Keeping House of Elderly Parent out of Probate

[sengsational]

DW is going to find a lawyer for this, but she asked me to do a little research and help her get schooled in the options so she and her brother know what to expect as they move forward on this.

Situation:

• DW's dad (DWD) wants to make it easy after he's gone
• DWD owns his house, free and clear
• DWD wants DW & her brother to split everything evenly

I've done a little poking around on this site and learned a few things:

• NC Doesn't allow a transfer on death for real estate
• Joint tenancy with right of survivorship seems to be an option, but might have "gift" consequences
• Certain options might allow step-up in basis of the house

I think there are probably other options, for instance, selling the house to the kids and DWD "totes the note" (which would be a wash once it got into the estate).


I'm not asking for specific answers here, obviously that's going to be what the lawyer does. But I would like to get pointers to places where I could read about the various options or maybe hear what options the people on this board have exercised and if those worked or not, what "gotchas" to look out for, etc. If you get the right lawyer, you can just follow blindly, but there are probably good, better, best solutions for DW, and good, better, best solutions for the lawyer....and those might not quite align. A well-informed position might help keep this process on track.

 

[OldShooter]

"Keeping House of Elderly Parent out of Probate"

Sometimes the way we state a problem limits the range of solutions to things that are really not optimum. I would suggest that you state your problem in terms of the result you want, not talking about the process to get to the result. I think your problem is to arrange for the transfer to occur in the simplest and most tax-efficient way. The process (i.e. avoiding probate) is really irrelevant.

& BTW, that basis step up (assuming he has a low basis in the house) is A Very Big Deal. Usually, selling or giving the house to the heirs prior to death is A Very Bad Idea. A good trusts & estates attorney can make sure this doesn't get screwed up.

 

[MichaelB]

DW is going to find a lawyer for this, but she asked me to do a little research and help her get schooled in the options so she and her brother know what to expect as they move forward on this.

Situation:

• DW's dad (DWD) wants to make it easy after he's gone
• DWD owns his house, free and clear
• DWD wants DW & her brother to split everything evenly

I've done a little poking around on this site and learned a few things:

• NC Doesn't allow a transfer on death for real estate
• Joint tenancy with right of survivorship seems to be an option, but might have "gift" consequences
• Certain options might allow step-up in basis of the house

I think there are probably other options, for instance, selling the house to the kids and DWD "totes the note" (which would be a wash once it got into the estate).


I'm not asking for specific answers here, obviously that's going to be what the lawyer does. But I would like to get pointers to places where I could read about the various options or maybe hear what options the people on this board have exercised and if those worked or not, what "gotchas" to look out for, etc. If you get the right lawyer, you can just follow blindly, but there are probably good, better, best solutions for DW, and good, better, best solutions for the lawyer....and those might not quite align. A well-informed position might help keep this process on track.

Seems to me if the asset is only in DWD's name, it will be subject to probate. Joint tenancy WROS might solve that, but it requires DWD to give up sole ownership and control of his home, and it exposes the house to claims against the children / joint owners. If they go this route, all the owners should have umbrella policies. The other potential downfall to joint ownership is the children acquire the cost basis now and lose the opportunity for potential future tax free growth.

A living trust can be set up that owns the house, and that would keep it out of probate and make beneficiary designation simple and easy.

 

[RE2Boys]

Good that you are consulting with a local lawyer over this matter. It all depends on your state's probate laws if this is something to spend more than 10 minutes considering.

I've settled two estates here in Pennsylvania. For vast majority of folks, probate is really nothing to worry over. Each time I visited the county court house thrice, never saw a judge or a court room. First visit is to open an estate, pay some fees, and receive a appointment as executor. Second time was to file an estate inventory. Last time was to file a "family agreement" to close the estate. All else done by mail. Neither involved any interests in any businesses, just straight forward investments, retirement accounts, and real estate transfer.

 

[FrankiesGirl]

Probate was actually super easy to process and allowed for a simple transfer of my father's house to myself and sibling with clear stepped up cost as of his death.



Our father's CPA was also a lawyer and he handled the paperwork and sibling was the executor. We signed what needed to be signed, filed and was transferred over within a week or two after.



