booker T. Washington’s home in Tuskegee, AL, and designed several buildings across the nation in our national parks. Never wavering in her resolve to become the best version of herself with each career move. When Anita started in real estate years over 25 years ago, the business was quite different. A lot has changed with contracts, how business is conducted and, how the public receives information. However, there is one thing she noticed had not changed. People still need a place to live! People will always need shelter; this is a part of the reason why Anita ventured into real estate sales.

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So, you still might be wondering what made Anita go into the real estate business. While watching a national TV news show she saw an interview being conducted with a woman, named Suzanne Brangham. Suzanne had just written a book called, "Housewise" which laid out the framework of what we now know as "flipping". This book fascinated her! With her keen eye for details, Anita would often see properties that were not designed the way people actually lived. As a result, after being laid off due to the energy crisis in the late '80s, she ended up redesigning folks' homes and spaces in Cincinnati and Chicago. This was way before the TV channel HGTV came into existence. The one thing that eluded her knowledge base that was mentioned in the book, was the specifics of how the real estate deals were done. So, Anita wanting to be the best, decided to immerse herself to learn about the real estate business from the inside, thus launching her career as a Realtor. While working in real estate Anita has not only been successful in selling their properties but assisting owners in how to present their homes in the best light to the public. She has redesigned thousands of kitchens, baths, and other spaces to the delight of both her buyers and sellers. As her career advanced, Anita found his stride working with single-family home buyers and sellers. Her design eye sees not only the good qualities but the not so good. This knowledge base is an asset to her clients demonstrating how to highlight the assets of a property and can suggest economical solutions for the not-so-good. Her experience in writing and reading architectural contracts and specifications also came in handy when marketing properties and negotiating contracts. She works hard to make sure her clients get the very best counsel in every kind of real estate market.

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Anita is especially qualified to work with people who have inherited properties. Even though she is the youngest of her siblings, she was the one that was called upon time after time to help settle several close family members' estates. Even with a grieving heart, Anita was always able to lean on her faith and make sound levelheaded decisions on behalf of everyone involved. She learned early on when her father died, the job of an executor is not an easy one. However, through faith, compassion, and perseverance the job can be completed. Therefore, she decided to focus part of her business on helping others navigate through this difficult process. Throughout her career, Anita has earned numerous designations and awards, including: • ABR (Accredited Buyer Representative) • CPRES (Certified Probate Real Estate Specialist) • CRS (Certified Residential Specialist) • ePro (National Association of REALTOR Technology)

• SRS (Seller Representative Specialist) • GRI (Graduate Real Estate Institute) • PPS (Professional Property Stager) • Completed Schluter Workshops I & II 2017 * OAR Presidents, Sales Club * Sales Masters Club * Outgoing Referral Leader * Sales & Listing Leader

Her affiliations include:

* Member of The National Association, Ohio Association, and Cincinnati Area Board of Realtors * Member of The Boyer Guild (Women in Architecture) * Golden Life Member of Delta Sigma Theta Sorority, Inc.

Anita lives in Cincinnati, with her husband. Their son is now a

Chief Warrant officer IV in the US Army. In her free time, she enjoys singing in her church choir, designing kitchens and baths, reading at least three books at a time, and giving her clients dogs hypnotizing doggie massages! Anita aims to provide the highest level of service to his clients and takes deep pride in helping them achieve their real estate goals

Testimonials Anita Helpful in explaining procedures of the Buyer/Sellers. H. McSayles

"Anita is a really nice person who is not full of self-importance but knows her business and how to handle things. Her conduct was professional but still genuine and sincere. I'm glad she was our agent. Werner Jud I recommend M. Anita Clayton as a good real estate agent to be chosen because I found her to be very dedicated, efficient, knowledgeable, and professional in doing her job. In her being my real estate agent in helping me to sell my parents' home, she advised me very well on every step that I needed to make in the process (i.e. preparing my parent's home to be suitable for selling, determining a good listing price for my parents' home, negotiating on purchasing bids placed my parents' home, etc.) and kept me up-to-date on all offers and showings that were made towards my parents' home through her and other agents as well. Also, she had a very pleasant personality that made her very easy to work with at all times. With all of these positive attributes, I would use M. Anita Clayton again as my real estate agent and recommend her highly to anyone as agent who they can hire for their selling and/ or purchasing real estate property needs. Jerome Jackson Anita is incredible! I actually found Anita online via a listing she had. I was impressed by her honesty and genuine concern for what type of home I was looking for right off the bat. She was compassionate and immediately I knew I had to meet her, as I truly felt she wanted to help me find a home in Cincinnati. She is attentive, knowledgeable, listens and advises as appropriate, dependable, and extremely professional. She goes to bat for her

