PROBATE AND REAL PROPERTY
Probate is the process of handling your assets after you pass away. This can be affected by whether you have testamentary documents (i.e. a will or trust). Otherwise, not to worry – your legislature has determined how you would have wanted your property to pass for you! This is called INTESTATE succession (or intestacy), as opposed to TESTATE succession (or testate) if you have a will or trust.
How this affects your real and personal property should be obvious: property passes to living persons (or entities). If you are looking to buy or sell a home whose owner is now passed away, there are a number of things a probate attorney can assist with you.
OWNERSHIP
Most importantly: ownership and authority. Ownership may pass via title. The two forms of vestment (how title “vests,” or is owned) are: Tenants in Common, and Joint Tenants. There is a special form of joint tenancy exclusively for married couples called Tenancy by the Entirety.
For instance, if a deed reads “John Smith and Jane Smith, his wife”; Jane immediately owns the entirety of the property after John dies if they are both still legally married. This is a Joint Tenancy by the Entirety. Should John and Jane get divorced (or, in some instances, it can be proved in a lawsuit that there are facts sufficient to justify a divorce has been equitably found), they no longer are joint tenants, but tenants in common. If the language was, instead of marital status, “Joint tenants”, “Joint Tenants with the rights of survivorship”, or simply the acronym “JTROS” or “JTWROS”, then their marital status is irrelevant, and the two parties on the deed remain joint tenants until there is a change in that deed.
The difference between joint tenants and tenants in common can be summarized as follows: imagine you have $1.00 in your bank account, and you and your friend, also on the account, go to the bank. If you take out 100 pennies and split the pennies evenly amongst yourselves (or even sometimes unevenly as well), that would be a tenancy in common. You can do whatever you want with your share of the pennies as you like without asking your friend’s permission. However, if you take out the dollar as a bill, then you would have to either go to the store to spend it together or agree on how it ought to be spent. This is a joint tenancy. You would be required to have your friend sign on the deed to authorize the sale of the house.
How this affects probate is simple: married couples primarily purchase property as joint tenants by the entirety, so it is imperative to review the deed to determine who owns the property. This vesting overrules any testamentary documents, so if John wrote that his share of the home (or the entire home) passes to his brother, Jim, in his will, Jim unfortunately has no right or interest in the home if the deed in any way created a joint tenancy. Anything that determines ownership outside of a will controls. That is because these determinations are considered contracts, and remove that property from the probate estate. For instance, going back to the bank, if you elect a “Payable on Death” or “Transfer on Death” account, those are considered Totten Trusts, and automatically pass or transfer to the specified beneficiary upon your death. “Totten Trusts” are a term of art (legalese for “legal jargon”) that were considered “poor man’s trusts” before attorneys became more affordable and readily accessible.
AUTHORITY
The next determination to make is who has the authority to manage that property. If you die intestate (with no will), you will need an Administrator appointed; if you have a will, the named Executor must be appointed by the Surrogate’s Court in the county where you lived. If there is a will, and the executor is cooperative and willing to proceed, the process could take all of a few weeks to have them appointed. In the case of an intestate, it could potentially take months. This is because family members of equal consanguinity are all eligible to be appointed, and certain documents must be provided to the Surrogate. Otherwise, an applicant Administrator will have to file an Order to Show Cause (and a verified complaint) in order to have the Chancery Judge in the Superior Court appoint someone. This could obviously take several months depending upon whether the parties are at odds.
However, once an Administrator or Executor is appointed, they are the responsible party for ensuring the entirety of the estate is brough tin (marshalled), protected, the value is maximized, the debts are paid, and the remaining estate is distributed to the beneficiaries (inheritance). They are called Fiduciaries, because Administrators and Executors have fiduciary duties to the estate: a duty of loyalty, and a duty of care. Loyalty, meaning they are loyal to each beneficiary of the estate to perform their role to the best of their ability; and care, that they follow the laws and the testamentary documents to ensure the estate is cared for and disposed of appropriately.
This fiduciary, then, once they have their Letters of Administration or Letters Testamentary from the Surrogate’s Court, has the authority to list, lease, and sell the real property.
OBLIGATIONS
Now that we know who owns the property and who has the authority to manage it, we have to consider who is entitled to benefits from it. This is a twofold issue: (1) beneficiaries, or people who inherit from the estate; and (2) creditors and lienholders against the decedent and the property itself (this can be taxes and so forth). A title company will require an estate questionnaire to be filled out and returned in order to issue a title policy to a buyer. That estate questionnaire is a basic form asking for basic information: who died, when, who is the fiduciary, when were they appointed and in what court, what is the docket number, who inherits, what debts are known, what debts have been paid, are there anticipated lawsuits or debts upcoming?
This information is equally as important to the fiduciary as it is the title company since the title company is essentially asking the fiduciary whether they are aware of what they need to do and if they have or are prepared to do it! Creditors, lienholders, and other debts can even be paid out from the proceeds of the sale if that makes sense for the estate as well, meaning the sale of the house can be a powerful tool for paying inheritance taxes, debts, and “funding” the estate (if the only asset is the house, it is not recommended that multiple people own it, but to sell it or have one person buy out the others so there is money and an equitable distribution to everyone).
“CLOSING OUT” THE ESTATE
While there is no formal way to close an estate, there are best practices. These practices are actually statutes found in the New Jersey Statutes, and even sometimes the Administrative Code! It is important to have a probate attorney assist with the entire process so the fiduciary (remember, they are solely responsible for everything and are the person getting sued) is protected and the estate is managed with proper care.
New Jersey laws states that distribution of the estate should not be made until 12 months after the fiduciary is appointed. Most people do not know this, and even more are upset by this fact. However, working with an attorney should provide some ease for beneficiaries (although, quite frankly, family likes to litigate regardless sometimes if the spite and vitriol is there) since the fiduciary should be able to relay the information they receive from their attorney to everyone else (this is best for all parties).
Once the fiduciary has all bills paid, and all the money in their control, they can provide all of the estate’s financial information to their attorney to prepare the final documents to close out the estate. One everything is signed and notarized, the money is all paid out, and the documents are filed with the Surrogate, the estate is essentially finished!