I have no idea why avoiding probate would be such a big deal? It really isn't complicated if the estate itself is simple (a few accounts, house/property).

 

[MI-Roger]

Good that you are consulting with a local lawyer over this matter. It all depends on your state's probate laws if this is something to spend more than 10 minutes considering.

I've settled two estates here in Pennsylvania. For vast majority of folks, probate is really nothing to worry over. Each time I visited the county court house thrice, never saw a judge or a court room. First visit is to open an estate, pay some fees, and receive a appointment as executor. Second time was to file an estate inventory. Last time was to file a "family agreement" to close the estate. All else done by mail. Neither involved any interests in any businesses, just straight forward investments, retirement accounts, and real estate transfer.

Probate was actually super easy to process and allowed for a simple transfer of my father's house to myself and sibling with clear stepped up cost as of his death.



Our father's CPA was also a lawyer and he handled the paperwork and sibling was the executor. We signed what needed to be signed, filed and was transferred over within a week or two after.



I have no idea why avoiding probate would be such a big deal? It really isn't complicated if the estate itself is simple (a few accounts, house/property).

I have heard there is no way to avoid probate. But there are ways to make the process as speedy and painless as your posts indicate.

To us Laymen, when we say "avoid probate" what we really mean is to avoid a protracted battle and legal wrangling in Probate by taking care of business correctly in advance.

 

[bingybear]

I think the way to avoid probate is to be under the asset level for probate. One way to deal that would be a living trust and put the house in the trust. You can put other asset in also (or POD/TOD to the trust). The trust just distributes the items after DWD death.

Just another method... use a lawyer for this if you choose to do this.

 

[jane_sm1th73]

A word of caution. Don't die in CT. Probate "judges" slot in their cronies to administer the estate if the grieving widow is asleep at the wheel and the kids have grown up with the Corrupticut way of doing things. The cronies charge by the hour. It is not uncommon for the entire estate to be consumed by probate fees. Nothing you can do about it, evidently. One of the many reasons I heaved a huge sigh of relief once I was safely over the state line, making my long-delayed exit twelve years ago.

 

[jane_sm1th73]

Sorry for missing the bead - I titled the house to a trust with myself as trustee until I became incapable, in which case control of the entire trust and assets would pass to whichever of my kids wound up with the most acumen. That is a revocable trust, sometimes known as a living trust. It's prepared in conjunction with a really short will, whose 1-2 paragraph directive states that the assets shall be distributed in accordance with the (name) Trust. My attorney referred to this instrument as a wraparound trust.

 

[catman2020]

First, it’s great you are talking to an attorney. Second, I would suggest you put the house in a living trust. You can set it up the way you’ve outlined and the execution is very simple when the time comes to transfer the house. I can imagine that some people are happy with the probate process but my experience is that it opens you up to a lot more work especially if you have any ‘colorful’ family members since it gives them plenty of opportunities to second guess and challenge the executor’s decisions. It’s relatively inexpensive to set up a trust. You should also get some other essential docs like health power of attorney and durable power of attorney. I hear that Nolo has worked for people which drops the cost to virtually nothing, but I’ve used an attorney and it’s a couple of thousand all in. Much less than even one small dispute in a probate case.

 

[Katsmeow]

I don't know anything about NC law and how probate is handled there. But...why do you want to avoid probate? How onerous it is can vary a great deal from state to state and depending upon the provisions of the will and of state law. Agree that it is good for DW to consult with an attorney.

 

[marko]

I don't know anything about NC law and how probate is handled there. But...why do you want to avoid probate? How onerous it is can vary a great deal from state to state and depending upon the provisions of the will and of state law. Agree that it is good for DW to consult with an attorney.

At least in my state, probate can tie up assets for a year or more before distribution/settlement. Just a PITA.

Also some states require (allow?) the attorney to charge by the size of the estate, so the smaller the estate, the lower the legal fees. My uncle's estate had to pay over $20K to the attorney who probated his (sizable) will in Missouri, dictated by state law. Same amount of work for him had it been 10% as big.

There's also privacy issues as probate requires publication of assets and so on.

Putting assets in a trust avoids probate and allows immediate transfer to heirs.

Again, get a lawyer to give you the pros and cons.