clients and truly has them in mind at all times. Not only were we pleased with our new home purchase, she went above and beyond to match us with a MLO that could secure financing for our particular situation. She always has the client's best interest in mind and will never steer you wrong. She is dedicated and genuinely works to get you the best bang for your buck, providing worthy insight, attention to detail, and provides an invaluable service. I don't know where we would be without Anita. She is wonderful and someone we will always call on when selling, buying, or renting a home and we will continue to refer others to her. Mt. Washington, Ohio I recently worked with Anita Clayton to purchase my second home. Anita was also the realtor for the purchase of my first home. I did not hesitate to choose to work with her the second time. She offers professional, reliable, and courteous service. Cincinnati, Ohio Anita was very responsive to our needs and went out of her way to be helpful and accommodating. Not only did she work her schedule around ours, but she was very responsive to questions by email and by telephone. When she needed to get with others to answer our questions, it was done in a very timely manner, and made our "short sale" purchase a lot more tolerable. We highly Ms. Clayton recently assisted me with a short sale involving my father's home. My father passed away in June and she was aware that I was very distraught from having to sell a childhood home full of memories. Ms. Clayton was very attentive and returned any calls in a timely manner. I appreciated all of the help that she provided during this time. I will utilize her services again and have referred her in the past to family members and friends. Karen Johnson-Jordan recommend her! Cincinnati, Ohio

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Ms Clayton was very helpful during the entire process of purchasing our new home. We had some challenges at the closing. Ms Clayton was our advocate and facilitated a successful resolution of all issues. She continued to be helpful with some minor issues that arose after the close. Cincinnati, Ohio We communicated by phone, email, and text. She was extremely diligent and very proactive. She was thorough, but not pushy in the least. She also was quite ethical in regard to other agents. I was the liaison between her and some very young friends of ours who were considering moving to the Blue Ash area. They, or rather the wife, was very interested. They couldn't decide whether to rent or buy. Hubby would not give final OK, so nothing was done. Anita put a lot of time in as did I, and it was frustrating for all. She was the ultimate professional. There was a slight language difficulty with the young couple, so that is why I worked with Anita. I would highly recommend her to anyone looking to purchase a property. She will work hard for you, be very honest and get you the best deal. So please consider her if you are looking for a house. You can do no better! Judy Walz I contacted Anita a few years ago when my husband and I were considering selling, and we were impressed from the outset with her professionality, expertise, patience and orderly procedural methods. We decided not to sell then, but she was just as enthusiastic about representing our home when we approached her again in the fall of 2010. After our home was placed on the market in November, we began to have showings almost immediately, and they continued throughout the process until an acceptable offer was made in February. Early on, she made us aware of details that would improve the quality of our showings. She kept us abreast of the status of sales in our area and explained the current real estate climate. She was very encouraging

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throughout the process, gave us frequent updates, and shared in our joy when the date for a closing was announced. I would highly recommend Anita Clayton for one who is seeking to sell or purchase a home. Margaret Horton Anita was great! My housing tour was set up about a week and a half before I went out to Cincinnati to look for a place to live, but Anita was still able to send me a variety of different options and get appointments for the places I wanted to see. She did an excellent job listening to what I was looking for and geared the search toward places that fit within those parameters. Anita is a very friendly, outgoing person, which made the day go by quickly and the house/apartment hunting quite enjoyable. This is my first time renting a home and my first time living in the Midwest, so she was also really helpful when it came to asking questions about homes in the area. I ended up renting one of the properties Anita took me to see and couldn't be happier! I would definitely work with her again and recommend her to people who are looking for an agent in the area. Kathryn Benbow "I have known Anita Clayton for some time now & she is very easy to work with. I would consider her a close friend & confidant." Connie Graham Anita memorized exactly what my needs were in a home...she always honored my requests when communicating with other agents...she is very charming, friendly, and down to earth! Thelma Dorn Anita sold two properties for me. She always extended herself to accommodate my needs. Her professionalism, honesty, and willingness to work for my best interest have been invaluable. She is surely an asset.

