What is probate?
Probate is the legal process of settling a deceased individual’s liabilities, distributing their assets, and closing their estate. If the decedent left a will, their assets will be distributed according to the instructions in the will. In the absence of a will, the estate is considered “intestate,” and the decedent’s assets will be distributed according to the state’s intestacy laws.
When does probate begin?
It’s a common misconception that probate begins as soon as someone passes away. Probate is an intricate legal process, and it can’t begin until someone submits a copy of the decedent’s will along with a petition for probate to the county court (in the county where the decedent lived or owned property).
Can you sell a house before probate begins?
The answer to this question depends on how the house is titled. If the house is owned in joint tenancy with another individual, or as tenants in the entirety with a surviving spouse, then the surviving owner receives full ownership and has the right to sell the house before probate. If the house is titled solely in the decedent’s name or as tenants in common, nobody can sell the property before probate begins. The beneficiary, tenant in common, or executor may have the house appraised and list the property for sale if time is of the essence and they’re acting in good faith, but they can’t sell the property before probate.
Can an executor sell property during probate?
An executor (aka the personal representative) is the person appointed by the court to manage the estate during probate. The decedent’s will should nominate an executor, but in the absence of a will the court can appoint an executor. In most cases, the executor is an immediate family member, though the court has the ability to appoint a neutral third-party special administrator when necessary.
Executors have the authority to sell property during probate, though they are bound by the decedent’s will. If the will bequeaths the house to a single beneficiary, the executor should be able to transfer title of ownership to the beneficiary without selling the house. However, if there are multiple beneficiaries, or if the will specifically directs that all assets are to be liquidated before disbursement, then the executor may be required to sell the house during probate.
One of the most common scenarios that requires an executor to sell a house during probate is when there aren’t enough liquid assets in the estate to cover the decedent’s liabilities. The process of selling assets to cover liabilities is known as abatement. When abatement is necessary, the executor won’t have any choice in the matter, and will be required by the court to sell the house in order to settle the estate’s liabilities. Once the debts and bills are paid, any residual value from the sale of the house may be transferred to the estate’s beneficiaries.
How to sell property during probate
As long as the estate’s interested parties (beneficiaries, legal heirs, creditors) don’t contest the will or object to the executor’s appointments, probate can take place informally. Informal probate allows the executor to handle the estate’s affairs without court supervision, and that includes the ability to sell the decedent’s house.
If you are the executor to an estate during informal probate and it becomes necessary to sell the decedent’s house, here’s how to go about the process:
- Have the property appraised – probate laws dictate that a house in probate should be sold for at least 90% of its fair market value, so you’ll need to determine the fair market value to protect yourself against any personal liability from underselling the property. Hire a professional appraiser to determine the fair market value and compare their appraisal against comparable homes in the area that have recently sold.
- List the home for sale – hire a real estate agent to help you determine the initial asking price and list the home on the market for sale.
- Consider offers with the beneficiaries – you may have the right to act independently as the executor, but it’s a good idea to keep the beneficiaries in the loop on big decisions like this if you want to avoid objections that may lead to formal supervised probate.
- Accept an offer – when you receive an acceptable offer, the prospective buyer will need to put down at least 10% in escrow. Consider asking the beneficiaries to agree to the sale in writing, too.
- Keep copious records – don’t cut any corners when it comes to documenting and recording the sale. Make and keep copies of every document, contract, and agreement. You’ll ultimately need to submit important documents from the sale to the court with your final accounting report, and you’ll want sufficient documentation to protect yourself from personal liability if a beneficiary files a complaint with the court.
- Sell the house and gather the proceeds – after you sell the house, gather the proceeds from the sale into an estate checking or savings account. From there, you can use the funds to settle the estate’s liabilities and disburse any residual value to the beneficiaries.
In cases where the house is not covered by a will (excluding joint tenancy and tenancy in the entirety), the court will transfer title of the house to the decedent’s legal heirs according to the state’s intestacy laws. Arizona intestacy laws dictate the following priority for legal heirs:
- If the decedent was married and did not have any children with another partner, the house would go to the surviving spouse (ARS 14-2102)
- If the decedent was married and had children with another partner, the house would be split between the surviving spouse and the children
- If there isn’t a surviving spouse, the house would go to the decedent’s children by representation (ARS 14-2103)
- If there isn’t a surviving spouse or children, the house would go to the decedent’s parents by representation (by extension that includes the decedent’s siblings, nieces and nephews)
- If there isn’t a surviving spouse, children, parents, siblings, or nieces and nephews, the house would go to the decedent’s grandparents by representation (by extension that would include aunts, uncles, and cousins)
- If there aren’t any extended family members to claim the estate, the house may pass to the state (ARS 14-2105)
Do You Need Help with Probate Matters?
As you can see, AZ probate laws can be complex. It requires a number of steps and without the right approach, it’s easy to get lost in the details.
At JacksonWhite, we can make probate a clear, easy-to-understand process. If you’d like help with probate matters, call the talented team at JacksonWhite Law today.
We can help explain your legal options and direct you to the probate solution that works for you and your loved ones.