 

[bingybear]

I don't know anything about NC law and how probate is handled there. But...why do you want to avoid probate? How onerous it is can vary a great deal from state to state and depending upon the provisions of the will and of state law. Agree that it is good for DW to consult with an attorney.

The OP did not say why they want to do this. There are a number of reasons that are commonly cited.

privacy - it is not part of the public record.
cost, probate fees can add up.
written correctly is can stop the estate being contested.

now DWD must be "of sound mind" as he must be able to create the trust, not DW or other kids.

 

[Cobra9777]

I'm just glad Texas allows TOD deeds for real estate. We recently helped DW's parents set one up with DW and her brother as 50/50 beneficiaries. Both our houses are titled that way as well. It boggles the mind why something so obviously helpful and simple is not allowed in some states. Must be states with lots of [-]estate attorneys[/-] trust salesmen making campaign contributions to state legislators.

I once calculated that ~98% of our net worth will transfer to our kids outside of probate. Only cars and household goods won't transfer automatically. And as a practical matter, car titles in Texas can be transferred by the heir by simply signing an affidavit of heirship at the DMV. I've also been told that household goods in Texas can be informally divided by surviving family if that's the only thing left in the estate. So maybe it's really 100%.

 

[bingybear]

Only cars and household goods won't transfer automatically. And as a practical matter, car titles in Texas can be transferred by the heir by simply signing an affidavit of heirship at the DMV. I've also been told that household goods in Texas can be informally divided by surviving family if that's the only thing left in the estate. So maybe it's really 100%.

In Ohio you can TOD cars. I believe it is a modification of the title.

From your description it sounds like cars go thru probate unless the value is too small.

 

[Cobra9777]

In Ohio you can TOD cars. I believe it is a modification of the title.

From your description it sounds like cars go thru probate unless the value is too small.

For whatever reason, you can TOD real estate in Texas but not cars. Not really a problem though because, as I said, any legal heir can get the title transferred to their name by signing an affidavit of heirship. Value of the car does not matter. So in effect, for undisputed situations, cars don't need to go through probate in Texas.

 

[PatrickA5]

I'm just glad Texas allows TOD deeds for real estate. We recently helped DW's parents set one up with DW and her brother as 50/50 beneficiaries. Both our houses are titled that way as well. It boggles the mind why something so obviously helpful and simple is not allowed in some states. Must be states with lots of [-]estate attorneys[/-] trust salesmen making campaign contributions to state legislators.

I once calculated that ~98% of our net worth will transfer to our kids outside of probate. Only cars and household goods won't transfer automatically. And as a practical matter, car titles in Texas can be transferred by the heir by simply signing an affidavit of heirship at the DMV. I've also been told that household goods in Texas can be informally divided by surviving family if that's the only thing left in the estate. So maybe it's really 100%.

Exactly what we did with my dads estate. Nothing ended up going through probate. House was TOD and sold with no problems. All of the accounts were either jointly owned, TOD or POD and were distributed within a week of getting the death certificates. The entire process was wrapped up within 45 days with the estate being split 50/50 with my brother. We did spend $75 having my lawyer record the house TOD affidavit with the county, but even that I could have done myself.

We have set up something similar with our own assets. We'll take a closer look at a Trust down the road if we think there is a different reason to have one (other than probate avoidance).

 

[jkern]

I think the obvious reason to avoid probate is time and money. In California, the probate lawyer charges 4% of the gross estate (in the 90's anyway). If a house valued at $500k with a $450k mortgage was to pass through probate. The lawyer would charge $20k on the $500k gross, not 4% on the $50k net. Thus, you would be effectively paying a 40% fee on your net proceeds. A very good reason to avoid probate.

 

[bingybear]

For whatever reason, you can TOD real estate in Texas but not cars. Not really a problem though because, as I said, any legal heir can get the title transferred to their name by signing an affidavit of heirship. Value of the car does not matter. So in effect, for undisputed situations, cars don't need to go through probate in Texas.

how do you know if it is undisputed until it goes thru probate? I recently signed my rights away on a will for a relative. I was not named in the will, but legally had an interest. If I hadn't signed they would have sent registered mail to make sure all possible interested parties were notified. I would assume you need all these people notified before anyone can be determined as "undisputed". This may go beyond "close" family.