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Laura Murray

Anita worked diligently and tirelessly to help me find and secure a home that fit my criteria. Once the house was that fit through every step toward the closing. When complications arose on the morning of the closing. Anita was calm but determined. Her energy and fortitude provided a gleam of hope in what seemed like my darkest hour. The deal fell through and I lost the home, but Anita continued to encourage...Anita spent countless hours working with me with no remuneration for her efforts. She never complained but instead her parting words to me were "Don’t worry, we'll find you a house". And she did a few short months later. Dr. Robyn Chatman MD "Anita is amazing! She is so professional, timely and an overall expert in the Real Estate arena! Every step was a true pleasure. Relocating out of state is not easy, but Anita made the home selling process one less thing to be worried about. We love Anita!" Rhaslyn & David McGhee Anita was very professional, hardworking, an accountable. I trusted her with handling everything about my home and she made sure to meet my needs and even exceed them! When there were concerns that came up with my home and was very honest and understanding in those matters. If I had a question about anything, no matter the time of day, she was available for me. I greatly appreciate her genuine help with the selling of my home especially during this pandemic! Anyone seeking a home or looking to sell should contact Anita because she will make sure the deal gets DONE! Michele Miller

To Whom It May Concern,

I would like to share my experiences with Mrs. Anita Clayton. I was introduced to Mrs. Clayton May of 2020 through a mutual friend via phone. I was looking for someone who could assist with an estate sale and eventually a realtor for my friend to sell my late grandmother's home. I contacted her and we began texting, she dropped off some information that my family and I needed concerning my late grandmother's assets. We were also grateful for her book which is a wonderful read. When my grandma passed, we were able to meet in person. Mrs. Clayton was so friendly, kind, patient, understanding, and went above and beyond. I could not have asked for a better person to assist us at this difficult time. Mrs. Clayton was more than a realtor and when we needed different things done, she knew someone. She has so many contacts and is truly a blessing in disguise. We were able to get all the items sold in the home, get the house remodeled and the house was sold within a short period of time. We were so pleased with our experience that she helped my mother purchase a condo. Whenever we saw a condo available Mrs. Clayton was able to set up a time the same day for us to see them. We received home listing updates on a regular basis and Mrs. Clayton was always communicating with us. Mrs. Clayton found the perfect home for my mom and she loved it. My mother was able to make an offer that night and the offer was accepted within 24 hours. Within five weeks my mom was in her home and loving it. I would recommend Mrs. Clayton to friends, family, etc. She is one of the best realtors out there. She goes above and beyond what is required.

Thanks, M. Martin

I worked with Anita on purchasing my first house. She already knew what I liked and it was a no-brainer to go back to someone

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who listened, and did what you asked. - Frances Grimes

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CHAPTER 1 Dealing with Inherited Homes: Best ed Homes: Best Practices for Families Dealing with an inherited home is a complex subject, and there are several complicated issues to resolve. A web search for “selling inherited property” returns more than 10 million results. A glance down the first page or two shows some of the issues: • Do You Pay Capital Gains Taxes on Property You Inherit? • What Taxes Are on an Inherited House? • If You Inherit a Home Do You Qualify for the $250,000 Home Sale Tax Exclusion? • What to Do When You Inherit Your Parent’s House, Home Inheritance Issues, and on and on. Additionally, it is not uncommon for a person selling an inherited home to have a sentimental attachment to the property, with the sale being the result of a recent death in the immediate family. This adds an emotionally overwhelming component to the transaction. Because of continuing property ownership obligations such as property taxes, insurance, utility bills, household and grounds maintenance—in addition to any issues with the settlement of the estate—a rapid sale is often necessary. Getting a loved one’s house ready for the market can be anxiety-provoking, emotional, and stressful. It likely includes clearing out once-treasured belongings and depersonalizing the rooms.

Then there is the financial cost of making necessary updates to attract buyers. Sometimes heirs must deal with liens or hidden problems in the house structure or systems (i.e., electric, plumbing, and gutters), and there may be disagreements among beneficiaries about the sale price, or whether to sell at all. Family members drag their feet, distracted by images of growing up in the home, preventing them from taking appropriate action. They can’t let go. Everyone takes the time they need to deal with the passing of a loved one. Sellers in this situation need to take the appropriate steps to learn the market, educate themselves, and have a reliable real estate agent and tax attorney or Certified Public Accountant (CPA), an empathetic party who is there to help. This little book is meant to offer some proven tips that can help owners of inherited property approach the issue in a structured manner, with fewer problems and more satisfactory results for all stakeholders concerned. Here, we will discuss the different aspects of splitting the property with family members and the best practices involved.

