Understanding How to Handle Real Property in a Decedent’s Estate
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Understanding How to Handle Real Property in a Decedent’s Estate
When it comes to administering a decedent’s estate, the personal representative has a crucial role in managing and distributing the assets. This includes handling any real property owned by the decedent, such as their home, rental properties, or land. In this article, we will explore the important steps that a personal representative must consider when dealing with real property in a decedent’s estate.
Step 1: Locating the Will
The first step for friends or family of the deceased is to search for the decedent’s last will and testament. The will appoints an executor or executrix who is responsible for probating the will and administering the estate. If the will does not provide specific guidance for real property, it will pass to the beneficiaries named in the will. In the absence of a will, the estate assets will pass according to Pennsylvania’s intestacy law, with the closest family member becoming the administrator of the estate.
Step 2: Obtaining Letters Testamentary / Letters of Administration
Once the personal representative is identified, they must appear before the Register of Wills in the county where the decedent resided. If there is a will, the personal representative should present the original will and request Letters Testamentary. In the absence of a will, they will request Letters of Administration. These letters grant the personal representative the legal capacity to administer the estate and carry out their duties.
Step 3: Understanding Personal Representative Duties
Pennsylvania law outlines the responsibilities of a personal representative when it comes to probate and estate administration. The personal representative has the right to take possession of, maintain, and administer all the real and personal estate of the decedent, except for real estate occupied by an heir or devisee. They must also collect rents and income from each asset, make necessary expenditures to preserve the estate, and may be directed to take possession of occupied real estate to protect the rights of claimants or other parties.
Step 4: Identifying the Real Property
The personal representative must identify the real property in the decedent’s estate. This can be done by searching through the decedent’s home and safe deposit box for copies of deeds and real estate tax records. The decedent’s accountant may provide information on mortgage interest deductions or rental payments, which can help identify real property. Additionally, the County Recorder of Deeds and the county real estate tax department can be searched for information on owned properties. The personal representative can also forward the decedent’s mail to their address, which may contain real estate tax bills or insurance information.
Step 5: Protecting and Preserving the Real Property
The personal representative has a duty to protect and preserve the real property in the estate. This includes maintaining appropriate insurance coverage, installing a home security system, changing locks, arranging for lawn maintenance and snow removal, and notifying local law enforcement about the vacant property. In cold months, the property should be winterized. Mortgage and tax payments should be made to avoid foreclosure. If the decedent had pets, arrangements should be made for their care.
Step 6: Valuing the Real Property
Proper estate administration requires the personal representative to value the real property for various purposes, such as filing an inventory of the decedent’s probate estate, filing the Pennsylvania inheritance tax return, accounting to the beneficiaries, and potentially filing tax returns. Valuing real property may involve obtaining a formal appraisal by a certified real estate appraiser. Alternatively, local tax assessments reflective of the fair market value can be used as a basis for valuation.
Step 7: Determining Whether to Sell the Property
The personal representative must decide whether to sell the real property. If a sale is pursued, it is typically done through a real estate agent or other traditional methods. The personal representative, as the legal representative of the estate, has the authority to sign necessary documents on behalf of the estate. When selling to a third party, the sale price can be used for valuation purposes if it reflects the true value. However, any sale to a related party requires approval from the beneficiaries or, if necessary, from the Orphan’s Court. If improvements are needed before selling, the estate can cover the costs, but receipts and invoices should be kept for tax purposes.
Step 8: Managing the Contents of the Real Property
Any tangible personal property found in the decedent’s home or other property is part of the estate and should be inventoried if it holds value. For smaller estates, the personal representative, with the help of family members, can organize and declutter the property. In larger estates, it may be necessary to hire an estate sale expert or auction team to manage an estate sale, especially for valuable personal property.
Step 9: Payment of Taxes
The personal representative is responsible for ensuring that all taxes related to the sale of real property, such as the Pennsylvania realty transfer tax, are paid. The transfer tax is typically paid at the closing of the sale. In addition, the personal representative must calculate and pay the Pennsylvania inheritance tax, which applies to real property and other estate assets. Fiduciary tax returns may also be necessary in some cases.
Consider Hiring an Estate Administration Attorney
Handling the real property in a decedent’s estate can be complex, and personal representatives may benefit from the guidance of an experienced probate and estate administration attorney. These professionals can provide advice on navigating the legal requirements and help ensure that the personal representative fulfills their duties correctly.
Remember, efficiently managing real property in a decedent’s estate is crucial for protecting the interests of the beneficiaries and ensuring a smooth administration process.