I would expect if a car is put in a living trust, then it could be retitled to the beneficiary at death outside of probate.

 

[gauss]

I think the obvious reason to avoid probate is time and money. In California, the probate lawyer charges 4% of the gross estate (in the 90's anyway). If a house valued at $500k with a $450k mortgage was to pass through probate. The lawyer would charge $20k on the $500k gross, not 4% on the $50k net. Thus, you would be effectively paying a 40% fee on your net proceeds. A very good reason to avoid probate.

Wow! Is a lawyer required in California for probate?

In my state I did an unsupervised - informal probate for my late father on my own without a lawyer.

I was considering hiring an attorney and did consult with one.

The treasurer of a local organization that I have volunteered with assured me that I had the necessary skills/temperament etc to do it on my own.

So glad that he had the talk with me. I learned much in the process.

BTW - The fee to the court was a few hundred dollars on $60,000 in assets.
I was glad that Dad did not spend any of his rather scarce funds on a Living Trust attorney.

-gauss

 

[RE2Boys]

In PA, a lawyer is not required to settle an estate, that is the responsibility of the executor/administrator!
I found a lawyer that would do all work required to settle the estate, either on a percentage or hourly charge, or just hire out as and adviser on a per hourly rate. So I was the doer, he would review some documents for completeness and guide me on the next step. Legal fees for each estate were less than $1k with a couple of hundred $ in probate fees. Each estate was about half million but many accounts were joint w/survivorship or beneficiary designated. I did have to transfer title of some real estate in a different county and he took care of the transfer.

 

[jkern]

Wow! Is a lawyer required in California for probate?

In my state I did an unsupervised - informal probate for my late father on my own without a lawyer.

I was considering hiring an attorney and did consult with one.

The treasurer of a local organization that I have volunteered with assured me that I had the necessary skills/temperament etc to do it on my own.

So glad that he had the talk with me. I learned much in the process.

BTW - The fee to the court was a few hundred dollars on $60,000 in assets.
I was glad that Dad did not spend any of his rather scarce funds on a Living Trust attorney.

-gauss

No, a lawyer is not required by law to do a probate in CA. My mother passed in 1992 and I did not hire a lawyer and did all the legal work for the probate myself. What I found was that when there is a maximum limit set by law what a lawyer can charge for services, they always charge the maximum.

 

[catman2020]

I don't know anything about NC law and how probate is handled there. But...why do you want to avoid probate? How onerous it is can vary a great deal from state to state and depending upon the provisions of the will and of state law. Agree that it is good for DW to consult with an attorney.

If you have a simple estate situation probate is probably fine. In fact,, you can avoid probate altogether in some cases if the assets are low enough or if everything is dealt with using TOD’s. The problem comes in if you have a larger estate or somewhat complex situation. If there are family disputes, mental incapacity, serious physical decline or other complexity, probate is very likely to be much slower, more expensive, and difficult than a trust.

Probate requires public disclosures and invites parties to engage in court procedures to air and resolve disputes. Setting up a trust is not inherently more complex or expensive than writing a will. I don’t get the argument that people are saving tons of $ by using a will instead of a trust.

 

[ncbill]

DW is going to find a lawyer for this, but she asked me to do a little research and help her get schooled in the options so she and her brother know what to expect as they move forward on this.

Situation:

• DW's dad (DWD) wants to make it easy after he's gone
• DWD owns his house, free and clear
• DWD wants DW & her brother to split everything evenly

I've done a little poking around on this site and learned a few things:

• NC Doesn't allow a transfer on death for real estate
• Joint tenancy with right of survivorship seems to be an option, but might have "gift" consequences
• Certain options might allow step-up in basis of the house

I think there are probably other options, for instance, selling the house to the kids and DWD "totes the note" (which would be a wash once it got into the estate).

Might want to look into a life estate as well (dad gifts the house to the kids but retains lifetime rights to live in the home, with dad still paying taxes/upkeep)

 

[38Chevy454]

I am not familiar with NC laws, but it seems that establishing a living trust and putting the house into that will avoid the probate and allow for quicker disbursements after DWD passes.


In my parent's case, where I was also the trustee, the trust was pretty easy process and I did not have to do any probate.