BENEFITS OF SELLING

No matter if you are a single heir or one of multiple heirs to the property, selling it as quickly as possible will save money, time, stress, and the tiring effort involved in the settlement process. There are several benefits to selling the inherited property. For example, in some cases, along with inheriting property, the heirs end up inheriting unexpected commitments and difficulties with legal and financial implications. Every situation when someone inherits and then sells a home is typically different from each other.

For example, if it is discovered there are environmental concerns

or the mortgage is “underwater” (meaning the mortgage balance is more than the home is worth), heirs may even choose not to accept the home at all, allowing it to go into foreclosure. Those who do not want inherited property should consult a lawyer promptly, as disclaimer paperwork will likely have to be filed. Traditional home sales methods are a perfectly good option if you find that there are no outstanding mortgages and the property is in good shape and does not require major repairs or cleaning to sell. If you can easily afford any necessary repairs and cleaning while handling the selling process, then you can safely choose to sell an inherited property just as you would any other house. This is not to say that selling the property will always be complication-free, but even when issues arise, it may still be worth it to persist with the sale. When there are siblings or family members who share the property with you as legal heirs, there might be disagreement about how the settlement should proceed. Therefore, selling the property could save you the aggravation of dividing a singular property between many hands. Once the property is converted to money, the money can be more easily distributed among the heirs. One concern that you do need to address is the amount of time required to sell the property, since it is uncertain when it may sell. A short sale of the home can come to your aid if there are mortgage payments due which you are unwilling or unable to pay. If one or more heirs inheriting the property have an urgent need for cash, then a quick home sale is also a good option. Sometimes, you might receive some added tax benefits from selling the home. At times, you might also feel that you just want to get rid of the burdens an inherited home imposes by selling it quickly so you can get on with your life as smoothly as possible.

If the property is in a different city or state, assuming the

responsibility of maintaining a vacant house can be a burden that you may not be prepared to endure. If the house goes to probate, even if there are no residents, the property must be maintained. The property taxes, insurance premiums, utilities, homeowners association fees, and other ongoing costs must be paid by someone. Depending on how long the probate period lasts, families may need to pay for many months of maintenance, along with the legal fees and other expenses connected to owning and selling the property. At the end of the probate, you will also have to go through the effort and expenditure of repairing and selling the home. Under such conditions, if your benefits are lower than your commitments, it may be wisest to simply sell the home to investors.

DEALING WITH F G WITH FAMILY MEMBERS

Disputes among siblings or legal heirs over the settlement of inherited property are common. Often, disputes over a property are dominated by past issues of sibling rivalry and are a fight for dominance. In the absence of parental guidance, adult siblings are left to face the scenario of ambiguity or disagreements over their rightful role. It is essential that you work to ensure that disputes and disagreements do not lead to litigation. Litigation will only worsen the situation by causing issues with family members, and creating uncertainty and wasting time waiting for legal issues to be settled, as well as the usual expense and aggravation associated with legal hearings. The tremendous cost involved in litigation is certainly a wasteful expenditure. Litigation is not the peacemaker’s choice—prevent it whenever you possibly can. This situation can be avoided. By keeping the emotional heat down and a compromising frame of mind in the forefront, there

is generally a solution that can be made for a peaceful settlement. Where creative solutions to these problems can be facilitated, there is mutual gain for all concerned. A good solution is for one of the heirs to buy the property from the others. Ordinarily, if you inherit the home with your siblings without any remaining mortgage, the rule is that ownership is to be evenly split unless otherwise stated in the will. If one of the siblings is interested in keeping it while the others want to sell it, the interested sibling can buy out the others using conventional financing. The cost involved in this process can be minimal and includes the appraiser’s fees and the closing costs. If this will work, you pay your siblings in cash for their shares and get the title of the property transferred into your sole name through a deed. Alternatively, a private agreement can prove useful under some circumstances. For instance, if you or your sibling cannot qualify for a mortgage, the one who does not wish to keep the house can finance the transaction. This will mean you will not need a home loan or incur out of pocket expenses. For a private agreement, you make a promissory note to your sibling for his or her share of the value as assessed by the appraisal. The amount due to him or her can be paid in monthly installments along with interest. With this arrangement, you can buy out the property over time. If necessary, you may also make a deed of trust that grants the power to foreclose if you default on payments. Renting the property could be the solution if none of the siblings are interested in keeping the property personally, but as a group the heirs see benefit in the house as rental or investment property. If you have a friendly relationship and can get along for a long period as co-owners of the property, you can rent out the

property and take your share out of the proceeds monthly. If one of the siblings manages the collection of rental payments and arranges maintenance for the property, the effort can be rewarded by the others with an increased share. Whatever the terms are, though, it is advisable to record them in a written agreement to forestall future disagreements and conflict. Sometimes, though, the best arrangement under these circumstances is still to sell the property, subtract the expenses and costs involved, and the commissions paid, and then divide the resulting amount among you. Selling the property as soon as you inherit also helps save on the capital gains tax. Capital gains tax for sale of the inherited property is calculated on the property value after the death of the decedent. Since the difference may not be much if the time between death and sale is short, you may be left with nothing to pay in capital gains tax. A lawsuit for partition should be the last resort for you to settle the inherited property if you cannot come to an amicable agreement with your sibling over the settlement. If it comes down to it, you can file a lawsuit asking the judge to order the sale of the home and terminate your co-ownership. This is a complicated process and the judge usually appoints a mediator first, to get the property ready for sale. If you are at odds with each other, you and your siblings might not be able to do this. Therefore, you will need to have an agent sell the home and mediate between you.

HOLDOVERS LIVING IN ESTATE

When inheriting a property, you might have to address the issue of holdovers living in the estate. If one of your siblings or yourself is living in the property, you need to come to an agreement with all the heirs regarding whether the concerned individual will continue to live there or will need to vacate.

In the case of continuing to live there, the terms must be clearly

drafted. If the right to remain there is mentioned in the will, then it cannot be challenged. If it has to be challenged for some reason, the necessary legal proceedings must be adhered to. If the decision is made to sell the property, then the property must be vacated in a definite timeline facilitating the sale. If the occupant wishes to continue residing in the property despite the sale, then it must be dealt with accordingly. If you are inheriting a property with tenants living in it, you must fulfill some responsibilities from the position of a landlord. If the property is sold, the legal rights of the tenants must be given due consideration. For complicated situations like this, consult an attorney.

SPLITTING UP ITEMS INS G UP ITEMS INSIDE

Decisions pertaining to the settlement of the property or the division of its contents among the legal heirs must follow the guidance given in the will. Where there is no will enacted by the owner of the property, then the state’s laws regarding intestate succession will come into play. If either the will or the law requires the estate to be divided equally, the heirs must act accordingly. Sentimental objects are invaluable to those they are valuable to and settling them should happen out of the legal conventions in agreement between the siblings. Since the value of sentimental objects is often subjective and cannot be decided by an appraiser, the real challenge comes when more than one sibling wants the possession. Negotiation and compromise are called for. A real estate agent can be appointed to decide the value of the property. The challenge here may revolve around how to divide the real estate among the heirs in a way that is acceptable to all parties. The two main approaches that the siblings could take include either selling the property to divide the proceeds or

keeping the property and sharing its use. If the estate also features assets that cannot be distributed on pro-rata basis, an equal division of value is the solution. If a sibling wants to hold the property, then the others can get cash equal to their share of the property or other assets as it may be decided. Ultimately, everyone involved in the deal walks away with his or her share of the property in the right proportion. Dealing with the leftover items in the estate could be a laborious task and a bothersome job while attempting to settle a property. In this situation, you might need to categorize the items as those to keep, those to sell, those to donate and those to throw away. Remember that during an estate sale, people may be ready to buy even the oddest things. Therefore, make an effort to see that as many things as possible are sold or auctioned away to be converted into cash and distributed among the heirs.

CHAPTER 2 Concepts to Know When Selling An Inherited Home ed Home

There are a few legal concepts and other issues you should make sure you know about when selling an inherited home so that you can make informed decisions and avoid complications.

WILLS

Most houses that are inherited are passed at the owner’s death by the terms of that person’s “will.” A will is a person’s last chance to do whatever they wish with their property. It is a legal document with the authority to dictate the disposition of a person’s property at death and is very difficult to contest, no matter how apparently unreasonable its terms may be. Yes, someone of “testamentary capacity” (sound mind) really can leave a massive fortune to charity or a favored pet, bequeathing nothing to children or other relatives. Where the maker of the will is the sole owner of a home, that person enjoys complete rights to it (subject to liens or mortgages) and can draft the will in favor of legal heirs or anyone else he or she wants to inherit the property. An individual appointed to administrate the estate of a deceased person is the “executor.” The executor’s main duty is to carry out the instructions and wishes of the deceased. The executor is appointed either by the maker of the will or, in cases where there was no prior appointment, by a court. The executor will ensure that the transfer of titles happens as stated in the will.

The existence of a will concerning the estate makes the process of inheritance indisputable and smooth. If there is no will in place, then the established state laws that govern “intestate succession” (death without a will) will dictate the handling of property and, if needed, a court will intervene to settle issues. The word “probate” carries negative connotations with many people such that they work and plan to avoid it. However, probate does not have to be a difficult or drawn-out proceeding. Currently some 35 states allow simplified probate proceedings, called “common” or “informal” probate. The difference between common and “solemn form” probate begins when the executor submits the will to the court. For example, when an executor chooses to pursue common form probate in New Jersey, that executor can file the will at the court clerk’s office and fill out an application for appointment to the executor position. Will witnesses do not have to be present. Where the executor chooses to probate the will by solemn form, a legal complaint must be filed with the probate court, asking the court to open probate proceedings. Solemn form probate involves sending notice of the proceedings and a copy of the will to all the decedent’s heirs, whether mentioned in the will or not, as long as they would have inherited if he had died “intestate” (without a will). Common form probate does not require this step, although heirs can request a copy of the will from the executor. The solemn form probate notice includes a date for a court hearing in some states. All interested parties have the right to attend this hearing, where a judge will admit the will for probate if he or she determines it is valid and meets the legal requirements. With most estates, there is no reason for the executor to go through a solemn form probate if common form probate is an option. An executor generally chooses solemn form probate only

if she believes an heir or beneficiary might contest the will. Solemn form probate restricts heirs and beneficiaries from filing a will contest after a court-ordered date. Often, judges hear potential will challenges during the initial court date, when they decide if a will is valid. The will is either declared invalid, or is declared valid and can proceed through the rest of probate uncontested. In common form probate, heirs generally have years to decide if they want to contest the will, which can leave the estate in legal limbo. Even after the estate settles and closes, there remains the possibility that an heir might file a contest to reopen it again. For example, Georgia allows heirs four years in which to contest a will probated by common form. Beneficiary distributions made through common form probate are not final until the challenge deadline passes (up to four years). This means a beneficiary can receive an inheritance, only to have no choice but to return it to the estate years later if another heir successfully challenges the will. With cash inheritances, the money could easily be long gone by that point. Real estate and tangible assets might fall into disrepair. Executors generally will not risk this and will ask the beneficiary to sign a binding agreement to return the inheritance to the estate if necessary, or request solemn form probate. If the executor mentioned in the will is unable or unwilling to serve, then an appendix will be created to appoint the new executor. However, before the appointment of the administrator, there should be a declination letter from the executor (if he or she is still living and not incapacitated). In this event, the executor can be selected by a majority of the beneficiaries. For the sake of minors or incapacitated heirs, the court appoints a guardian ad litem, which is just a fancy way of saying someone to look out for the interests of the minor

heirs. Probate is not required when there is no property to be divided under the terms of the will and testamentary letters are not necessary to take control of assets in that case. It is essential to file the will of the deceased with the probate court. Unlike bank accounts, real estate properties will not automatically pass on to a surviving co-owner. To transfer the title of an automobile, probate is not needed, but real estate transfers require it. In the absence of a will that names an executor, state law will list people who can legally discharge the responsibility. If there is a necessity for a probate court proceeding, then the court will choose the administrator based on a priority list. The “intestate succession” laws vary between states as to what happens to a deceased person’s property who dies without enacting a valid will. If the deceased person was married, the surviving spouse will get the largest share of the estate. In cases where there were no children, the surviving spouse inherits the entirety of the property. The laws of every state dictate how children and other heirs inherit the property differently, though, and will need to be studied to make sure you fully understand the state laws that will be affecting you and your property.

TAXES

While the authors of a will pass on their property with the best of intentions, inheritors often must spend a great deal of money, effort, and time if they want to keep that property. The tax burdens accompanying inherited property are frequently a matter of concern and confusion. When inheriting a home, you need to know what kinds of taxes are attached to the home and what your obligations are. Note that tax laws significantly differ from state to state, so you should make sure to understand the inheritance tax laws of your state.

For simplicity, the broad categories of taxes applicable to inheritance are roughly summarized here: Estate Tax: The estate tax in the United States is a tax on the transfer of the estate of a deceased person. The tax applies to property that is transferred via a will or according to state laws of intestacy. Other transfers that are subject to the tax can include those made through an intestate estate or trust, or the payment of certain life insurance benefits or financial account sums to beneficiaries. According to the IRS, the estate tax is one part of the Unified Gift and Estate Tax system in the United States. The other part of the system, the gift tax, applies to transfers of property during a person’s life. In addition to the federal estate tax, many states have enacted similar taxes of their own. These taxes may be termed an “inheritance tax.” If an asset is left to a spouse or a federally recognized charity, the tax usually does not apply. In addition, a maximum amount, varying year by year, can be given by an individual, before and/or upon their death, without incurring federal gift or estate taxes: $5.6 million for individuals and $11.2 million for married couples. The annual gift exclusion amount is $15,000 for 2018—up from $14,000 where it’s been since 2013. • Inheritance Tax: Heirs pay federal inheritance tax on the net worth of their inheritance. The net worth is the gross value less certain deductions, a mortgage that must be paid off on an inherited house, for instance, or a marital deduction for property inherited by a spouse. If the result is more than the IRS exempt amount for a given year, the heir must pay an inheritance tax at the federal income- tax rate for the non-exempt amount. • Property Tax: Heirs may have to pay property taxes as

soon as they inherit real estate and will pay them for as long as they own the house. Many states cap how much the assessed property value can rise from year to year, but when someone buys or inherits real estate, it will be reassessed at current market value. Even if subsequent assessments are capped, the initial reassessment can result in heirs paying thousands of dollars more in taxes than the previous owner. Some states offer an exemption; California state law, for instance, says that if the heir is the spouse or child of the owner, there is no reassessment. • Capital Gains Tax: Capital Gains taxes are applicable when you decide to sell your inherited home for the fair market value or more. This means that you will have to pay taxes on your profits from the sale of the property. This is assessed based on how much you sell the property for and what the value of the property was when you inherited it. Generally, you will not be required to pay any capital gains tax if you sell the property immediately after inheriting it, since the property value will not have had time to increase. • Reporting the Inheritance: It is necessary for the executor of the estate to report the inherited property by filing an estate tax return. The “cost basis” (which we will talk about more later in the book) of an inherited home is decided based on when you inherited the property. In most cases, the basis for an inherited home is the market value of the property on the date when the deceased person died. • Reporting the Sale: When selling an inherited home, you are expected to report the sale on your income tax. Subtract the amount you received from the sale from the

base amount to calculate whether you gained or lost from the deal and report it on the IRS Schedule D form. You will also need to copy the gain or loss figure over to your 1040 tax return form.

NAME ON PROPERTY

When you inherit personal property, the process is simple and the procedure is straight-forward. The will or the court’s decision may be enough to directly transfer the property to you. In the case of inheriting real estate, things can be a bit more complicated. This is because the titling document showing ownership of the property must be modified to state that you are the new owner. Generally, in this case, the executor of the will or the administrator nominated by the probate court will issue a new deed that names you as the owner of the property. The documents you will need in this regard include the death certificate and probated will of the previous owner, if available. You must consult the original deed of the property to confirm that the property was not owned jointly at the time of the death of the deceased. If the property is/was owned jointly, then the surviving owner inherits the property in full. Therefore, you will have to confirm whether you can inherit it by reading the death certificate and determining the order of inheritance. If the person that you inherit the property from has died first and left behind a co-owner, then the property would revert back to the other owner, leaving you to establish your claim as the legal heir to the property. If the will lists you as the inheritor, then you will require an executor’s deed.

If the inheritance is facilitated by the court in the absence of a will, then you must present an administrator’s deed. Both kinds of deeds must describe the property legally and mention your name as the new owner. Along with the administrator who issued the deed, you need to sign the new deed in the presence of a notary public. If needed, you must also be able to produce a copy of the probated will as part of making the deed.

LIFE ESTATES

According to its legal definition, “life estate” is not ownership, but the right to use or occupy real property for one’s life. Often this is given to a person (such as a family member) by deed or as a gift under a will with the idea that a younger person will then take the property upon the death of the one who receives the life estate. Title may also return to the person giving or deeding the property or to his/her surviving children or descendants upon the death of the life tenant—this is called “reversion.” Examples of creation of a life estate include, “I grant to Sally Smith the right to live in said real property until her death,” or, “I give my daughter, Sadie Smith, said real property, subject to a life estate to Sally Smith.” This means a woman’s mother, Sally, gets to live in the house until she dies, and then the woman’s daughter, Sadie, will own the property. Creating a life estate is done by redrafting the property’s deed to include mention of the life estate with the remainder passing to somebody else. Like any other property transfers, both parties must sign this deed, have it notarized, and then submit it to the recording office of the state. Such a document should be prepared by a competent real estate attorney. Living trusts have come to replace the role played by life estates, which are not as commonly used today. However, there are some advantages to this form of inheritance. For example, this method

is useful to the heirs as a means to increase the property’s value following the death of the decedent. A life estate can also help avoid probate, which is a legally required process to transfer the property from the deceased to his descendants, but which can be sidestepped by using a life estate instead, since it is not technically an inheritance. A life estate can also be called an “instant transfer.” There are, of course, tax implications when using a life estate. Section 2036 of the Federal Estate Tax Code treats life estates as a gift. The gift tax must only be paid if the value exceeds a specified amount. If the property is sold after the end of a life estate, there is no net gain that needs to be reported on taxes because of the value step-up. In case your total property value is more than $1 million dollars or if the property is in a different country or state, though, you should absolutely take a cautious approach to drafting a life estate and retain the services of an attorney.

CHAPTER 3 Distribution Among Family Members

While drafting a will, its maker usually makes provisions for the major parts of his or her estate—cash, stocks, expensive jewelry, and heirlooms. However, it is common that people do not make provision for most of the more mundane personal property items in their will—furniture, automobiles, household effects, and the large number of other items acquired and stored over a lifetime. The usual provision is that the remainder of the estate be divided equally or equitably among the heirs. Dividing the personal property of a deceased family member is emotionally difficult and engenders hard feelings and disputes among heirs. To assist with this, an equitable process is outlined below:

SORT OUT ITEMS F T ITEMS FAMILY MEMBERS INTEND TO KEEP

This first step requires the time, energy, and fortitude to go through every item in the house that you or your family members intend to keep. So closely following a loss, it can be painful endure inventorying and disposing of the possessions they have left behind. Before moving on to selling or auctioning the items, it is crucial to establish a boundary or limit to who among the family members possesses the right to keep sentimental items or properties, especially among siblings. If the will or law requires the property to be divided equally, then you must follow it.

For better organization, you are encouraged to separate the items you wish to keep in a separate container or location to avoid confusion with other items you intend to sell, donate, or throw away. Mutual agreement between siblings or other family members can decide who will keep which sentimental objects without further dispute. A mathematical algorithm was developed to fairly distribute an inheritance among the siblings within a family. The algorithm developed is to divide the inheritance between them equally. For example, a deceased parent left an antique firearms collection to be divided equally between his four children. There was an uneven number of items of varying values. Each sibling wanted some of the same items. The solution was to have the collection assessed, item by item, by a professional dealer. This established a total worth for the collection, such that each sibling knew the dollar worth of his or her part. The collection was laid out in a room, each piece tagged by value. A coin flip decided which sibling would choose an item first, second, and so on. The siblings went around the room choosing until their value was reached. In the end, the siblings did not have the same number of items, but had each received an equal share of the collection’s value. In the event of serious disputes over the equal distribution of items between heirs, the family can resort to working with a mediator to resolve a fair distribution of items or properties. This is an equitable system for when the family does not wish to liquidate the assets or rejects joint ownership between heirs. Each member submits his or her own prioritized list of items to the mediator. The mediator then prepares a list for each member of the family of the items allocated for each of them. Each

member will then show their list of preferred items to the other members for negotiation and adjustment. If you come across any papers, be sure to thoroughly review each before proceeding to throw them out. Important key financial documents such as wills, trusts, addenda, real estate deeds, and titles should be kept. Beyond that, it is up to the heirs to decide which sentimental photos or other memorabilia they want to preserve.

SELL VALUABLE ITEMS O LE ITEMS OR PROPERTY AND DISTRIBUTE THE NE TE THE NET PROFIT EQUALLY

In a scenario where you and your siblings have inherited real estate from your deceased parents, it is important to seek mutual terms as to whether the property should be sold and the profit divided immediately, or if you wish to keep the property as rental or investment income, or simply share the use of the house. In some circumstances, one sibling may want to keep the home while others have no interest in it or want it sold for the financial gain. An equal division of value can still be obtained if there are other assets in the estate. Through this agreement, the one who wants the house gets to keep it while the others get cash or other assets, but ultimately everyone receives an equal value of assets. Another option would be that the sibling who wants the house would have to buy out the other siblings’ interests in it. In all of this, it is wise to seek professional advice from real estate investors, agents, and attorneys. They can give personal perspectives from experience on how to sell your house at the highest possible value in the market, and can help you make sales decisions. Nowadays, it is a more convenient and customary practice to sell any unwanted items online for extra cash rather than simply

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